Could TV Upfronts Strength Hamper Programmatic Progress?

EvolveWith major upfront negotiations winding down, Fox, NBC and ABC hope to emulate CBS’ strong showing, which reportedly saw CPM hikes in the low double digits and about 5% higher sales volume.

Networks have the leverage this year to command higher prices because of the present scarcity, say buyers.

National TV networks reported 19% more revenue from the scatter market (when dollars are reserved closer to a program’s air time at a premium) between October 2015 and April 2016, which led to a 2% increase in upfront revenue in the same time period, according to Standard Media Index (SMI).

That’s a complete turnaround from last year, when scatter revenue dipped 2%, causing a 6% decline in upfront dollars.

But a strong upfront could hamper programmatic TV progress, say some industry insiders, since networks might be more reluctant to expose their data or offer buyers the same concessions they would when prices are weak.

Last year, as a result of the soft scatter market, programmers talked up proprietary audience indexing tools and data platforms to differentiate their upfront pitches. Some positioned their programmatic tools as a value-add – or even a must-have, in some cases, to access the deepest of audience insights – for buying that network’s media.

This has apparently worked in the networks’ favor.

As one buyer put it: “Networks want to create the illusion of data for their own benefit, but you don’t really have programmatic TV until you have dynamic ad insertion totally enabled.”

Time will tell if networks are vested in programmatic for the long haul.

“The money is coming in and the elasticity of price is proving clients are willing to pay more in the upfronts,” one agency investment source said. “I forced my buyers to move fast and we’re putting all our money in the upfronts.”

There’s still a perception among certain buyers that they’d rather “waste a lot and get a lot [with large linear TV buys] than to spend less and get less.”

And programmatic, in its current incarnation, is still a very small part of a network’s revenue, added Jason Kanefsky, EVP and director of strategic investments at Havas.

“Data-infused buying will continue to accelerate as both agencies and networks continue to develop tools that can apply multiple metrics to their clients’ program selection, but this can be done through traditional scatter and does not need to run though a ‘programmatic pipe.’”

Last year’s upfront was all about the acceleration of data-driven buying, but Marianne Gambelli, the chief investment officer for Horizon Media and former president of ad sales for NBC, said she hopes networks aren’t shortsighted and pull back on data access as a result.

Another so-called benefit of programmatic in TV is access to more cross-screen demand – and digitally attuned buyers who want a wider range of formats coupled with their linear buys.

“I think programmatic automation and advanced data targeting helps to make TV more accountable,” she added. “The networks should keep moving the industry moving forward and not let one stronger marketplace allow them to become complacent and accept that we can go back to the way things were always done.”

Buyers also point out that the price inflation at play isn’t necessarily indicative of some big migration back to traditional TV, despite certain vertical increases in spend among political, pharma and CPG advertisers.

Price inflation also happens when ratings decline, Gambelli claimed.

If anything, increased CPMs on linear TV will prompt the buying community to evaluate the holistic video landscape more aggressively, whether through convergent deals that capture delayed/digital impressions for TV content or factor in streaming video on demand on platforms like Hulu, Gambelli said.

Jim Tricarico, CRO at cable and broadcast media network Cadent, agreed.

“Price increases are all about scarcity,” he noted. “Lower ratings means less inventory. Higher prices means inventory preservation.”

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