WHY THIS MATTERSThe upfront remains the time when the bulk of advertising inventory is sold by broadcast and cable TV networks, setting the tone for the season.
Related: Digital Video Market Surges Into NewFronts
This years upfront feels much different than the last couple. Scatter has been exceedingly hot and that's boosted ad revenue for most of the programmers the last few quarters.
Second-quarter scatter has long been a bellwether for the upfront, but even during the fourth quarter and first quarter, scatter market volume and pricing have encouraged senior media executives such as CBS' Leslie Moonves and Discovery's David Zaslav to comment on how strong they expect pricing and volume to be in the upfront.
But the upfront is also being shaped, as usual, by additional factors. There's been a perception that last year, marketers put a lot of money into digital, they didn't get the returns they were expecting and many brought money back to TV.
At the same time, the media-buying world has been turned upside down by a continuous parade of big brands with billion-dollar budgets reviewing their account and switching agencies. Among the biggest companies conducting reviews were Procter & Gamble, Unilever, General Mills, Johnson & Johnson, BMW, Visa and Volkswagen.
While those accounts shifted, some buys might have been delayed, pushing money into scatter where prices were considerably higher. There could be a priority on getting money down in the upfront, if only to control costs.
There was also a consolidation at advertising agency holding company Publicis. After many years of having its big agencies-Starcom, Mediavest and Zenith-negotiate upfront deals separately, Publicis has formed the Publicis Media Exchange and will have media buying veteran (and B&C Hall of Famer) John Muszynski handling the negotiation for its biggest clients with the top networks.
In some ways, Publicis' new approach resembles those of GroupM and Interpublic Group, which centralized their agencies' upfront negotiations years ago.
Another change last year came when longtime Magna Global exec Todd Gordon left to join programmatic company Tube Mogul. He was replaced by David Cohen, who has been with Universal McCann.
Related: Market Movers: Broadcast Sales Execs
Some network sales execs note that the increased concentration on the buy side reduces the bulk of the upfront to five agencies talking to a half-dozen media companies. In a year when there's a buyers' market, that could make life tough for the networks. But this year, when it looks like a sellers' market, there's not as much pressure.
To get a clearer picture of the forces facing the upfront, B&C business editor Jon Lafayette asked a series of questions to some of the most influential media buyers. Here are the edited responses of those who participated.
TV executives are unanimously talking about how hot the scatter market is and how that will translate into a strong upfront. Are you advising your clients to put more money into this upfront? And what pricing do you foresee and how can you moderate the increases?
David Cohen, Magna Global: We believe the scatter market strength has definitely been driven by the lack of supply due to ratings declines. In primetime alone, we have seen 2 years of ratings decline [-17%] against adult audiences. We've seen media partners come in and out of sale as they try to make advertisers good due to ratings shortfalls. Magna predicted this trend, as we saw clients requiring greater flexibility and holding out for the calendar year upfront and scatter markets. We believe that at the end of the year, spending will still be flat to only slightly up vs. a year ago.
These dynamics, coupled with the impending reduction of advertising loads (in cable) will lead to an inflationary upfront market. We are predicting high-single-digit increases, which is forcing a re-evaluation of other options for clients. With fully 30% of video consumption happening outside of linear television-over-the-top, subscription video-on-demand, online video-we believe the market is ripe for a significant share shift out of linear TV and into other video channels.
Chris Geraci, OMD: Our guidance, with regard to upfront budget levels and price projections, is client-specific, complex and proprietary. However, I can tell you that our approach to the upfront market is zero-based and primarily forward-looking. While a strong scatter market in one broadcast year may indeed have direct correlation to the marketplace dynamics of the preceding upfront, it does not automatically indicate strength in the approaching market. This is especially true in an environment where the landscape and the consideration set of video options are changing so rapidly.
Mike Law, Amplifi : Some things never change during the pre upfront season the sales side has always talked about the strength of the market! The dynamics of the market are that supply on linear TV is shrinking and demand at this stage appears to be flat. This lends itself to an inflationary market. We need to be flexible with our dollars and think about where video supply exists across all screens to help mitigate inflation. We work with our clients to spend dollars when the time is right, be that upfront or scatter.
Are clients really moving money from digital back to TV? What digital video products provide an alternative to TV?
Cohen: We are not seeing a movement from digital budgets back to TV, in fact-for the first time ever-we are predicting that digital budgets will exceed television budgets in the U.S. Full-episode players, VOD, OTT, YouTube, Facebook and other high-quality video networks are viable alternatives to traditional TV.
Geraci: The question really shouldn't be whether money is moving from digital back to TV,' but how much fluidi
