Upfront Postmortem: Buyers Assess This Year’s ‘Ugly’ Market

Networks secure big CPM gains, but trouble is on the horizon

Given how strong the scatter market had been last season, and the network execs' brash predictions of a lucrative upfront after a couple of lean years, buyers had entered upfront negotiations prepared for the worst—or so they thought. "We knew it was going to be ugly," admitted one buyer, "but we had no idea."

Chart: Carlos Monteiro

While CBS Corp. chairman, CEO and president Les Moonves' bold pre-upfront predictions of double-digit gains may have seemed at the time like a pipe dream, that ended up becoming more of a benchmark in this year's robust market. With the upfront almost completely in the books (NBCUniversal is the last major company that hasn't completed negotiations at press time), all of the networks have reason to celebrate, as many notched CPM increases stretching into the double digits, while volume was also up across the board.

This year's broadcast national TV upfront ad sales will tally around $8.75 billion, a 4.7 percent increase from last year, according to early data from media consulting firm Media Dynamics. On the cable side, upfront sales reached $9.86 billion, up 4.3 percent from 2015.

"It's frustrating as a client and as a buyer when you constantly see inflation while ratings are going down," said Carrie Drinkwater, svp, group director of investment activation, Mediahub. "However, we do have to understand that the world is changing and the media landscape is changing, so there are fewer TV rating points available for the amount of money that's chasing them."

This year, the more favorable deals went to clients who made their buys early. "As the upfronts went on, if you didn't have a lot of money and were late to the game, the inventory was gone. There's just not enough of it to go around," said a buyer.

Another buyer, meanwhile, said the major increases were also a result of their peers not being more informed and aggressive at the negotiating table: "People were not smart about how they registered their money. Because the sellers were picking and choosing what business they wrote, people had no recourse—'Well, we can stare them down, but where are we going to go?'—and they just succumb."

Buyers are divided over whether the strong upfront will finally weaken the scatter market. Drinkwater noted that networks turned away some upfront money, "and I can't imagine they would have done that to set themselves up for a marketplace that has minimal scatter." Others think that scatter will be softer, given that some companies moved their scatter dollars to the upfront to protect themselves against further increases.

While buyers acquiesced to the CPM hikes, they warn that clients will balk at continued increases. "There's a point where clients and agencies will need to walk because it's not ROI-positive for us, and it becomes too inefficient to buy TV," said one. (Scoffed a rival buyer: "I don't know where these people think they're going because digital is not the answer.")

As linear ratings continue to decline, "we're in a business of paying more for less. Until we're paying more for more, I don't know that we're at a point where we can feel good about things," said a buyer. And this year's big gains are overshadowing other potential future problems, especially as viewing habits shift away from linear.

"If I were a TV seller, I would not celebrate long because unless they really get their digital act together, it's going to be a rough road ahead," said another buyer. "We basically put a Band-Aid on it for a year and did not fix the actual illness, and it worries me a lot that a lot of the TV sellers who have access to great content are not looking at it in more of a multimedia world."

This story first appeared in the July 25, 2016 issue of Adweek magazine.
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