TV’s ‘Historic’ Upfront Secret: Primetime TV Sees Exodus of Ad Dollars

TV Ad Sales Upfronts
always with honor for Variety

ViacomCBS CEO Bob Bakish in early June predicted this year’s upfront ad-sales session would be “off the hook” for his company, and, in general, the media industry. And it was — but perhaps not in the way many executives would like.

Big entertainment conglomerates ranging from WarnerMedia to NBCUniversal have called this year’s haggle with Madison Avenue “historic” and “extremely strong,” because TV networks have managed to secure record increases in ad rates. Meanwhile, the process, which usually takes all summer to complete, largely wrapped in advance of the July 4 holiday.

But those big hikes and fast deals have come with a different kind of cost: Media buyers familiar with this year’s discussions say the TV companies have likely parted ways with a significant chunk of the volume of dollars they once received for their primetime programing — perhaps permanently.

Upfront haggling is not complete — Discovery continues to wrangle at the bargaining table, according to people familiar with the matter — but the nation’s five English-language broadcast networks could have seen the volume of ad commitments they secured for their next cycle of primetime programming slump compared to what they attracted in 2019, the last upfront sales session that took place before the coronavirus pandemic.  Based on conversations with media buyers and other executives, Variety estimates NBC, ABC, CBS, Fox and the CW secured between $8.2 billion and $10.1 billion for their 2021-2022 primetime schedules, compared with between $9.6 billion and $10.8 billion for primetime for 2019-2020. In other words, primetime volume could be down between 6.5% and 14% from what the networks nabbed in 2019. Compared with last year, when Variety estimates suggest the networks may have secured between $8.2 billion and $9.8 billion for their 2020-2021 schedule amid the peak of coronavirus, primetime volume may be flat or up just 3% or so.

Some portion of the pre-pandemic support collected for primetime appears to have moved elsewhere, a blow to the economics of the media industry. Despite a growing attraction to streaming, primetime TV remains the place where the networks get the most money for the commercials they run.

“They don’t have the same audiences that they had a year ago, and the year before that, and the year before that,” says one media buyer familiar with the current scope of negotiations. “They have less to sell.” Advertising executives believe much of that lost primetime volume has, like a glacier breaking free after decades from an arctic shelf, drifted elsewhere, most likely to streaming video and other types of digital commercials.

2010  $8.1B to $8.7B
2011  $8.8B to $9.3B
2012  $8.8B to $9.3B
2013  $8.6B to $9.2B
2014  $8.17B to $8.94B
2015  $8.02B to $8.69B
2016  $8.41B to $9.25B
2017  $8.78B to $9.62B
2018  $9.1B to $10.06B
2019  $9.6B to $10.8B
2020  $8.2B to $9.8B 
2021  $8.2B to $10.1B
Source: Variety estimates

ViacomCBS, NBCUniversal, Walt Disney, Fox Corp., WarnerMedia and Discovery have routinely declined to comment on the details of their upfront process. Fox saw increases in primetime volume over 2020, according to a person familiar with the matter. A person familiar with ViacomCBS indicated the company nabbed “historic” rates. WarnerMedia claimed in a news release that It had secured a record level of overall commitments, but said nothing about whether those ad deals were tied to linear TV or streaming. Jeff Shell, CEO of NBCUniversal, said during a recent investor conference that the company enjoyed its “strongest upfront I think probably in the history of NBCUniversal,” but did not elaborate on pricing or volume. There is still room for potential disclosure from the media companies when they post their second-quarter earnings reports in coming weeks.

All the numbers should be taken as directional indicators, not hard, cold cash. Upfront figures are typically built on fuzzy math and rarely have any correlation to the ad money big media owners like CBS, Walt Disney, NBCUniversal, Fox Corporation and WarnerMedia collect by the end of the year. Advertisers can pull orders at certain moments in the season or “re-express” advertising if specific programing is yanked off the schedule, changing the nature of their commitment to purchase inventory. But they still serve as a sort of guide as to where money is being spent. In recent years, the figures have lent ballast to the theory that the networks can keep new money flowing despite ratings erosion and viewers moving to streaming options. This year, numbers call that ability into doubt.

To be sure, the media companies met with some success. Each year, the TV companies press for increases in the cost of reaching 1,000 viewers, a measure known as a CPM that is central to the industry’s annual upfront discussions, when U.S. TV companies try to sell the bulk of their commercial inventory. Most cable networks were able to nab CPM hikes of 9% to 12%, according to buyers and other executives, while broadcast outlets held firm for increases of between 16% and 22%. ViacomCBS insisted on some CPM rate increases of between 22% and 25%, these people said, spurring a more prolonged negotiation with agencies, and resulting in a decline in commitments from some clients. Last year, the networks were able to command paltry CPM increases of just 3% to 4%.

Rate hikes, however, don’t fill bank accounts. Ad dollars do. “Their rates of change are robust,” says the media buying executive, referring to the CPM increases. “But not their volume.”

