If everybody waits out this upfront for better inventory in the fall, will anybody get enough of it? Brian Wieser, analyst at Pivotal Research (and a former head forecaster for Magna Global), said he’s predicting volume decreases on the order of between 5 percent and 10 percent across what was a $9.25 billion upfront bazaar last year (where networks saw strong interest in upfront commitments), which was followed by a weak season. That puts the upfront haul (which is, of course, largely theoretical anyway—clients can cancel up to 25 percent of their commitments in Q1 of 2015, with options to renege increasing to 50 percent in Q2 and Q3) comfortably south of the $9 billion mark.
But it also means more of the real buying will get done after the season’s hits are established, and at a hefty markup. “Scatter is going to be pricey,” said one network exec flatly. Don’t confuse this talk with the CPM gains networks tout during the upfront—those can be valuable, but they can also be a smokescreen when dollar volume is down.
“We’ve had a couple of years where it seems like all of the scatter business was pushed into the upfront markets, and that, surprisingly, continued into last year from the year before,” explained Wieser. “Because [the trend] didn’t break last year, we had virtually no volume in the scatter market [since new shows couldn’t deliver the ratings].”
Clients, Wieser said, are asking themselves why they’re putting so much money down in the upfront when that money just gets redistributed at midseason to atone for underdeliveries. Why not hold back that money and spend it when it’s clear what the hits are, rather than have money languish at a network where your customers aren’t watching?
Well, buyers are about to find out whether or not the trade-off—better shows for higher prices—is worth it. “‘Why don’t we look to see what pops up in the middle of the year and whose seasons are strongest?’” Wieser asked rhetorically. The glum ratio of hits to misses isn’t new—even the networks themselves joke about how bad it is—so if you don’t have to lock in your buys, why bother?
But if every advertiser decides that this is the season to cut back on upfront budgets and put the remaining cash into scatter inventory on the season’s established hits, scatter pricing is going to go through the roof.
On some level, that’s good for the creative part of the industry—scatter is driven by success measured in old-fashioned GRPs, not by predictions and targeting.
But it also means networks can charge whatever they want when the numbers are in. Worse, if most of the inventory is gone, either because of underperformance elsewhere in the market or a run on scatter inventory, buyers may have to thank them for it. Clients give media buyers a certain amount of money and don’t want to hear that they couldn’t spend it because buyers waited too long.
Still, some of the money that didn’t land in broadcast this year is almost certainly going into cable, and companies like NBCU, which have been priced cheaply in the past, are seeing what CEO Steve Burke called “a very meaningful correction year.” Dollar volume in broadcast has been sinking for a while—it’s pretty clear that this isn’t the bottom yet.