Upfront Flexibility, Optimization… and Trust

By Thought Leaders Archives
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I've watched with interest the last several months as Upfront positioning among buyers and sellers has unfolded. Plenty of issues to address, both legacy and COVID-19 related. Flexibility regarding quarterly options is clearly a burning issue as we approach negotiations. My recent work with a TV-based media company had me engaging with the buying community as the COVID crisis deepened. When many clients asked for relief of their TV commitments, conversations between networks and agencies grew less cordial. Some brand categories were easy for networks to grant relief to, given their exposure. Sellers believed other categories were using the crisis to re-capture committed dollars, and to re-direct some of those dollars down the purchase funnel closer to online sales, where the action would increasingly be. Were the sellers right? I don't know, but the same brands demanding "relief" from TV networks were still running ads on digital platforms where they own the flexibility to pull them. When buyers also claimed that other TV partners had granted relief, on-going checks of iSpot didn't confirm some claims. What was going on here?

Network groups also seek increased flexibility in the Upfront partnership, particularly in delivering guarantees across platforms. Marketers have their own reasons to doubt that TV-based families of networks will act in their brands' best interest in this pursuit. Cord-cutting and declining ratings put added pressure on all TV and digital avails to be filled, whether a network's internal optimizer says they fit a brand's plan or not. Agencies also know that multiple P&L's within media families need to be fed. So why would an agency trust a sales optimization system that enables sellers to shift inventories as they see fit? And why would networks trust that an agency will apply any other guideline than self-interest in acting on a 30-day option condition?

TV networks spend billions of dollars on program development, a dynamic historically particular to TV, and now to streaming. I don't believe networks are ready to plan their program development budgets around 30-day option windows in which brands "hold" inventory that's fully cancellable after the quarterly sales market has passed. Nor do I believe agencies will trust networks not to under-deliver their audience guarantees or deliver them on lower-impact platforms – there's simply too much history of exorbitant audience estimating, and subsequent makegood fulfillment on lesser properties.

In the run-up to negotiations, buyers and sellers attest to want to partner on the flexibility issues. This is as it should be, although this may also reflect the desire on sellers' part to 'get the money to the table.' My sense is that negotiations over quarterly options will not bring meaningful "digital-type" change to the TV market. Not this year. That day may come, but it will come when TV's primacy and supply/demand dynamic slip further, and more sports rights move to digital platforms. Not helpful in the discussion is the client-side demand for both cancellation and expansion rights. While we may consider this an opening gambit, it does little to engender a feeling of partnership. The original Upfront construct was based on brands trading flexibility for discounts, enabling networks to invest in program development, and brands to plan their marketing calendars. Brands now ask for the right to lock in that discount, and then either pull back or expand their dollar commitments - in a medium that is fully sold.

One element missing in the relationship is a thorny word – trust. And maybe it's ok to say it. Sometimes interests don't perfectly align, and the risk/reward of a misstep is too large to consider for both parties. There was a time when risks could be taken, and money spilled, and all parties kept their positions and accounts. The pressure on accounts and revenues is too white-hot today. There is nothing left to spill.

There are, of course, ways to compromise. In the existing 60-90 day option window structure, the third month in a particular quarter has either 120 or 150 days of notice for cancellation. This seems generous for TV sellers to enjoy in our hybrid TV/digital environment. Quarters could be cleaved in two, with shorter windows to better reflect brand planning and financial results. Is that 30 days? I don't believe so. Could it be 60 days for each half of the quarter? Seems more likely, with a give-back from brands of flexibility for the seller to move exposures among networks and platforms within negotiated parameters.

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