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Are the National TV Upfronts still relevant?

For at least the past decade, media industry watchers have pondered whether the National TV Upfronts might go the way of floppy discs, dinosaurs, and parachute pants.  Really, there has been deliberation about them for much longer than that (in fact, the format was broadly debated in 1992).  The timing and formats have evolved somewhat over the years, most recently in 2008 with the addition of the NewFronts and the scaling down of some of the traditional network presentations in response to the recession.  And still, there are aspects to the process that seem out of touch and downright … inefficient … to many observers.  All of which leads us to ask:  are the Upfronts still relevant?

How the Upfronts Work

The National TV Upfronts are essentially a kind of futures market, although not in the traditional Wall Street sense.  Buyers make commitments for a year’s worth of TV advertising time (typically September/October through the following August/September), and they receive guaranteed pricing from the sellers for that entire period.  Buyers can alternately purchase TV time ad hoc (on a quarter-to-quarter basis) in the Scatter market, however the pricing fluctuates based on supply and demand.The basic tenets of an Upfront deal:

  • Purchased a year at a time (usually for the TV “season” from September-August)
  • Rates are negotiated as increases (or occasionally decreases) in cost-per-thousand vs. the prior year
  • Audience delivery is guaranteed over the course of the buy by the seller, so if certain programming underperforms, the buyer receives Audience Deficiency Units (additional ad units) to deliver to the guaranteed audience purchased
  • Buyers do not pay for any audience over-delivery which may occur
  • Advertisers can negotiate specific programming or mixes of programming, which will impact the overall package pricing
  • The buyer receives “cancellation options” on a portion of the commitment (typically 15-30% of the total), and can thus reduce its overall commitment to the seller on 60-90 days’ notice
  • These types of buys often incorporate sponsorships, integrations, so-called “added value”, multi-platform extensions (such as online video, video on demand, etc.)
  • Depending on the network and the advertiser category, the buyer may be able to negotiate other guarantees such as competitive pod exclusivity, position within pod, etc.

The allure of the Upfronts has been that in most years, pricing is lower.  Occasionally, in soft economies, Scatter pricing has actually been lower.  The other major benefit to the Upfronts has been that audience deliveries are guaranteed by the so-called broadcast networks (ABC, CBS, etc.).  Delivery on cable networks (such as Discovery or Bravo) are typically guaranteed in both Upfront and Scatter buys.

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The other defining characteristic of the Upfronts is the presentations by the vendors and the negotiations that follow.  In May of each year, the broadcast networks each present highlights from their upcoming season’s schedule, new technologies, and audience/research highlights to buyers in venues like Radio City Music Hall and Carnegie Hall.  These events have evolved over the years, but they remain a way for sellers to try to create excitement in the marketplace in advance of the actual negotiations.  In recent decades, cable and digital video sellers have added their own events.

A Brief-ish History Of the Upfronts

To understand where we’re going, we need to understand where we’ve been.  Or something like that.  In order to have a conversation about what the Upfronts mean today, we need to understand a little bit about how they came to be, and how they’ve evolved to their current state.

The Upfronts have actually been around for nearly as long as television itself.  Shortly after the launch of the ABC and CBS TV networks (which followed NBC), the Upfronts began in 1948.  There was no television “season” at that time, and programs premiered basically as they were ready – with that show’s “season” essentially determined by its premiere date.  Upfront negotiations were loosely tied to the studio development cycle, and actually would begin the week after Washington’s Birthday.  Advertisers were tied to specific shows, and in essence “owned” those programs.  In this sense, all TV advertising was sold as Upfront.

This model had some limitations for both sides.  Since advertisers “owned” specific shows, they assumed much of the financial risk for a program’s failure.  They had all of their eggs in a very limited number of baskets.  On the other hand, in the 1950s, many of the top rated programs on TV were tied to specific advertisers, limiting the networks’ ability to control their overall ad sales initiatives.