TV will likely capture some of that lost primetime volume. Media buyers say interest in new ad-supported streaming services like HBO Max, Paramount Plus, Pluto, Peacock and Hulu is fervent, and there are strong indicators the new hubs soaked up some portion of the ad money once earmarked for primetime. But the networks face all sorts of competitors in the digital space, where they are merely new players, not the dominant force.  And unit prices for digital advertising are generally lower than linear TV, which continues to generate the industry’s biggest simultaneous audiences.

With streaming video snaring audiences who once flocked to traditional TV, the networks have focused ever more intently on the economic science of yield management.

Simply put, with linear TV ratings in shorter supply with every passing season, there is a rush by many traditional advertisers to get their money down in schedules before the network sell out of the product Madison Avenue wants most – audience impressions. Indeed, buyers say some agencies and clients found themselves unable to get as much of their upfront mix as they might like because of the industry’s ongoing ratings declines.

Meanwhile, a growing phalanx of advertisers new to working with TV outlets has started looking to run commercials that reach bigger audiences. This group includes streamers and mobile-entertainment companies ranging from Netflix to Spotify as well as direct-to-consumer entities like Wayfair and Warby Parker. These companies don’t enjoy the decades-old relationships that blue-chip marketers like Procter & Gamble or State Farm have with TV, and also don’t have grandfathered conditions that limit the CPM increases they have to assume each year. The networks are increasingly looking to sell more of their inventory to clients who pay the higher rates.

The dwindling supply of linear audiences forced advertisers to move earlier to alternate venues. Spanish-language broadcaster Univision often has to wait until after its English-language rivals have wrapped their upfront deals. But this year, people familiar with the matter said, Univision was writing business alongside its counterparts, and saw its ad commitments increase noticeably.

Meanwhile, the networks are testing new ways to bolster their new streaming outlets. WarnerMedia last year sold the bulk of its 2020 inventory for the new HBO Max to three of the industry’s biggest media buyers, even though the company had few specifics on important elements such as formats and measurement, according to people familiar with the discussions. In exchange for putting down money in early days, WarnerMedia this year gave the agencies a first chance to snatch up HBO Max inventory, knowing that others would be more eager to invest in streaming. As a result, WarnerMedia had commitments for streaming well before its sales talks began in earnest. The company also sought narrower CPM increases for linear TV, according to a person familiar with the matter, spurring sales for its cable networks.

Other factors no doubt played a role in this year’s upfront results. NBCUniversal was under pressure to sell millions of dollars of big-ticket sports inventory in both the Summer and Winter Olympics as well as next year’s Super Bowl. The unusual confluence of events came about due to a delay of the 2020 Tokyo Olympics forced by the pandemic and a decision between CBS and NBC to “swap” Super Bowl broadcasts to put the Big Game closer to NBC’s 2022 Winter Olympics and CBS’ 2021 NCAA men’s basketball championships. And many advertisers, struck by national reaction last year to the killing of George Floyd while in the custody of police in Minneapolis, have begun to earmark more support for multicultural media and Black-owned media companies.

Based on Variety’s estimate of primetime volume staying flat to rising as much as 5%, NBCUniversal may have seen primetime commitments come in between $2.68 billion and $2.98 billion for its next programming cycle, compared with $2.68 billion and $2.84 billion last year.

CBS may have seen its primetime commitments total between $2.03 billion and $2.64 billion, according to Variety estimates, compared with $2.03 billion and $2.51 billion last year. Buyers said the company bolstered its push for higher-than-market rates by refusing to sell its sports inventory without commitments for ad time in broadcast and cable TV. In some cases, as the company prevailed in its quest for high rates, it lost some of the volume it might normally have secured.

Disney saw the bulk of its volume growth come for digital and live sports, according to a person familiar with the matter, with ABC’s primetime linear volume staying relatively flat. As such, ABC’s primetime volume may have come in at $1.66 billion to $2.18 billion, on par with 2020.

Fox may have seen primetime volume total between $1.36 billion and $1.72 billion, according to Variety estimates, compared with $1.36 billion and $1.64 billion in 2020.

The CW may have seen primetime volume come in between $440.8 million and $626.9 million, according to Variety estimates, compared with $440.8 million and $$597.1 million last year. Some of the increase came about because the network, jointly owned by ViacomCBS and WarnerMedia, offered new original programing on Saturday evenings.

Determining how much money has peeled away from primetime and moved to streaming is difficult. And just because ad dollars flow one way doesn’t mean they won’t return at some point in the future. Some big Madison Avenue players pulled their dollars from TV in the past to chase consumers via YouTube. When that venue started to be scrutinized for offensive content, a chunk of that money returned to TV.

For now, at least, there’s no denying primetime’s weakened condition. As more consumers watch their favorite programs at moments of their own choosing, primetime, clearly, is anytime. Advertisers have long been obsessed with keeping their ads in front of TV’s big crowds. There is no small risk that they will become increasingly focused on reaching the smaller audience groups being created by an endless number of windows for digital viewing.