MBP Overview: The Television Upfront

The television upfront is either a dinosaur or a thriving marketplace, depending on who you ask… and when you ask them.

The network upfront happens in May, when networks reveal their fall schedules and advertisers can buy blocks of TV time all at once and not have to worry about missing out on prime inventory later on. If they hold back their funds and wait to buy inventory later - during the “scatter” market - they may have little or no prime inventory to choose from. On the other hand, if they agree to purchase during the upfront at prices that are later shown to be higher than demand dictates, they essentially lose money.

The upfront television marketplace process has been criticized by buyers for years. Prior to 2005, buyers swore, as the upfronts loomed, that they wouldn’t get hosed by the networks, which continued to increase prices in spite of the fact that the value of television was supposedly decreasing in the digital age. The death knell of the 30-second spot had been tolled, many claimed, yet sellers didn’t seem to hear it. Buyers claimed that the prices were too steep and that the networks didn’t reflect the fact that demand for TV had begun to dissipate.

By 2005 and 2006, however, prices at the upfront began to flatten or to rise only marginally, boding well for buyers.

But soon another issue reared its head: the metrics that would be used as “currency” during the upfront. Typically, buyers “bet” on how well a show will perform as evidenced by its ratings. But in recent years, as DVR use became more popular, viewers had the ability to record shows and play them back. Ratings that included playback data were obviously higher than ratings for live-only viewing, which gathered data only on people who watched the show at the time at which it aired.

However, because the data doesn’t show how many viewers are actually watching an ad when it is played during playback mode, buyers did not want to negotiate deals based on anything but live-only (as opposed to the live-plus-same-day, live-plus-two-day, live-plus-seven-day, or any other of the six streams of data that Nielsen was able to offer). In 2006, the year the measurement became an issue, the networks capitulated, agreeing to negotiate deals solely based on live-only ratings.. The upfront fetched just $9 billion in 2006 (compared to $9.3 billion in 2004).

But now, with the 2007 upfront, networks are saying they will not do deals based on live-only ratings. A CBS representative says that the network “intends to get paid for DVR viewing in this year’s upfront negotiations,” for example, while Alan Wurtzel, president of NBC Universal research, says, “We have got to get some credit [for viewers] beyond live. The live-only data stream is a distortion of how people watch television today…. Live-plus-same-day is a good compromise and live-plus-same-day is what we are going to use for this upfront.”

Next year, many upfront players believe, the measurement disagreement won’t be an issue because Nielsen’s commercial minute ratings - which measure average viewership of the commercial pods throughout a show - will be in full use. (Commercial ratings were supposed to be in use during this spring’s upfront, but controversy surrounding the new data caused a number of delays.) The most recent report is that they will be ready for release at the end of May, but that buyers and sellers should hold off on using them as currency until the end of the summer, after they have had time to vet the data.
In the meantime, speculation has been blossoming regarding the ultimate future of the upfronts: Would the TV upfront turn into a television/digital hybrid? Would digital media begin an upfront of its own? Or would the upfront die altogether, now that digital media is supposedly stealing much of television’s luster?
Part of the reason the upfront has been called into question is that its very reason for existence has changed. Before digital media and, perhaps more to the point, before cable television, the upfront was a seller’s game. The networks announced their fall schedules and buyers rushed to purchase air time before inventory ran out. In two or three days, the networks sold out of inventory and buyers who missed their opportunity were out of luck.

Today, with hundreds of cable channels that can target consumers more specifically than the networks can, there is far more inventory available. And the networks no longer have just a single season, but rather launch shows every which time. Digital media, too, has broadened the scope of marketing. Some major companies have opted to sit out the upfront altogether; Johnson & Johnson is avoiding the upfront this year for the second year in a row.
In spite of it all, the upfront seems to have survived, though the complete process takes closer to several weeks or a month rather than days.

This year, analysts are predicting that sellers will be able to pull three to five percent increases, based on the fact that the scatter market has been strong, which could indicate that demand for inventory is high.

Buyers are reportedly scoffing at such reports. Rino Scanzoni, chief investment officer for GroupM, points out that his agency does not look at upfront and scatter dollars being separate issues. “If you combine the two this season, the overall dollar growth for broadcast television is only about 2 percent, and that is something that shouldn’t give them great negotiating advantage in the next upfront,” he has said. He goes so far as to say that the networks are beginning their posturing, trying to “panic” the buyers.

But whether optimistic buyers like Scanzoni truly have the upper hand or whether they’re whistling in the dark is up for grabs.

For a list of upfront stories by category, see to the right. Or, click here for a complete listing.