In 1962, ABC moved its entire programming lineup to premier during a single week in the Fall, in an effort to lure dollars from automotive advertisers eager for big audiences as they launched their new models.  Within a couple years, the other broadcast networks had followed suit, and the TV “season” was born.  It was ABC again that would – some 5 years later – offer ratings guarantees to advertisers who purchased in its Upfronts.  This shifted risk for failing shows away from advertisers, and as this became the standard really ushered in the Upfront as we now know it.  This also allowed the networks to “package” hit shows with less successful ones.

For a time, limited supply and increasing demand drove huge (i.e. 25%) year-over-year price increases.  Still, advertisers who skipped the Upfront and waited for Scatter often got burned with even higher increases.  Even now, in most years Scatter inventory is more expensive than Upfront.  And even to this day, networks often command year-over-year annual increases that, while not 25%, are still well above inflation in most other categories.

The modern broadcast Upfronts kicked off with lavish presentations by each network in May, typically 2 weeks before the Memorial Day holiday.  After (or sometimes during) the presentations, dealing would start.  In some years, the entire process might take a couple of days, and be wrapped up prior to Memorial Day.  As Cable networks became more important (and as other broadcast networks like Fox and CW launched), they added their presentations to the “schedule”, which now spans many weeks.  Then, in an effort to lure advertisers to digital video, the digital industry launched the NewFronts in 2008, featuring dozens of additional vendors presenting their wares the first 2 weeks of May each year.

Keep Upfront Buys; But Lose “The Upfronts”

Few would argue that the basic characteristics of an Upfront deal don’t have a place in the contemporary media supply chain.  For an annual or multi-quarter commitment to a network, an advertiser locks in rates, obtains audience delivery guarantees, and has the flexibility to cancel some pre-agreed portion if necessary.  With that said, there are some key aspects to the current Upfront selling cycle that don’t make sense for the industry.

1.  The timing is silly, and doesn’t work that well for anyone.

The May launch to the National TV Upfronts is driven by the September Fall TV “season”, which was created for the automotive industry in the 1960s.  Most of the deals are done between May and July, and most of them cover purchases (and feature a guarantee period) that runs September/October through the following August/September.  So advertisers are making commitments as far as 18 months out, and networks are weighing the pricing they command in the Upfronts vs. potentially holding inventory back for higher profits in the Scatter markets many quarters in the future.

This doesn’t really work great for either side.  Both are making decisions way earlier than they might like, although certainly the sell side likes locking in business.  Some advertisers even forego the Upfronts entirely, because they aren’t willing financially to make commitments so early.  And all of this is predicated on the idea that there will be this “feeding frenzy” for the new season’s inventory once the sellers have presented their wares.  Supply isn’t so limited anymore, though.  Audiences are a great deal more fragmented.

The highest rated series on TV in Adults 18-49 is on Cable (AMC’s “The Walking Dead”).  Popular “YouTubers” routinely garner millions (sometimes tens of millions) of views.  There is a great deal of video content on the market, and it is not just the big 3-4 networks which generate reach these days.  Unquestionably, some of the highest rated programs/content out there still air on the traditional broadcast networks.  However, the situation is no longer anywhere near what it once was, when the networks could present their Fall schedules for 3-4 days, and then in 48 hours write a year’s worth of business at 20% increases over the prior year.

Indeed, the very idea of a TV “season” has gone out the window, to some extent.  Sure, some shows still premiere in the Fall.  But others premiere throughout the year, in Winter, in Summer.  Some go on mid-season hiatus only to return later in the year.  On subscription services like Netflix and Amazon, entire seasons are released at once.  Digital video content is created and released on myriad different timetables.

So, “season” doesn’t mean what it used to.  Why the continued focus on selling based on this idea of a TV “season”, and why the “annual” Upfronts in May/June?  What if advertisers signed deals at a time and based upon a timeframe that worked for their businesses?  Their planning cycles, their fiscal years, etc.  Advertisers and agencies don’t have the same gun to their heads as they did when there were fewer options, so why does the industry at large still act as if they do?

