Buyers Expect Staggered Upfronts Marketplace as TV Ad Forecast Remains Murky

'We don't know when the world will be back,' explains one marketer

a bunch of TVs overlaid with a question mark
Advertisers have many questions—and few answers—about what the TV marketplace will look like over the coming year. Getty Images
Headshot of Jason Lynch

Key insights:

For the past month and a half, the TV industry has been grappling with the fallout from the Covid-19 pandemic, which has halted Hollywood production, canceled almost all live sports and will cause an estimated $10 billion ad revenue loss in the first half of 2020.

While buyers and advertisers continue to navigate their necessary short-term coronavirus-related moves—adjusting ad spend and messaging—they are not ready to think long term yet. With so many unanswered questions about the economic impact of the crisis on their respective businesses, this year’s upfront marketplace will not take place during its usual early summer timetable. (Already, May’s upfronts week has collapsed, as most media companies delayed their virtual events.)

Instead, because of the continued economic uncertainty across the country, coupled with TV’s production shutdown, buyers tell Adweek that this year’s upfront negotiations will likely operate on a staggered schedule, with clients and categories engaging in talks at various times during the second half of the year.

A more pressing issue for many marketers is their looming third-quarter options, which give them the ability to cancel some of their third-quarter buys made during last year’s upfront negotiations. Many of those options must be exercised by May 1—though there are indications that some media companies will allow those deadlines to be extended—and are likely to further blunt the TV ad marketplace.

According to new data from eMarketer, U.S. TV ad spending will decline by between 22.3% and 29.3% in the first half of 2020 compared to previous forecasts, a loss of between $10 billion and $12 billion in revenue. This morning, AT&T released its quarterly earnings, revealing that first-quarter advertising revenue had fallen 24% year over year to $957 million—a loss of $304 million—as a result of the pandemic.

No one’s up for an upfront yet

With no clear picture of when the economy may be able to bounce back or when it will be safe for Americans to stop sheltering in place, advertisers are not in a position to talk about upfronts.

“I don’t know what type of client is willing right now to commit money in 2020. We don’t know when the world will be back,” said one buyer, speaking anonymously. “I can’t imagine any client’s CEO or CMO or CFO approving money right now for fourth quarter—at least any substantial enough money to create a marketplace. Who knows what’s going to happen with automotive and theatrical; there’s so much unknown for those big categories right now.”

“I don't know what type of client is willing right now to commit money in 2020. We don't know when the world will be back."
Anonymous ad buyer

While pharmaceutical, insurance companies and streaming have increased their ad spends during the pandemic, travel continues to be hit hard. The food industry is a mixed bag: Casual dining is taking a hit as restaurants have closed, but QSR brands are pushing their delivery options.

Multiple advertising organizations have been conducting talks among marketers and publishers about the upfront marketplace, according to sources, including the 4A’s and Association of National Advertisers, and many upfronts week presenters are gathering today for the VAB’s semiannual board of directors meeting, where upfront plans are expected to be discussed.

While some people are advocating for a switch to a calendar-year upfront, buyers said a staggered approach is more likely, depending on when a particular company is ready to go to market.

As one buyer explained, “Key categories are going to have different timelines on when they’re ready to make commitments. What might be good for CPG may not be good for travel, and what might be good for travel may not be good for auto and so on and so forth.”

Because of that, “I don’t think we’re going to have a unanimous decision. I think we’re just going to have to spend an enormous amount of time listening to our clients—as we have already been doing—gathering the information and weighing the options. And then, as we always do, dive in when we think we see opportunity. That’s how we’ve always negotiated,” said Catherine Sullivan, chief investment officer for North America at Omnicom Media Group.

“I think that’s much more likely to happen that way, based on individual client needs, than a unilateral decision to fully punt everything to a calendar upfront and place fourth quarter in scatter, and everyone agree to that,” said David Campanelli, co-chief investment officer at Horizon Media.

