Primetime ratings continue to fall for broadcasters and ad-supported cable networks. Yet by all accounts, next week will kick off the strongest upfront ad sales market in years.
Have buyers lost their minds?
Not really. The economy — especially consumer spending — is holding up as broadcasters prepare to sell as much as 80% of their primetime inventory for the season that begins this fall, while cable networks offer as much as 60%.
As a result, ABC, CBS, Fox, and NBC could collectively see $8.44 billion in the upfront market, up 5.5% vs last year, Nomura Securites’ Anthony DiClemente estimates. A lot depends on how much inventory they choose to sell. But the CPM unit price, the amount advertisers pay to reach 1,000 viewers, could rise 8% for ABC, 9% for CBS, and 7% for Fox and NBC.
Cable is more complicated. But the analyst expects networks to collectively sign deals worth $9.64 billion, up 2%.
Auto makers are eager to expand their shares of the growing sales market. Pharmaceutical companies are drumming up business ahead of the so-called “patent cliff” over the next year or so, when exclusive manufacturing rights expire for several blockbuster drugs including Crestor (cholesterol), Benicar (anti-HIV), Humira (arthritis) and Cialis (well, you know).
Additional ad dollars should flood in from fast casual restaurants, tech and telecom products and Hollywood studios looking to promote the barrage of big budget films headed to theaters.
In Q1 advertisers devoted about 9% of their revenues to “a marketing-related item,” up from 8.4% in the same period last year and 8.3% in early 2014, Pivotal Research Group’s Brian Wieser observes.
These forces contributed to an average 6% increase in ad sales for major TV network owners in the first three months of this year.
Media execs say that bodes well for them, especially in a year when political campaigns and Olympics-related advertisers will be looking for airtime.
They’re also confident that buyers won’t hold on to their cash betting that the economy will weaken, depressing the price of TV spots. Consumer spending at retail increased 1.3% in April, the Commerce Department reported today, beating the 0.8% that economists anticipated.
That follows a 6.8-point rise, to 95.8, earlier this month in the University of Michigan’s Index of Consumer Sentiment. That’s the highest the index has been since June 2015.
Meanwhile, traditional TV sellers are less skittish than they’d been in years past that buyers would shift a massive amount of dollars to digital video providers including YouTube, Yahoo, and AOL.
Some buyers are returning to TV amid concerns about the effectiveness of their spots on digital platforms, especially with the soaring consumer use of ad blockers.
The nation’s largest advertiser, Procter and Gamble, is shifting some dollars back to TV, the Wall Street Journal reported last month.
Meanwhile, traditional TV companies are adapting. They’re selling TV along with their own digital properties. They’re also tapping new sources of data about the people who watch different shows to help buyers target their sales pitches — and see whether they work.
As a result, “digital video is increasingly viewed as a complementary medium to TV ad buys rather than a substitute,” DiClemente says.
But while media execs anticipate a strong upfront — CBS’ Leslie Moonves told analysts last week that he’s “salivating” — nothing is guaranteed.
Traditional TV is struggling to hang on to the young viewers who advertisers covet.
“Last season, there were 19 shows in broadcast primetime that drew [Live+Same day] viewership in the 18-49 demographic of more than 1 million, compared to only 12 shows this year,” Stifel Research’s Benjamin Mogil observes.
With ratings declining, and some companies including Fox and Viacom vowing to cut ad minutes on specific networks and shows, the industry has fewer ratings points to sell.
Ad agency Magna Global sent a powerful signal about its view of the market last week by announcing that it shifted $250 million from its budget for TV to an upfront deal with YouTube.