Will Last Year’s Upfront Shortfalls Continue in 2015?

'The upfront is not what it used to be and never will be again'

With the 2015-2016 upfronts now behind us, it's on to the sales season. Last year's upfront market was down, with both broadcast and cable taking hits. New Jersey-based MDI pegged the decline at 6.1% to $18.125 billion overall, including a 4.7% drop by cable to $9.67 billion. The shortfalls marked the first retreat since 2009-10, when the market suffered from the lingering effects of the 2008 financial crisis.

Where is the upfront headed this year? While agency executives say it's too soon to say, there are a number of key things to consider that will partly shape the Madison Avenue bazaar.

SCATTER: While the market still hinges on supply and demand, the equation has changed significantly.

"That's less of an issue now with all of the platforms," said Amy Ginsberg, managing director of investment at Initiative. "The upfront is not what it used to be and never will be again."

Still, the relative scarcity of key inventory and the wont to hedge against paying more in scatter as hits materialize will influence outlays. The problem for network sellers: most buyers say they have not been penalized heavily for holding back at the upfront.

"There has been little risk on pricing for most brands and the availabilities are there," said MediaVest president of investment Melissa Shapiro.

Jackie Kulesza, evp and group director of digital acceleration at Starcom USA, assessed scatter differently: "There are some supply constraints. It's important to analyze that investment strategies and spending goals are [ahead of the upfront]."

CURRENCY: Buyers are forecasting that both C3 (live + 3-day DVR viewing) and C7 (live + 7-day DVR viewing) will be in play. "It depends on the client. Different types of currencies will be used," said Kulesza.

Initiative's Ginsberg thought C7 would be a bigger factor during last year's upfront. "It depends on the client: C7 is not useful for retail clients," she said, pointing to more immediate needs. If the networks are truly pushing C7, Ginsburg says, "we're going to look at 'minute-by-minute,' rather than the average.

CABLE: With ratings off, cable — which still scores with its targeting capabilities — doesn't hold the same value proposition of being able to replace broadcast weight.

"Yes, we've seen a decline in cable ratings among the top tier players," said MediaVest's Shapiro. "But it's not about adding more cable, broadcast or syndication. It's about [evaluating] the entire media landscape in the right measures."

"Cable is down double-digits, but it depends if you're going after (the adult demographic) 25 to 54, or another demo," said Ginsberg. "Hallmark and ABC Family are up."

John Swift, CEO and president of North American investment at Omnicon Media Group, noted that if clients didn't secure positions in certain cable shows during the upfront, they couldn't get in.

All the same, he wonders if this is "the year the long tail of TV gets hurt? Are there too many ad-supported cable networks?"

BROADCAST: Ratings parity among networks should put the ball in the buyers' court. "NBC built up with the singing shows and then The Black List last year," said one buyer. "Fox is feeling okay too with Empire. Since the networks are all within a few points of each other, you have options."

Initiative's Ginsberg is looking for more patience from the broadcasters, particularly on the sitcom side.

"The networks are less particular and they pull things quicker. Seinfeld was terrible at first; Big Bang grew after its first year," she said. "The comedies [as a group] are getting older. They need focus, more time to grow."

FLEXIBILITY: The principle manifests in several ways, including when brands need to be in the market.

"[Flexibility] has always been an important word. Clients have challenges and requirements in terms of delivery and numbers they need to meet and report," said Kulesza. "They have to balance the risk-reward strategy about how deeply they play in upfront versus whether they are in the marketplace the entire year."

Buyers are adhering to the guideline of following the consumer/viewer who are finding more ways to watch on different screens, which affords them an edge in talking to suppliers. "If you don't buy a certain show on linear, you can get it a different way," said Ginsberg.

MEASUREMENT/DATA: Tracey Scheppach, executive vice president of precision video at Starcom MediaVest Group, said the TV market is growing. "There is more supply than ever, but it's harder to get at all of the information with that fragmentation.

Data is causing you to reevaluate the role of agencies. There are growing pains. We need more people, more technology, more analysis. We need to find people with different skill sets to help us make smarter decisions."

At this point, Kulesza says, "technology continues to outpace measurement, which has adapted and evolved. Consumers expect to view content whenever and wherever. The changing environment gives us an opportunity to really understand what and where they're watching and what to value. We're making educated bets, but measurement is not catching up as quickly as we would like."

UPFRONT FORECAST: "It's too early to tell [about volume]," said MediaVest's Shapiro. Clients are still sorting out objectives and strategies.

Kulesza also stayed away from prognostication: "We don't know if volume will be up or down. It's too early."

Omnicon's Swift summed it up this way: "There has been an overall lack of urgency in the market over the last few years. The pricing premiums have not been as severe overall in scatter, but supply [ratings] issues have limited the availability of certain programming. It's early, but I don't see the upfront being super down."