The New Upfront Imperative

As reported in last week's MyersBizNet Upfront CPM and Revenue Report, the brutal reality is that this year's Upfront was the worst in years, with overall volume falling across the board. Some analysts suggest the Upfront downturn is cyclical and that the market will recover next year. For me, it's difficult to draw any conclusion other than that the 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 supply/demand 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 demand.

Viacom, Turner Broadcasting, NBCU, ESPN, Scripps, The Weather Channel and other brand-focused TV-based media companies are responding by bifurcating their media assets, and focusing increased energy and investments on high value promotional and marketing solutions that can be measured based on advertiser return-on-investment rather than ratings and cost-per-thousands. I envision a time when some media companies will price long-term deals with selected clients based on costs-plus-margin rather than on negotiated spot costs. If the Upfront market this year proves to be the beginning of a secular reality, as it most certainly will, then we will also see the market's quality and value leaders investing in new assets and resources to monetize their content in more profitable ways – primarily by focusing on activating audiences and attracting marketers' below-the-line promotional budgets .

Readers who have followed my reports know I've consistently reported on the long-term importance of de-commoditizing a media company's more valuable inventory; this is no longer a long-term opportunity; it's now shifting to a short-term strategic imperative if Upfront revenue trends are to be reversed. Media companies that offer high-value branded content associations, targeted audience value, and consumer engagement can better monetize these assets when value is measured by almost anything other than cost efficiency. The best example will continue to be live sports, which the major sports leagues and their media partners have consistently optimized through promotional partnerships.

Unless a media company has the scale and cost structure to profitably be the industry's low-cost leader, in the Wal-Mart model, or as an alternative can generate premium revenues through enhanced value, in the Saks Fifth Avenue model, they will be relegated to battle it out, with diminishing success, in highly competitive and increasingly cluttered Upfront markets.