Why The 2017 TV Upfronts Could Be A Buyer’s Market

ipMaureen Bosetti, the chief investment officer for IPG Mediabrands’ Initiative, will discuss dynamics for this year’s upfronts alongside other TV power players at Industry Preview on Jan. 18 in New York City.

The 2016 TV upfronts ended with networks posting double-digit CPM increases, but will that momentum carry into 2017?

Two key factors could help buyers wield more influence at the bargaining table this year.

Changing Of The Guard In The Sales C-Suite

ABC News sales vet Catherine Sullivan departed in mid-November for Omnicom, and ABC’s sales chief, Geri Wang, will step down in March, prior to the peak upfront negotiation period.

Fox Network’s head of ad sales, Toby Byrne, exited his network in September, while Viacom’s sales leader, Jeff Lucas, left for Snapchat after completing 2016’s upfront.

These departures come at a crucial time for broadcasters competing with the winner of last year’s upfronts – NBCUniversal.

“You’ve got to have a lot of power in the marketplace because you’re up against NBCUniversal, which brings really strong broadcast dayparts, cable networks and digital assets,” said one TV agency executive, who asked to remain anonymous. “Maybe we see ABC, Disney and ESPN come closer together as a result of the transitions, which is what we’ve said needs to happen for a long time.”

Inventory Prices Are Up, But Programming Ratings Are Down

In addition to organizational uncertainties at the networks, traditional ratings are falling as more viewership moves to digital and video on demand.

Amazon, Netflix and Hulu are also gaining power by offering content with few or no ads. 

As a result, many networks are racing to improve the consumer experience by reducing ad loads by as much as 50% for certain programs.

But this reduction is offset by price increases.

“A lot of the pricing hikes we saw [during the 2016 upfronts] were likely the result of supply shrinkage, rather than more money coming back into the space,” predicted Marianne Gambelli, the chief investment officer at Horizon Media.

Although the strong 2016 upfront made the TV ad market appear robust, buyers believe ratings declines – especially in traditionally strong categories like live sports – prove that consumer habits are evolving.

Although the US general election could be responsible for some viewership shortfalls, the NFL still experienced its most significant drops in ratings this fall.

And if TV audiences have evolved, buyers say, then networks should too.

“More of our teams are looking across the OTT and video landscape,” said one buyer. “We’re starting to shift money within our own TV pools, so I think the competition will get harder for them.”

Despite these headwinds, broadcast networks believe that the strength of the scatter market – inventory bought for a higher price closer to the air date – will continue into the first quarter of 2017.

And although networks still view upfronts as a hallowed time to secure big commitments, they see the writing on the wall and are striking digital deals (e.g., NBC and Apple News/BuzzFeed) and preferred partnerships to get ahead of new buyer demands.

“I think there’s still a defined upfront marketplace and a moment in time where [buyers leverage] 50-60% of their [money] to get the best deals, inventory, marketing and value,” said Maureen Bosetti, chief investment officer for IPG Mediabrands’ Initiative.

She added: “The principle of the upfront has remained the same, but the timing of it and the partners you talk to have changed. Conversations are happening at different times throughout the year to ensure more fluid conversations, given the evolving needs for our clients.”

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