One TV ad sales chief predicted that of the roughly $20 billion in ad sales transacted during a traditional upfront, half of that business will be conducted later in the summer, one quarter will move to a calendar upfront model, and the other 25% will shift entirely out of upfront and into the scatter market. That last point dovetails with an Interactive Advertising Bureau survey last month, in which buyers said they expect to spend 20% less than originally planned in this year’s upfront marketplace.

Mulling their options

While many advertisers aren’t ready to think about the upfronts, they do have to make a decision on their third-quarter options, with the May 1 deadline just a week away. Buyers expect the third-quarter cut will be deeper than usual, as advertisers “are probably going to take some part, if not all, of their options to give them the flexibility they need” as they try to determine how long their businesses will be impacted.

Some agencies have asked media companies for flexibility in moving the option deadlines, and networks are likely to comply in an effort to hold on to that ad revenue.

Those cancellations will also impact the scatter market, which has taken a hit during the pandemic with so many clients seeking relief. Even with some scatter activity, “the options that are taken will far outweigh any scatter money that comes in,” notes one buyer.

Sports will lead the way—probably

Marketers said most media companies have been flexible with their requests for relief during the pandemic following some early stumbles last month, including less-than-attractive replacement options for some canceled sports events. “You had live hockey, and they’d run you in repeats but not lower the CPM,” said one buyer. “That was ridiculous—but it’s come a long way.”

“Nostradamus would be great right now. Is baseball coming back? Is the NBA coming back? Will there be a hockey Stanley Cup? We just don't know these things."
Carrie Drinkwater, executive director of integrated investments at Mediahub

At this point, most buyers expect that TV’s fourth quarter will include a considerable amount of live sports, but there’s still no indication of if and when the leagues will be able to resume play.

“Nostradamus would be great right now. Is baseball coming back? Is the NBA coming back? Will there be a hockey Stanley Cup? We just don’t know these things,” said Carrie Drinkwater, executive director of integrated investments at Mediahub.

Added Omnicom’s Sullivan, “Understanding what those schedules start to look like, and what does the new world of live look like, will help us to understand supply and demand, and what the third and fourth quarter looks like.”

During Fox Sports’ virtual town halls with agencies earlier this month, company execs updated buyers on the state of live sports to help them plan for the NFL’s and MLB’s return following the pandemic.

“Several of our partners suggested that once we could give them some certainty around the sports schedule, they could go back to their clients and start planning for late third and fourth quarter,” Seth Winter, evp of sports sales at Fox Sports, told Adweek at the time. “They recognize that sports is going to be a vital part of the restoration of the advertising marketplace. … We’re looking at sports as a way to plug whatever holes might exist in the entertainment schedule.”

As buyers gauge their media spend strategies during and following the crisis, they aren’t just looking at when shows will be back in production and when live sports will resume, but what consumer sentiment will be at that time.

Gibbs Haljun, total investment lead at GroupM’s Mindshare, said that Mindshare’s weekly research study on consumer sentiment and other behavior changes during the pandemic has noted “fear, anxiety, stress and things like that, and that has a very motivating impact on consumers and what they’re willing to do and what they’re not willing to do. And that will also impact of a lot of what happens as we move forward in third and fourth quarter, and beyond.”

There’s been one F-word that has kept coming up during the past month in discussions between marketers and publishers: flexibility.

“Flexibility is something that’s key, and it’s going to be more important than ever before,” said one buyer. “How do we work that into how we do business on a daily basis? Does that mean less committing up front, changing the way we work the upfront?”

For starters, one TV sales exec suggested that in addition to having cancellation options baked into upfront talks, there might also be a focus on expansion options, to give brands the ability to increase their buy later in the season at the same reduced upfront prices.

Overall, “everybody is being far more creative than we ever have been in terms of looking for solutions, finding solutions, trying to push things out, and be more adaptable because of what’s going on,” said Mindshare’s Haljun. “And I think this could be a great way to change the business a little bit and evolve for the better. Where it’s not about saying ‘No,’ it’s about saying, ‘Hey, let me see what I can do.’”

@jasonlynch Jason Lynch is TV Editor at Adweek, overseeing trends, technology, personalities and programming across broadcast, cable and streaming video.