New Media Having Limited Impact on Upfront Budgets
The biggest story of the Upfront will probably be the continued dominance of broadcast network television and the continued vitality of television as marketers' primary advertising medium.
Some observers have suggested the Internet and other new media options could sap as much as an additional $500 to $600 million from the broadcast Upfront marketplace, compared to an estimated $350 million that shifted to video alternatives in the 2005/2006
Upfront. Fox Broadcasting's Jon Nesvig, however, is unconcerned. "The networks and the big media companies are going to be the primary ways advertisers will be engaged in the new media," he told Jack Myers Media Business Report. "We will be covering most of the new platforms. It makes the business more complicated and deals take longer to be put together."
Joann Ross, president of sales for CBS Network TV points out "budgets might be held out for digital but we are selling cross platform, VOD, 'outernet,' and looking at other places our shows and content
can be seen and can help bring in incremental money." Ross believes the Upfront could be boosted by revenues moving to television from newspapers, direct response and other media but that digital media will not yet significantly impact broadcast network revenues. CBS last week launched "Innertube" an advertising supported broadband channel featuring specially created content and selected network programming.
Mel Berning, executive vice president of A&E Networks suggests "so much of the money is now spent across the calendar year and tied to integrated marketing, cross platform and digital ideas. We are transitioning to a longer-term outlook on the market. The Upfront is always
important, but it's not a make or break situation. We will not continue to see a concentrated Upfront period you can point to as great bell weather. It's part of a process."
Total advertiser spending on broadband video advertising in 2006 is projected to be less than $300 million, with much of that being invested with the traditional broadcast and cable networks. While
shifts to digital media could potentially represent almost $800 million, broadcast and cable networks are confident they
can retain some of those budgets and attract an equal amount in incremental spending from new and current advertisers. This may be the last year such confidence is justified.
The relatively stable Upfront market that Jack Myers Media Business Report projects for this year is most notable for the relatively minimal actual impact of digital technologies, commercial ratings, DVR ratings, and specialized research. It would, however, be dangerous if network and agency executives are lulled into a false sense of security. The growing
impact of digital technologies, broadband and wireless technologies are almost certain to have far greater impact on Upfront spending in the 2007/2008 Upfront. Within the next twelve months, television networks and media agencies will have a clearer perspective on the actual market changes wrought by new media technologies.
As DVR penetration increases and more popular programs become available on-demand on multiple platforms, the job of media buyers and media sellers will become increasingly complex. The options for off-network non-live viewing will be far more expansive and media
measurement issues will be dramatically more complex in 2008 and beyond. The acceleration of current market trends in the next year will be exponential. Even in this year's Upfront, cable companies like Scripps Networks, Fox Cable, Turner Broadcasting, MTV Networks and most
others are making digital opportunities a centerpiece of their presentations and virtually every network organization has digital offerings integrated into this year's presentations to advertisers.
"Last year everyone had a toe in the water. This year they're ankle deep," says Bruce Lefkowitz, EVP for Fox Cable Networks and National Geographic Channel. "Everyone is taking the
temperature. It's a more palatable way for advertisers to gain experience in products that have a real relationship with valued programming. We have specific VOD inventory for four different products. We own programming across every platform and we are starting to talk to wireless," he
adds. "Advertisers are focused on non-linear opportunities and the market is a lot more fluid than it has been in the past."
Network and agency executives agree that advancing DVR penetration and commercial ratings are likely to play more of a role in next year's Upfront negotiations than they are
having this year. While these issues have clearly provided trade press reporters with good stories this year and researchers with reams of new information to analyze, neither buyers nor sellers are prepared to "go to the mats" to argue a specific point of view. On an agency-by-agency and
network-by-network basis, there may be some factoring of new data into agreements. But in general, commercial ratings and DVR usage is not having a meaningful impact this year.
Similarly, industry interest in new measures of engagement, attentiveness and responsiveness to advertising is generating buzz but having limited impact this year. Agencies are using new data
for internal optimization programs and decision-making, but not factoring this data into specific pricing negotiations. In the next year, again, new sources of data will be more readily available and validated, promising changes in next year's Upfront.
For this year, however, the biggest story of the Upfront will probably be the continued dominance of broadcast
network television; the continued vitality of television as marketers' primary advertising medium; and the relative stability of the Upfront marketplace.
