The cases for and against the annual TV advertising upfront model

By Tim Peterson

Two years ago, some members of the TV advertising industry were debating the future of the upfront. Advertisers impacted by the pandemic were scrambling to cancel or push back their commitments, agencies were seeking greater flexibility in their relatively rigid commitments, and major marketers like Mastercard and P&G were calling for a change from the traditional upfront window to a calendar-year model. Two years later, though, the upfront model seems as vibrant as ever.

Not only do more marketers, such as direct-to-consumer brands, enter the upfront each year, but the upfront timetable has expanded. Last fall, AMC Networks was already having preliminary discussions ahead of this year’s upfront market, the TV network group’s revenue chief Kim Kelleher said on the Digiday Podcast. By February buyers and sellers began their initial talks, according to executives at TV networks and agencies. And this month one agency executive said they wouldn’t be surprised if the upfront talks for next year’s cycle start in January.

And yet agitations with the upfront persist, particularly among ad buyers itching against the collar of their annual commitments. “The upfront is something that this time of year everyone is like, ‘Tear it down,’” said a second agency executive.

So, with the broadcast networks’ upfront presentations a month away, let’s look at the cases for and against the upfront for a sense of whether the annual buying model has become too big a part of the business to ever fade away.

The case for the upfront

The upfront is the offspring of TV networks’ and advertisers’ mutual needs for security. TV networks want to know how much money from advertisers they can count on to offset the costs of the programming they pay for in order to attract the audiences that advertisers want to reach. Meanwhile, advertisers want to know they will be able to reach those audiences because TV remains the primary opportunity to reach a large, concurrent audience.

As a result, the erosion in linear TV viewership — combined with the limitations major ad-supported streamers have put on their ad loads — has actually heightened the level of scarcity in TV’s inventory supply and urged more advertisers to participate in the upfront. “Our strategy [in 2021] was, for clients that didn’t participate in the upfront in the past, to get them into the upfront,” said a third agency executive.

And then there is the financial upside. If TV and streaming continue to be the most cost-effective way of reaching a large audience — especially in the face of Facebook’s rising ad prices and dropping performance — then it will continue to be the closest option to a must-buy for advertisers. That puts advertisers on the hunt for the lowest possible price. The best bargains can usually be found in the upfront market where TV networks and streaming services offer rates that can range from 40% to 80% lower than what advertisers can secure in the so-called “scatter” market, where inventory can be purchased …read more

Source:: Digiday