TV Ad Market Is “Softening” As Upfront Sales Approach, Research Firm Says

Look out broadcasters: The ad market appears to be “softening” ahead of the upfront sales season according to an analysis out this morning from Standard Media Index, an advertising research firm.

National TV ad spending has grown for most of the 2016-17 broadcast season, but that “has been tempered by 1Q 2017 which saw a slow down in ad spend,” SMI says in its first published analysis ahead of the upfronts.

It observes that the scatter market was down 11.5% to $3.8 billion in the broadcast year up to March. By contrast, the upfront was up 3.7% to $16.5 billion.

SMI notes that the “overall implications of this on the upcoming Upfronts cannot be fully determined as yet.”

Still, it sees TV networks adjusting to a market where brands “continue to want more for less.” Most broadcasters have already said that they will offer “omnichannel deals” and data-driven targeting.

Sports will drive the market in a year that will include the Winter Olympics and the FIFA World Cup.

But SMI  says it sees “key advertising events like March Madness and Hollywood Award Season slowing down more than anticipated.”

For example, upfront spending for the Oscars in the 2016-17 broadcast season fell 12% to $68.1 million, SMI says. The Grammy Awards fell 10% to $35.6 million.

There were some exceptions: The Golden Globes were up 7% to $27.4 million, while the Annual CMA Awards were up 16% to $17.7 million.

Broadly speaking, SMI notes that some upfront TV dollars have shifted from entertainment to sports and news. Entertainment accounted for 70.7% of the prime time dollars committed in the 2016-17 season vs. 78.3% in 2014-15.  Sports moved to 26.4% from 19.3% in the same two periods while news was up to 2.7% from 2.2%.

Much of the shift was due to the lower spending for reality shows, especially after American Idol ended in 2016.

It’s unclear whether TV will be able to take a big slug of dollars back from digital platforms such as YouTube and Facebook. Last year’s Q4 revealed “the first glimpse of a flattening Digital market,” with year-over-year sales up 9% vs. 35% in the same period in 2015, SMI says.  That continued in Q1: Digital sales improved 6% in the first three months of 2017 as opposed to 19% in the same period in 2016.

That could reflect weakness in the overall market. But it also might show signs of a backlash as some buyers including Procter & Gamble question the effectiveness of digital while others recoil from disclosures showing ads running adjacent to controversial content including videos posted by jihadists.

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