Are Upfront Numbers Real and Relevant? Here's an Alternative.

With 30 billion up for grabs in media agency reviews this year39s Upfront is complicated with agency negotiators and networks discussing quotspecial dealsquot and quotcontingentquot pricing While Upfront commitments typically remain in place on a clientbyclient basis when they move agencies networks are reluctant to expose special discounts and packages offered one agency to another that was not offered that deal Those agencies that negotiate with networks on a multiclient basis are especially exposed if they lose a major account or two and are unable to meet their commitments Clients are also reported to be holding back on Upfront budgets as they focus on their reviews and explore new ideas and new options Plus procurement officers and supply chain management at the clients are getting more involved in the review process and therefore in the Upfront discussions With new forms of data poking their way into negotiations there are even more variables slowing down the market as reported in the recent MediaVillage series by Charlene Weisler Additionally NBCU and Fox are packaging inventory across multiple platforms making it more difficult to read the differentiated markets for broadcast cable and digitalAs RBC Capital Markets39 analyst David Bank reports quotThe TV Networks appear to be easing into a new pattern of upfront sales that investors should get used to Rather than the typical 39wrapup39 around Memorial Day we are heading into a target of July 4th which many networks still haven39t been able to hitquot Bank also reports that quotoverall volumes will probably be down 6 we get mixed messages amp8211 anywhere between 5 and 7 declines amp8211 so we will settle in the middle Pricing is generally up low to midsingle digitsquot I39m projecting an Upfront market this year that is down more than last year39s when broadcast network volume declined 79 and cable volume declined 48 As I reported in my 201415 Upfront Summary last year quotthe national TV market is being irrevocably impacted by secular and systemic shifts resulting from the growing impact of enhanced metrics programmatic buying and digital video The Upfront will continue to be a supplydemand marketplace in which supply expansion is outpacing demand There are far more market influences driving downward pricing and creating new inventory sources than there are influences driving increased demandquot This year39s Upfront is more volatile than ever ABCTV and NBCU are reported to be in a quotstalematequot with several agencies While some cable groups have concluded deals for the most part the cable syndication and digital video marketplaces are in a holding patternIt39s far more relevant to focus on annual network TV ad spending data than on Upfront deals which are increasingly difficult amp8211 even impossible amp8211 to use for market decisions Our forecasts predict a more conservative marketplace in calendar year 2015 than 2014 keeping in mind that the Upfront represents seasonal spending from September to August In calendar year 2015 broadcast network 39legacy39 ad spending is forecast to decline 72 with digital ad growth at 20 resulting in total revenue declines of 45 Cable overall is forecast to decline 18amp160 For 2016 we39re forecasting increased declines in legacy ad spending with increased growth of investments in the networks39 digital and VOD assets by advertisers resulting in overall broadcast digital declines of 37 for broadcast and 23 for cableIn summary a look at the data below suggests that each network can make its Upfront decisions with confidence that next year39s patterns will be generally similar to this year39s If the broadcast network Upfront volume is down more than 89 then scatter will be up commensurately more than in this year39s scatter If the Upfront investments are down less than 78 scatter pricing and revenues will be down commensurately For cable if volume is down more than 56 scatter will be commensurately up if volume is down less than 45 then scatter will be commensurately downThere is an opportunity for some share shift as available Upfront budgets will ultimately find a home with the networks and syndicators that are most willing to negotiate But there is too much volatility in the market and too many new variables so it39s time investors and the press stop assigning so much relevance to the Upfront market The volatility will continue and each year the Upfront becomes less and less of a litmus test on the health of the TV and advertising market It39s time for networks to explore alternative relationship priorities and engage in more clientspecific longterm initiativesMyersBizNet TomorrowTodayamp160amp160amp160amp160amp160amp160amp160Marketing Advertising Spending Data 2014 2016amp160amp160amp160amp160amp160amp160amp160UPDATED 4115amp160 Data reportedamp160 in 000000amp160amp160amp160amp160amp160amp160amp160amp160quotLegacyquot refers to revenues generated for traditional nondigital advertising and marketing spend within each categoryCalendar 2014Calendar 2015Calendar 2016 Change Share Change Share Change ShareAdvertisingamp160amp160amp160amp160amp160amp160amp160amp160amp160Broadcast Network TVamp160131925634451839333371771532Legacy061733490072160868757814831837Digital220192310020023071252502884163CableSatellite Network Televisionamp160332700647182652347232592146Legacy262565995028249419404023943924Digital200134750175158260250197876amp160amp160amp160amp160amp160amp160amp160amp160amp160amp160

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Are Upfront Numbers Real and Relevant? Here's an Alternative.

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