TV’s Upfront Talks Start to Heat Up, Despite Pandemic

TV Ad Sales Upfronts
always with honor for Variety

Madison Avenue is starting to realize that it can’t do without TV. How much it will pay for the privilege in tough times remains to be seen.

Major buying agencies have begun negotiating with TV networks in earnest over advance purchases of advertising time, a sign that TV’s annual “upfront” process will take place in some fashion despite the onerous conditions from the coronavirus pandemic hurting several of the industry’s top marketing categories. NBCUniversal, Fox Corp., WarnerMedia, Walt Disney and ViacomCBS are among the companies that have met with top buying organizations like Publicis Media and Omnicom Media Group, according to six people with knowledge of the talks. The companies declined to comment.

“The upfront is now in full swing,” NBCUniversal CEO Jeff Shell said during a call with investors Wednesday.

Despite the executive’s optimistic tone, people familiar with current talks say most of the haggling is just that – though consumer-products giant Procter & Gamble is said to have begun negotiating terms with some media outlets. A sense has emerged that upfront talks could last through Labor Day, and several executives acknowledge volume this year will not match what has been secured in recent sessions.

Billions of dollars are at stake. In 2019, the five English-language broadcast networks secured between $9.6 billion and $10.8 billion for advance ad commitments for their primetime schedules, according to Variety estimates, compared with $9.1 billion and $10.06 billion in 2018’s haggle. The process marked the fourth consecutive year that the networks were able to claim increasing volume for their primetime schedules.

Driving this year’s talks is a sense that the market for so-called “scatter” advertising, or commercial inventory that is purchased closer to air time, will remain robust through the end of 2020 and into next year, these people said.  The rush of clients to sports events from the NBA and Major League Baseball has bolstered that dynamic.  To mitigate the costs that come with buying ads on an as-needed basis, advertisers typically need to buy commercial time in advance, and make certain they are rewarded with better terms for doing so. Agencies are looking for significant terms that grant them “flexibility” in case of a new twist in the spread of pandemic. And they are seeking contingency plans in case some big-ticket properties – including the National Football League – run into headwinds.

Ad spending in many categories remains down, according to data from ad-spend tracker Kantar. But shortfalls have moderated somewhat over the last few weeks. The number of 30-second spots aired across the nation’s top 25 TV networks was off 12% between July 13 and July 19, the researcher said.  In a similar period in late May, that figure was off 18%. Ad spending behind food, household products and insurance appears to have increased, according to Kantar, but similar outlays behind automobiles, beverages, restaurants, retail and telecommunications continue to dwindle. Movie studios have, for all intents and purposes, stopped running commercials.

Buyers and sellers have come to the table this year far apart on terms, these people say, though there is a consensus emerging of where progress can be made. Some big buyers have tried to secure  significant rollbacks in CPMs, a measure of the cost of reaching 1,000 viewers that is a central term in these annual talks between U.S. TV networks and Madison Avenue. But some TV companies have pressed for large increases, these people said. Neither is likely to be the final term in deals.

“There are definitely some negatives out there,” said one buying executive. “But networks are starting high.”

These people say some agencies came to the table seeking CPM rollbacks in the double-digit percentage range,  while TV networks have sought CPM increases in the high-single-digit to low-double digit percentage range. But these are largely negotiating feints, these people said: No media company can afford to agree to a CPM rollback of more than 20% and no advertiser operating in this climate would likely consider agreeing to a CPM increase of between 7% and 11%. TV networks “started in that range,” said the buying executive.  “But I don’t think they realistically expect to end up there.”

Now the discussions are moving to a narrower set of pricing terms, according to one of the people familiar with discussions. Buyers want to try to keep CPM rates flat with last year, or limit them to a low-single-digit percentage increase. Meanwhile, the networks are pressing for increases that are as high as the mid-single-digit percentage range.

No matter the final terms, it’s clear how significantly the pandemic has changed the marketplace. In 2019, all the English-language networks were able to secure significant CPM percentage gains, with some pressing for hikes as high as 14%.