TV on the Spot: Networks Claim Victory in Upfront, but Tough Economy Could Loom

·5 min read

TV networks are claiming victory in this year’s upfront ad-sales market, but their executives understand they may be snatching it from the jaws of defeat.

CBS, NBC, Fox, Univision and some of their brethren are cheering about the upfront, when U.S. TV networks try to sell the bulk of their ad inventory in advance of the next cycle of programming. They have some reason to do so. By many accounts, the volume of advertising commitments they won is up over last year. Disney, for example, predicted Monday that it would take in around $9 billion in advertising for the year ahead (upfront numbers are never guaranteed, of course, as advertisers can cancel parts of their order depending on circumstances). At the same time, the networks drove that ad cash to the bank by agreeing to smaller rate hikes — usually a flashing sign they lack some leverage in the market. What’s more, uncertainty in the macroeconomic environment weighed heavily on discussions.

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“The psychology of the marketplace this year was, ‘Hey, I don’t know what the future holds, and I don’t like that,’” says one media buyer familiar with this year’s upfront talks.

What clouds hover over the horizon? A roiling stock market, major spikes in inflation and the threat of a recession, to name just a few. Madison Avenue has taken heed. So-called scatter advertising — spots purchased on an as-needed basis in real time as opposed to the advance commitments placed through upfront buys — is already looking depressed. The scatter market is “definitely weaker than it was last week, last month, last year,” NBCUniversal CEO Jeff Shell told investors in June.

What’s more, Microsoft sat out the upfront session, according to five executives with knowledge of the matter, and there is some talk among executives that both Pepsi and Burger King could have tamped down some upfront spending as well. Pepsi and Burger King declined to respond to questions about their upfront activity. Microsoft previously declined to respond to a similar query.

With the business outlook foggy, advertisers gravitated to networks opting to cut back on a measure known as a CPM, or the cost of reaching 1,000 viewers. With demand rising last year after the initial wave of coronavirus, the networks pressed their advantage and sought CPM hikes of 16% to as much as 25%. In 2022, however, most of the media companies were content with increases of 8% to 12%, according to executives familiar with this year’s market.

Those who got too aggressive may have missed out on some money. The newly formed Warner Bros. Discovery has made progress in the upfront, but the company’s pugnacious demands for high CPM and volume commitments generated pushback from buyers. Amazon’s drive for top prices for its new “Thursday Night Football” — on par, some buyers say, with Fox’s hefty fees for 30-second ads on its Sunday afternoon NFL telecasts — also earned some rebuke. Warner Bros. Discovery and Amazon declined to comment

And while the media companies are taking in higher levels of ad commitments than last year, not all their properties are getting the same level of support. One buyer estimates that overall ad volume for video ads from the TV companies rose 6%, but notes that gain was fueled by double-digit percentage increases in the amount pledged for digital, like Paramount+ or Peacock, coupled with a slight increase or flat results for linear broadcast and a pullback of around 10% from traditional cable.

The TV crew has other reasons to crow. YouTube, Amazon, Roku and other digital players have grown accustomed to luring some of the TV dollars that used to go right to the networks. But TV is competing more directly with broadband rivals, says one of the buyers, offering better rates. “Our digital growth went to the broadcast players’ digital products,” this buyer says. “All of a sudden, the digital landscape is very broad, very crowded,” and advertisers have more players trying to court their money.

Sports offered a different story. Advertisers rushed to get money down on big matches and games, eager to court the big live audiences that tune in and have become much harder to find with primetime dramas and comedies. TV executives say their top sports broadcasts are luring advertisers who normally relied on traditional TV, even marketers who normally try to make a pitch to female consumers. “Big sporting events are what major marketers are migrating toward,” says Mark Evans, executive vice president of ad sales for Fox Sports. “It’s the best way to get your products in front of millions of people at once.” Another bright spot: streaming. With Disney, launching a new ad-supported version of Disney+ and others courting commercials to place alongside their broadband outlets, advertisers were definitely intrigued, as they are about a similar option slated to come from Netflix.

Now that most upfront deals are done, all eyes are on the economy. If the nation’s financial picture deteriorates further, look for advertisers to try to bump their ad plans by three months or more. “If there’s a recession coming, it will be interesting to see if the money sticks or falls out,” says one of the buyers.

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