The 2021 TV Upfronts: When Will the Bubble Burst?
Let me paint a picture for you – it is mid-May and the Monday of Upfront Week 2021, the annual coming-together of the buyers and sellers of national TV commercials. This is where networks traditionally showcase their new programming to advertisers ahead of the upcoming fall season. In past years, buyers scurried across Rockefeller Center with their clients in tow to get to the NBCU presentation on time and looked forward to taking in all the new opportunities to showcase their brands. In 2020, during the pandemic, these presentations didn’t happen at all. No one was sure whether there would even be any new programming with most production halted. Some did manage to be produced, but the networks communicated to the buying community via e-newsletters with the premiere dates listed as “TBD.”
This year (yes, back to May 2021) I’m suited up in my best work-from-home sweats, ready to enjoy my morning coffee and see what’s in store for the post-pandemic recovery season over a virtual event when my phone rings (or text beeps, or Teams Chat rings, as this is my new normal).
“Get your budgets and registrations in now!” a very direct voice says. “What? I don’t even know what I am buying,” I think. “Why are people registering budgets already??”
Eight weeks later, we are emerging from what was the fiercest, quickest Upfront in recent history.
By mid-June, CW, NBCU and Disney had wrapped their Upfront negotiations in rapid succession. By the end of June, all major media companies had closed business.
Network executives are publicizing this as the most successful Upfront in history in terms of volume and pricing, echoing statements about the “high demand,” “strength of the market,” and “tremendous volume.”
“It was the strongest Upfront I think probably in the history of NBCUniversal,” said Jeff Shell, NBCU’s CEO. “We saw results in this Upfront far beyond what we thought we’d see. Demand was extremely strong.”
And on the buying side – we saw it too. Demand is high because advertisers have re-emerged post-pandemic with aggressive goals to engage consumes and deliver on KPIs. We know the demand is there – we saw it in the Scatter marketplace leading into the Upfront season where multiple media outlets sought increases anywhere from 30-50% over the 20-21 Upfront pricing.
But what we also understand is that primetime ratings are down 27% when comparing Q4-Q2 P18+ Nielsen ratings to the same time period year prior. And while it’s anticipated that linear TV Upfront volume will be up 7.6% YOY, it’s really the decline in ratings that is creating an artificial market and driving the demand. In fact, the $19.9B “record volume” is essentially flat to the 2-year pre-pandemic average. In primetime specifically, the low-end estimate from Variety is $8.2B which aside from last year is the lowest amount spent in prime since 2015.
What was indeed historically high, however, was the ROC (rate-of-change) CPM increases secured by the networks. Broadcasters closed in the high-teens to low-twenties with some cable media companies (Discovery) securing even higher increases. These increases are more than double the previous decade’s peak of +11% in 19-20, which was the highest ROC increase since the 2008 recession.
Of course, what seems obvious to us is that when the numbers from last year’s pandemic-delayed 2020-2021 Upfront are added, they will show a flat to -4% change from that record 19-20 year. So essentially what the networks were trying to do with the 20% increase this year was to just make up for last year’s losses and net out at a +9% for the two-year average. Of course, this is not how the networks will spin it in the press. But the question that is burning inside media professionals analyzing these numbers daily is: How long can these insane increases go on?
Just last year the ANA was calling for the broadcast Upfronts to be dissolved – pushing for more flexibility for advertisers and control as it relates to timing. But here we are just a year later, in the same cycle but with the sales demands coming from the network media companies pushing what is more favorable for the health of their business model under the veil of a video-agnostic, consumer-first response to changing consumption habits.
What quickly disappeared as well were the agency demands that the Upfront marketplace become more accountable for outcomes & measurement, more accurate in audience estimates and guarantees, and better at attribution models. All of that went out the window when that phone call, text or Teams Chat was answered in a panic, and we were all forced to get on board or miss the boat.
The COVID pandemic was a disruptor and an accelerant, lighting a fire in the industry to call for change on both sides. While last year it was the advertisers making demands, the pendulum has swung the other direction, more quickly than ever before. Moving forward, national TV advertisers expect three new norms:
- Networks shifting dollars to their digital & streaming platforms – as much as 30%
- Broadening Demos – anything with “+” is seen as a positive (pun intended)
- Flexible video guarantees – platform/network agnostic
As advertisers we must stay vigilant in our knowledge of consumer trends and plan for these adjustments accordingly from a pricing and allocation standpoint. But keep in mind, as we expand our strategies and develop more marketplace competition for what was previously earmarked as linear dollars, the networks will have to price more in accordance with their audience deliveries as response to the fragmented spending. The network pricing bubble will eventually pop.
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