If you think terrestrial TV is dying, think again. Turner has reported double-digit CPM increases for their recently completed Upfront. Dollar volume was up too, even though they reduced commercial load on a number of programs. How is this happening? Actually it was predictable. Every four years since the early ‘70s pricing has increased significantly for TV. This happened even in 2012 in the face of a huge global economic downturn. It’s a function of the US presidential and other elections combined with the Summer Olympics.
Coverage of the Summer Olympics produces premium inventory that only occurs every four years, while the ad volume of the elections causes other advertisers to pay more. (As a reminder of how big the four-year election cycle is, we have elections with a total of 469 seats in the U.S. Congress -- 34 Senate seats and all 435 House seats -- in addition to the presidential choice all up for vote on November 8, 2016.)
I opined decades ago that the networks, if they were really all-powerful, should get the Olympics moved to years that did not have presidential elections to even out their gains. In fact, the Winter Olympics was moved to alternate years a couple of decades ago, but the Summer Olympics, combined with political conventions and full bore election advertising support the usually slow summer months for broadcast like nothing else can. This effect combined with political advertising throughout the year takes even the slow inventory time and produces gains for the networks.
For a couple of decades, lower network viewing shares and the move to so many other forms of video on so many devices has caused many to prophesy that this effect cannot continue. But it does. TV viewing and buying may be changing, but the inventory demand remains the same. TV advertising is too effective and we spend too much time with it for the major advertisers to stop using it.
Also, don’t pay any attention to the headlines that say CPM buying is going away. (This generally refers to HH CPM buying.) Those are writers that do not understand our market. For decades, agencies and advertisers have been wanting the guarantees to be based on audience rather than total households. The result is that we are looking at target audience CPMs rather than HH CPMs for many deals. But HH CPMs are where the track record is, so they will be reported anyway.
As for the big increase this year, don’t worry; CPMs will even out over time. Just don’t expect them to go down anytime soon. More than likely 2017 will be flat or with small increases rather than increase from a CPM basis. That’s just the ebb and flow of the quadrennial effect.
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