ViacomCBS, Discovery Face Showdown With Advertisers in TV’s Upfront Talks (EXCLUSIVE)

David Zaslav Bob Bakish
AP/Courtesy of Asa Mathat/Vox Media

This year’s upfront ad-sales session is shaping up to be one of the fastest in recent memory. But some TV companies are working to slow things down.

At a time when advertisers appear willing to capitulate to significant pricing increases, they are still balking at demands from both Discovery and ViacomCBS, according to three media buying executives and other people familiar with the tone of these annual negotiations for commercial inventory between U.S. media companies and Madison Avenue. In each year’s upfront, TV networks jockey for billions of dollars in advance ad commitments, and they are working to capture advertising support in 2021 after a lackluster cycle crimped by the pandemic last year.

“They don’t seem to be in a rush,” said one buying executive of Discovery and ViacomCBS. “Let the market develop and then settle later. Conversations are very active.” Still, one executive described the situation as a “stalemate” between the two media companies and the buying agencies with whom they negotiate.

ViacomCBS and Discovery appear to be betting that a rush by national advertisers to get money down on linear TV will lend ballast to their demands. As they do, however, they risk having those same potential sponsors put more money down instead with competitors who may be offering less onerous rates.

Both companies declined to make executives available for comment.

As the TV networks’ viewers migrate away from linear TV programs to streaming video, their parent companies have smaller audiences to sell — and, as a result, fewer ratings points. But a post-pandemic surge of spending by advertisers means the TV outlets are still seeing high demand for the traditional TV audiences that remain. NBCUniversal, Walt Disney, and the CW are among the media companies that have moved along steadily through upfront talks, according to people familiar with recent discussions.

“If there ever is a time when the TV upfronts should crack, it should be now. The rise in cord cutting and the shift in engagement towards streaming are leading to the largest year over year declines in impressions in years. However, we hear the demand in the 2021 TV upfronts is super strong, with higher pricing again expected to offset much lower volumes of impression inventory,” said Michael Nathanson, an independent media analyst, in a Thursday research note. “While the lack of impressions is holding back absolute TV advertising growth, there hasn’t been a wholesale dumping of the linear TV model.”

Indeed, ad dollars in this year’s upfront are likely to split between traditional TV networks and their new-tech streaming counterparts.

It’s not clear whether the networks will make back the linear volume they lost during coronavirus. In 2020, 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 fall by at least 9.3% to 14.6%, according to Variety estimates. That marked the first time since 2015 that upfront estimates have sagged. Based on conversations with media buyers and other executives, Variety estimated NBC, ABC, CBS, Fox and the CW secured between $8.2 billion and $9.8 billion for their 2020-2021 primetime schedules, compared with between $9.6 billion and $10.8 billion for primetime in the 2019-2020 season.

Now, as the volume of advance dollars splinters around new and old TV venues, the networks are insisting on significant increases in the rate of reaching 1,000 viewers, a metric known as a CPM that is central to these annual discussions. Broadcast networks have pressed for CPM hikes between 16% and at least 19%, with some pushing for increases in the low 20% range, according to executives familiar with the process. Cable networks have sought CPM increases between 9% and 13%, these people said.

Both ViacomCBS and Discovery have challenges. Though they are among the nation’s biggest suppliers of TV programming and commercial TV inventory, some of their cable operations aren’t among the industry’s top performers. Media buyers suggest ViacomCBS ad sales executives believe their top offerings — which include top-watched offerings like “NCIS,” NFL football, and “The Late Show With Stephen Colbert” — should get top dollar. Discovery’s stance, these buyers suggested, may be driven in part by expectations from the company’s CEO, David Zaslav.

“David the other day mentioned that this is the hottest upfront that he’s seen in his career. We’re dealing with a lot of demand in the upfront,” said Gunnar Wiedenfels, speaking at an investor conference earlier this week, adding: “We certainly have something to offer here.”

Both companies no doubt feel some wind at their backs. “It’s going to be off the hook,” said Bob Baskish, ViacomCBS’ CEO, speaking about the upfront at the investor conference. Before the talks can ring, however, the companies need to make a connection with their advertisers on prices and rates.