Why This Matters: The bulk of TV’s $70 billion ad business still happens during the annual upfront bazaar.
Amid a turbulent media world, with giant companies merging and technology taking over, the 2019 upfront is likely to look very similar to its most recent predecessors. In the face of eroding linear ratings, television remains a hot commodity with advertisers who have been burned by the lack of safety, privacy worries and underperformance of digital media.
To be sure, every upfront is special. Networks and advertisers are wading deeper into the data pool, particularly as more viewing shifts to over-the-top platforms where commercials can be better targeted and even made addressable down to a specific household.
And big changes going on at The Walt Disney Co., as it absorbs the assets of 21st Century Fox, the emergence of the New Fox and AT&T’s restructuring of what used to be Turner could affect the market as well. But the fundamentals look familiar.
“What’s remarkable, with all that systemic change happening, is that the fundamental way we go about doing our business really hasn’t changed much,” Peter Olsen, president for advertising at A+E Networks, said. “There are a lot of headlines … new products … new acronyms … but the goals of the clients are the same. At the end of the day, it’s audience and budgets and client goals, and it’s really not that different.”
Supply and Demand
With supply down and demand steady to possibly higher, networks are calculating just how much of a price increase they can get away with this year, buyers and sellers said.
“I do not see this trend changing any time soon,” said Erin Elliott, VP of media at ad agency Walton Isaacson. “Traditional TV still remains the mother of all video with unparalleled reach. Linear TV is still your most efficient buy when considering eyeballs versus rates.”
“We’re hearing from most advertisers that they’re increasing their ad budgets this year, and they’re focusing more money on the upfront — particularly because there are fewer impressions for sale overall,” said Andrew Sippel, executive VP for media at Advertiser Perceptions, which surveys ad sales and agency and client decision-makers. “They want to make sure they get the best stuff before it’s gone.”
“There’s going to be more inventory for sale,” Sippel said. “Execs from a number of networks have told me that last year, they held back a significant amount of inventory for scatter, thinking supply and demand would give them big CPM increases. But advertisers committed more to the upfront than they expected, so the networks got less for scatter than they anticipated. They’ve learned, so they’re planning on putting more inventory into the upfront this year, and taking what the market will bear.”
A+E’s Olsen is also bullish and feels advertisers’ pain. “We do acknowledge the recent supply demand dynamics throw off an inflationary marketplace that are a big challenge to our advertising partners. Many of our conversations in the past few months are around how do we use our talent, insights and products to drive more effectiveness for the marketing dollars that our partners invest with us.,” Olsen said. “And I think in response a lot of us are trying to be good partners.”
One way to be a good partner is by coming up with data that proves what most marketers know, which is that television works.
In last year’s upfront, A+E guaranteed campaigns would generate results. “We were thrilled to be the first to offer business outcomes and we are thrilled that many of competitors are joining the race,” Olsen said. A+E will continue to offer those guarantees. “If the demand is there, which we think it is, we’re happy to keep going in that direction, because we ultimately think it’s good for the business.”
Setting the Lineup
Disney, Fox and WarnerMedia will be making changes in how they approach the market amid large corporate moves.
A year ago, Discovery completed its acquisition of Scripps Networks Interactive as it went into the upfront.
“Merging two big ad sales organizations is a challenge,” said Jon Steinlauf, chief U.S. advertising sales officer at Discovery and formerly of Scripps. “You have to make a lot of hard decisions. I just like the fact that our reorganization is behind us.”
He expects overall demand to be stable, and thinks that Discovery will have a strong supply story for buyers.
“In the month of February for women 25 to 54 in primetime live-plus-same-day, we were one, two, three, four with ID, HGTV, Food Network and TLC,” Steinlauf said. “I don’t think that’s ever happened before that one company took the first four positions in a demo as important as women 25 to 54.”
And the fastest-growing part of Discovery’s ad business is on its over-the-top GO apps for each of its networks.
“It’s younger viewers, so advertisers are using it as a reach extender,” he said. Those ads also draw premium pricing because they are more targetable.
Data-driven advertising will have a bigger role in the upfront, even if the old-school business approach still dominates.
“We’re having more conversations around audience buying,” Steinlauf said. “But audience buying is not 100% of people’s budgets.”
He said companies are still using 80% of their budgets to reach 25- to 54-year-old Nielsen demos to get awareness and launch products. But they’re also taking 20% of their budget and putting it into automation, addressability, programming, audience buying and database buying.
“I think there’s a place in this business for both,” the Discovery executive said.
