UPFRONT UPDATE: Volume, CPM and Market Dynamics

Through an unconventional economic analysis of the media economy, MyersBizNet has been able to determine that overall 2014-2015 broadcast and cable TV Upfront volume will be down by as much as 5% or even 6%, with a best case (but unlikely) scenario of flat volume. (It's important to note that there are no official reports on Upfront investments issued by either networks or agencies. MyersBizNet data is based on our own market analyses and reports.)

NATIONAL TV UPFRONT VOLUME

• Total investments in national television are projected to decline 0% to 5%, generating between an estimated $20.8 and $21.3 billion. Last year's Upfront volume was estimated between $20.8 and $22.6 billion
• Total broadcast network TV ad spending, including sports, is projected to decline 4% to 7% in this year's Upfront marketplace, to an estimated $9.4 to $9.8 billion.
• Broadcast network primetime spending is projected to decline as much as 8% to 12% in this year's Upfront, to an estimated $5.75 to $6.0 billion.
• Cable TV network Upfront ad spending should increase 5% to 6%, growing to an estimated $9.65 to $9.75 billion
• National TV syndication ad spending is forecast to be off by 1% to 3%, declining to $1.75 to $1.78 billion.

COSTS-PER-THOUSAND

• Broadcast primetime costs-per-thousand, based on historical precedence, should increase as much as 8% to 12% (on an apples-to-apples comparison). In last year's 2013-14 Upfront, broadcast network primetime CPMs increased 6.3% against 6.5% spending declines. However, it's unlikely the networks will be able to negotiate such significant increases, with a more likely scenario of average 5% to 9% CPM increases. Overall broadcast network costs-per-thousand, including sports, should increase 4% to 7%.
• Cable network CPM increases should range from an average of 3.5% to 9.0%. Network-by-network CPM increases will vary significantly, with those networks that have ratings growth combined with low CPM bases generating increases well into the double digits. In last year's Upfront, cable network Upfront CPMs increased an average 2.8% to 7.0%

ONLINE AND ALTERNATIVE VIDEO

• Broadcast networks, and to a lesser extent cable networks, will package online and mobile video into their Upfront deals, capturing a significant share of the spending targeted to online video.
• Upfront investments in online originated video content (YouTube Preferred, AOL, Yahoo, Tremor, Yume, Microsoft, Vevo, etc) will increase from an estimated $500 million last year to $800 million this year. While it's inevitable that online and mobile video will have a growing impact on future Upfront markets, and while a share of this $800 million is shifted directly from broadcast and cable, most of these budgets are being drawn from non-TV sources. Upfront budgets represent an estimated 20%-25% of total online originated video investments. There is downward pressure on online video CPMs, bringing them into line with (and below) network TV average CPMs.
• With National Cinemedia acquiring Screenvision later this year, cinema advertising is being viewed as a more viable alternative to network TV. Marketers are also investing in options such as Simulmedia, video-on-demand, local broadcast and cable, and digital place-based video. The DP-AA is including several of its members into a programmatic-accessible package and is reported to be generating Upfront business.
• Agencies are actively seeking to integrate video platforms into their automated systems, but this is not yet impacting on overall network TV investments.

Agencies and clients are requiring CPM decreases; networks – especially broadcast networks -- are under pressure to increase CPMs, resulting in an inevitable stand-off in this year's Upfront.

• Networks with the highest established costs-per-thousand that have also suffered ratings declines in the past year are facing a difficult reality. Demand is down; supply options are increasing; CPM growth is required to meet budgets; advertisers are seeking to reduce their overall CPM by moving to lower cost options. Most marketers and agencies are pursuing automated and programmatic solutions for their online video buying, driving down costs-per-thousand. With their spending flat to down, they want equal or even greater overall reach and frequency against target audiences, which means they need to shift their spending to lower base-cost alternatives. Marketers' procurement officers have a greater voice in their agency's purchasing decisions, placing pressure on agencies to reduce the costs of legacy media advertising. (The acceptance of live plus seven day viewing (C7) by some marketers helps manage CPM gains.) But networks are implementing strategies designed to create greater demand, the key to their success.

Networks are dramatically ramping up their marketing, promotional, experiential, digital, VOD and research offerings to justify increased costs-per-thousand and reinforce the value and superiority of network television over online and mobile alternatives. Networks continue to invest billions in high quality, high appeal destination content, with more great programming available than ever. The limited availability of highly prized primetime inventory, the sudden emergence of more appealing late night programming, and limited access to the most valuable marketing and promotional offerings assures that several advertisers will want to capture these assets and will pay premiums for the privilege. These dynamics, while being attacked, managed and manipulated, remain in place and will continue to exist for at least a few more years. Digital and other options, while viable, remain "other" options and are not yet mainstream.

Please share your insights and comments. E-mail me at jm@jackmyers.com.

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