Everyone will still turn out next week to catch the major broadcast and cable networks’ upfront presentations. Advertisers and analysts alike enjoy taking a first look at the new prime time shows, gawking at the stars, and downing the after-party drinks and shrimp.
But many realize that all the sound and fury signify, well, not quite nothing — but a lot less than they did in years past.
Pre-season primetime sales aren’t a reliable early indicator for how traditional media companies will fare financially. Last year upfront commitments slipped about 5% vs 2013 for broadcast and cable. But that “didn’t portend total TV budgets declining commensurately,” RBC Capital Markets’ David Bank says. Advertisers spent more on sports and other dayparts. They also increasingly postpone their purchases. “The risk of being squeezed out of the market by either higher prices or declining inventory, is being mitigated by a scatter market that never really seems to ‘tighten’ anymore,” he says.
Networks’ declining ratings make it hard to stampede advertisers. There are “relatively few ‘must-have’ TV programs to buy,” Pivotal Research Group’s Brian Wieser says. As a result, some networks “may not have the necessary conviction to hold out for higher prices, especially if some buyers are particularly insistent on pricing rollbacks or diminished increases.”
What does that mean for this upfront season? Few executives are willing to make specific predictions. Total spending across all video media likely will rise by a low single digit percentage, says National CineMedia sales and marketing President Cliff Marks. Retail, electronics, technology, entertainment, automotive, insurance, and telecom companies likely will be most active.
“The question on the advertising side is, will the volume be there?” Discovery CEO David Zaslav says. After selling 30% of its inventory, the cable company still “is not getting excited….we’re staying conservative.”
Like last year, everyone wonders how much TV spending will shift to other platforms — especially digital video. Google, Yahoo, AOL, and many others say that they now offer programming that’s as slick as anything you’d see on conventional TV — and it costs less, and is much more effective at reaching young viewers.
“After a decade of hype, cord cutting is happening fast,” says Google’s head of content and business operations Robert Kyncl. In five years “the majority of advertiser-supported video will take place on a mobile device.”
Although the speed of cord cutting is debatable, ad spending “definitely has migrated out of traditional media into new media,” Disney CEO Bob Iger told analysts this week. He says he’s not worried because Disney is also investing in digital ventures and just “16% of our revenue this year is advertising generated” which is “less than a lot of the other media companies.”
But major networks lead by CBS are waging a counteroffensive, amassing data from Nielsen and other sources to demonstrate to buyers that viewers are most likely to purchase goods they see hawked on traditional TV.
CBS chief Les Moonves is characteristically optimistic — at least as far as his company is concerned. “We are not seeing the shift [in spending] out of network. …We’re looking forward to the upfront where we expect volume and pricing both could be up fairly significantly.” He also anticipates a big increase in commercials sold based on the number of viewers who see them over the course of seven days, instead of three. “We are capable of selling it both ways. But for our scripted programming — most specifically our scripted dramas and the comedies as well — that extra 7 days means a great deal.”