The week of May 15 is the annual upfront presentations by the broadcast networks. In Manhattan, hundreds of marketers, responsible for billions of ad dollars, will be given presentations from the networks. The networks will tout how successful they have been over the past year, and go over their programming strategy for the year ahead. After the presentations, negotiations for purchasing commercial time will begin “upfront” that usually last for a few weeks.
The 2017 upfront marks several milestones.
It was 50 years ago, at the 1967 upfronts that, the first guaranteed CPM was negotiated. (The CPM or cost-per-thousand is the metric used to negotiate ad time). Back then ABC, the third network, in a three-network universe, guaranteed the audience delivery of its schedule with American Home Product. According to the late Erwin Ephron, the other networks, realizing advertisers would pay a premium and less likely to “cherry pick” top rated programs only, began to offer audience guarantees. The popularity of the upfronts grew.
Ten years ago, the currency of negotiations changed from program ratings to commercial ratings. The industry, concerned about the growth of TiVo and other DVR devices that could zap ads created C3 ratings, an aggregate sum of all commercial minute ratings in a program for up to three days after the show first aired. For the most part C3 (or C7) remains the negotiating currency.
Another milestone was 25 years ago. In 1992 at the Association of National Advertisers (ANA) TV Advertising Forum, two prominent ad agencies Young & Rubicam and J. Walter Thompson along with Procter & Gamble, the leading national advertiser, proposed the upfront be replaced with a continuous ad marketplace. According to Ephron, the networks grabbed $3.8 billion in the prime-time upfront, significantly more than the previous year and any talk of abandoning the upfront was shelved.
The upfronts have since grown notably and now include cable networks, Spanish language networks, movie theaters and, most importantly, for the past ten years, digital media (a.k.a. NewFronts). There are now dozens of presentations from content providers that have joined the annual “feeding frenzy”. For television alone well over $20 billion worth of ad time will be negotiated in the weeks to follow. The upfront continues to be a mainstay for half-century although it makes little sense to advertisers. For example, no advertiser has a fiscal year that coincides with a broadcast season. Or why do the upfront negotiations happen in the spring? Why can’t it be moved to the late summer when marketers have a better sense of their ad budget and programs?
Television continues to lose viewers, as audiences migrate to other platforms or watch content on-demand that either goes unmeasured or is not part of the negotiating currency. According to ad agency Magna, TV ratings have declined 33% over the past four years. Moreover, there will be even more video competition next year, from the two biggest companies in digital media, Google and Facebook. Both companies have announced aggressive plans to produce original and premium video content to the ad marketplace.
This year at the NewFronts, Google’s YouTube announced they will spend hundreds of millions of dollars on content producing forty original shows. Many of these shows will be free and ad-supported. Earlier this year Facebook CEO Mark Zuckerberg announced video will become an area of focus for the company. Engadget reports that Facebook could debut 24 TV-like original shows as soon as June 2017.
The strategies from the two online giants come at a time when eMarketer and other companies project digital media ad spending have surpassed television. Digital media has proven to be a disruptive force in the business model of traditional media. As revenue producing giants Google and Facebook now cast their eyes on video, what impact will they have with the upfronts? Digital companies do not need an upfront to get ad dollars especially as ad buys become more automated. Also they can and have released content throughout the year. As television’s importance with advertisers diminishes in the years ahead, how important will the upfront be? After 50 years it could mark the beginning of the end of an era.