2.  The presentations themselves have gotten out of hand.

Even as some networks have dialed back the lavishness of their Upfront presentations, the sheer number of presentations is nothing short of insane.  Certain sellers (like NBC/Universal) have combined the presentations for their various properties.  Still, between the so-called broadcast networks, the Cable networks, and the digital video sellers, the NewFronts/Upfronts extend from early March through mid-May and comprise no fewer than 80 (!!) individual presentations.

You may wonder, who in the hell is going to all of these presentations, and when do they have time to do anything else?  So do we.  In fairness, not every buyer or advertiser goes to every presentation.  They go to the ones that they are interested in, or the ones that fall within their particular specialty, target audiences, etc.  Still, you have industry professionals attending in some cases dozens of presentations on different days and in different locations.

Does this make sense in this day and age?  Bottom line, does this format provide buyers with the best opportunity to learn what they need to learn in order to make investment decisions?  Shouldn’t that be the focus?  It’s been proposed that perhaps a conference-style gathering, in a single location over 2-3 days would be an improvement.  Perhaps it would be, but would even that be the most efficient way to communicate actual necessary information to buyers?

What about webinars?  Live streams?  Do the presentations really need to be live at all?  Should they be more interactive and data-driven, so that buyers can efficiently obtain actual information that would help them make decisions?  I know, it sounds a lot less “fun” than the current model.  But are the Upfronts really that “fun” anymore?  And is it really about “fun” anyway?  We’re talking about huge financial commitments.

The sellers potentially miss out on some PR without these big events, but that doesn’t have to be the case.  If they are announcing anything that is truly newsworthy, won’t it find its way to the trades anyway?  Does having the networks’ celebrities or executives there live, in person, really sell more advertising?  Gee, I hope not.  Hardly a sound reason for making marketing investment decisions.  And it’s not as if the public at large is following these events or the “news” that comes out of them to any great degree.

Bottom line, the focus should be on efficiently communicating information that buyers need to make informed, rational marketing investment decisions.  Anything other than that is just a waste.

3.  The lack of transparency is dated and inefficient for the market.

The biggest news items to come out of most National TV Upfronts are, of course, the pricing that the marketplace and the key sellers within it are able to command.  Who is getting what percent cost-per-thousand increases?  Is the market up or down?  By how much?

Right now, this is all based on a lot of hearsay.  Networks don’t "officially" divulge their pricing, and neither do agencies or advertisers.  No one wants to make a “bad deal”.  No one wants to look foolish.  No one wants to have their pricing used to help competitors – either on the buy or sell sides – leverage better deals than the one they just cut.

In a more perfect national TV marketplace, this information would be transparent.  Inventory would be bought and sold based on its merits and based on economic forces.  All of the other B.S. would go away.  Yes, prices would fluctuate, but much the way that stock prices fluctuate.  And, if everyone weren’t buying and selling at the same time, once a year, then this data would be timelier and more dynamic.  Does this devalue inventory?  Not if it was worth it in the first place.  It just removes some of the subjectivity from the process.

This would further allow advertisers to more fully leverage other data to make informed, granular decisions about what to buy and what to pay.  Whether this process were fully “programmatic” and whether such data were incorporated into the “currency” of the buy or not, this would still allow advertisers to make better decisions about how to most effectively invest their media dollars.  Surely, algorithms can be written to deal with things like program mix, dollar volume, etc.  Yes, it would take emotion out of it.  Yes, there are those who might “lose” in that kind of a scenario.  And that would foster competition and improvement on both sides of the buying equation.

Ultimately, the idea of “Upfront” buys is not going to go away, nor should it.  But certain aspects of the current paradigm don’t make sense anymore, and they are holding the industry back.  Inertia and CYA dynamics have led to a situation where advertisers and agencies – after viewing perhaps dozens of mind-numbing presentations where every seller is “#1” at something – negotiate with limited information to pay an undisclosed amount for commercial time, transacted much earlier than they would like, for an upcoming TV “season” that really doesn’t exist in a meaningful way anymore.   But yes, by all means, let’s do it again.

If you made it all the way down here, you might also enjoy “Is the TV Upront Right For Your Organization?”.

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