By early July of a typical year, most media companies have already wrapped up their annual upfront negotiations. But like everything else in the industry, that timetable was upended this year by the Covid-19 pandemic, resulting in a staggered upfront marketplace with some clients negotiating in the usual broadcast upfront timeframe, while others shifted to a calendar year upfront.
However, even for brands able to transact on a typical upfront timeframe, negotiations have largely stalled, with buyers and networks remaining far apart on pricing amid continued economic uncertainty. And the standoff has been exacerbated by the recent surge in coronavirus cases—particularly in big states like Arizona, California, Florida and Texas—which is forcing some brands to re-shutter their businesses and has buyers even more wary about committing to upfront pricing in case the market falls apart again.
Even with the return of live sports just weeks away—as Major League Baseball and National Basketball Association games are set to resume later this month—buyers are worried about the marketplace’s once-again precarious state.
Two weeks ago, “I would have said we’re doing great,” said one buyer, speaking anonymously, but the spike in Covid-19 cases “scares me.” Among agencies, added a second buyer, there is a growing concern that if those four states and others are shut down again, “are we back where we started? And what does that mean for the next six months, and our media budgets and media pricing for the next year?”
The Nasdaq hitting an all-time high last month “created this fake euphoria for a moment,” said Catherine Sullivan, chief investment officer for North America at Omnicom Media Group. “Some of the sellers are still sitting in a world where they feel like, ‘Oh, this is going to be over and it’s moving on.’ And I can say that, regardless of what industry my clients sit in, that is not the conversation that they’re having with me. So it’s a very interesting dynamic that’s playing out right now in the upfront marketplace.”
Upfront pricing “was already going to be really tricky this year,” with so much coronavirus-related uncertainty, said one buyer, also speaking anonymously—and that was before the recent increase in cases.
As a result of the surge, even buyers and clients who were ready to move in the upfront by late last month have rethought their plans. “Now I feel like we need to wait and see how this works out before we commit to something, because I don’t want to be the agency that commits to a, making it up, plus-five in pricing, and then the world falls apart again, and the media world falls apart, and it’s actually minus-five,” said a buyer.
This adds another wrinkle to an already tense upfront marketplace. Other buyers pointed to the continued ratings erosion in primetime, despite the increase in viewers early in the pandemic (those numbers began to recede in May), which will only get worse if production shutdowns continue and series aren’t able to resume airing new episodes.
“Even if the economics of the demand show that the CPM should be a plus, how would you pay a plus for repeats, or why would you pay [more] for an inequitable schedule?” said one buyer. “I would never pay more for a weaker product. And there’s still so much uncertainty. The fall could get worse.”
With live sports still sidelined, May’s national TV ad revenue fell 23% year-over-year, to a weekly average of $716.4 million, according to Standard Media Index. And buyers expect overall 2020 ad spend to fall 20% from last year, according to recent IAB survey.