When you consider the various ways that COVID has disrupted the TV advertising business this year, the Upfronts are where the effects may be the most enduring. Will media buyers be wooed again with live performances by A-list celebrities? Probably. But now that networks, media agencies and brands have been forced to carry on without them, the more interesting question is whether the Upfronts will continue to play such a dominant role in TV ad sales. (Consider that they accounted for 73% of network ad buys during the 2018-2019 TV season.)
COVID’s Impact on Upfronts
The pandemic caused existing deals that extended into 2020 to be renegotiated and also led to the introduction of new “optionality,” which allowed deals to be extended, canceled or moved around. This fall, sellers walked into delayed Upfront negotiations for 2021 with considerably less leverage than they normally have. Since content production is still severely limited, there was a lack of tentpole programming for the major networks to promote.
As a result, Variety reported that advance commitments for the next year of TV could be down by as much as 15% to 20%, and CPMs for top inventory were up only 3% to 4% compared to double-digit increases in preceding years. Even the secured commitments will be treated more like call options than firm orders; I’ve heard that some contracts even provide opportunity for penalty-free cancellation.
Sellers are still trying to hang onto an Upfront cycle by packaging sports, but it’s unclear how effective this will be given the prevailing uncertainty around sports scheduling.
Calls for Change in the Upfront Process
Meanwhile, the Upfronts are under fire on a completely different front. Earlier this fall, Procter & Gamble’s Chief Brand Officer Marc Pritchard called the Upfront marketplace “antiquated” and driven by information asymmetry. In his view, media agencies end up pressuring their clients to commit to spending tens of millions of dollars in order to secure bulk discounts, while the compressed three-week timeline gives networks a negotiating edge. Going forward, he said, P&G will negotiate directly with the networks—and outside of the Upfronts—as much as possible instead of letting its media agencies take the lead.
Given that P&G spent $7.3 billion on advertising during the last fiscal year, the company has a megaphone when it speaks out on the business of media and marketing.
So, what does the future look like? We can be almost certain that Upfronts with the typical pomp and circumstance won’t take place in spring 2021, even in the best-case scenario for wide distribution of multiple COVID vaccines. If advance sales volumes and pricing under the current remote, disrupted model are reasonably successful, it begs the question of whether the Upfronts ever need to return in their traditional form. There’s also reasonable concern among network executives that reduced spending commitments may become permanent—especially as the shift of viewers to streaming platforms accelerates and siphons off ad dollars.
3 Ways Networks Should Adapt in 2021
Here are three steps networks may take to improve their leverage in the marketplace in the event that the Upfronts’ role is reduced going forward.
1. Rethink Your Approach to Pricing and Packaging
In 2021 and beyond, sellers should prepare to dedicate significantly more time and resources to actively managing scatter inventory. Pricing and inventory management must be an active project and an everyday event rather than a two-month cram session every spring.
In other words, networks can’t expect to finalize their rate cards and large-deal negotiations once a year and be done.
In the absence of the usual volume of tentpole content in 2021, networks must also be creative about developing broader, more complicated packages at a larger scale than was necessary before. For example, networks might package three or four different programs or dayparts to get to a target demo of 2 million people, which could have been delivered through one piece of tentpole content in preceding years. This approach can help to replicate the reach of missing high-value programming while also letting advertisers over-index against their desired audience.
How do you create, sell and steward these more complicated packages at scale when your main information analysis tool is Excel? You can’t. Instead, networks must turn to data science.
2. Invest in Data and Analytics
Even before COVID, the well-documented decline of linear audiences had started to exert downward pressure on price, and leverage had swung solidly to buyers. Large media agencies have also invested heavily in data and analytics over the past decade, which further increased their leverage and negotiating advantages over media sellers.
Sellers should have a material negotiating advantage. They know their content and audiences better than buyers do—and must bring that knowledge to the negotiating table. One potential application of this is by packaging new shows, where the seller can far more accurately infer audience attributes with proven shows that have a known audience. Another is to package ads with product-placement offers based on what the seller knows about how plots and storytelling will unfold on specific shows. This strategy would help sellers to make more creative and proactive offers instead of being reactive.
Programmers are ultimately much better-positioned to know where specific audiences with purchasing intent can be found, such as yogurt-eating moms in the Midwest or video-game-playing Gen Zers, than media agencies are. They just historically haven’t invested in the data and analytics capabilities to surface these insights at scale. The truth is, the return on this investment must start with an investment. The actionable insights and answers to your pressing strategic and negotiating questions are sitting in data that you control. The work is in cleaning, organizing and processing that data so it speaks to you and helps you to be more effective.
3. Change Your Go-to-market Approach to be Proactive
The marketplace for TV advertising has historically been reactionary, and the Upfronts were largely responsible for that. For decades, the networks essentially counted on large media buying agencies to show up at their door with an aggregated check for $2 billion every year, and proactive packaging and selling was fairly unnecessary and uncommon.
If the Upfronts can no longer be counted on to deliver the lion’s share of ad revenue, then network salespeople will need to adjust and adopt new approaches. This should entail going into media agencies, as well as brands like P&G that opt to lead their own negotiations, with specific proposals. Going back to the first point, it also requires being creative about packaging of audiences and programming to meet advertiser requirements.
No one has a crystal ball, and it’s possible that the Upfronts will come roaring back. But these three strategies seem overdue for networks either way. Even before COVID, the decline of linear audiences posed a significant threat to the TV advertising business as we know it. No matter what happens to the Upfronts, being more strategic about pricing and packaging, investing in data and analytics for insights and advantage, and having a more proactive go-to-market approach are essential steps to make the most of your market position and your opportunities.