With upfront negotiations more than halfway done, buyers and sellers are saying that volume and prices for ads in nearly all programming other than sports are heading down for the first time in a non-recessionary year.
In the upfronts, prices have almost always gone up on a cost-per-thousand viewers (CPM) basis. This year, though, lower ratings, cord-cutting and economic worries have produced a perfect storm for buyers, who have long believed that ads in broadcast primetime are overpriced.
With the writer’s strike — and a likely strike by actors as well — advertisers are resisting paying premium prices for the reality and game shows likely to replace scripted series on primetime schedules this fall, market participants said.
“A lot of advertisers have said this is the year where we want to make a statement that broadcast primetime needs to be adjusted,” one top ad-sales executive said.
With weaker entertainment options, more money is flowing into sports, which is looking like a surer bet.
The demand for live sports, particularly in the fall, is driving up demand. Prices for commercials in sports programming are up 5% to 7%, sources said.
Media companies, under pressure from Wall Street to cut direct-to-consumer losses, are also competing for streaming ad dollars. Sellers are willing to offer friendly pricing for broadcast prime in exchange for streaming volume, one source said.
Media companies would prefer to have streaming revenue locked down in the upfront, while advertisers are preferring to execute streaming buys programmatically and in the last-minute scatter markets.
Pricing and volume for linear advertising is likely to be down between 5% and 10%, sources said. That will be offset by 40% to 50% growth in streaming volume, But with limited inventory overall upfront is expected to down.
Network executives declined to comment until upfront negotiations were concluded.
Reacting to reports of a tough market, Wells Fargo analyst Steven Cahall noted that it appeared that the cycle of price increase has been broken. “CPMs have risen in the upfront every year in recent memory except COVID,” Cahall said in a research note. “It seems macro plus audience fragmentation are finally breaking linear TV.
“Investors have been asking about upfront volume and suggesting things could be down 20%-plus with heaving pricing pressure,” he said. “We’d say the overall tone, including a -5% to +5% CPM result–is modestly ahead of the low expectations.”
The upfront is only part of the ad revenue picture. With the down upfront, the focus will shift to the scatter market, where most ad-supported VOD and connected TV is already transacted.
“Historically, scatter prices have been above upfront, but that has not been the case since roughly last summer,” Cahall noted. “This fall will see more ad dollars done through scatter, which should show signs of life in May/June, but still appears to be down double digits year-over-year due to ad recession.”
Cahall said advertisers seem to be buying less inventory in the upfront, counting on continued weakness in scatter.
“Scatter could squeeze higher fast, though, if macro-driven ad spend whips back while ratings declines mean more make-goods, so less available inventory to buy,“ he said. ”But since a macro recovery seems improbable, we think scatter pricing below upfront is likely.”
Cahall said the upfront results look best for new players in the ad business like Netflix, Vizio and Roku and worst for Fox, Paramount and AMC Networks, which get the highest share of their revenue from linear advertising.
