The Upfront returned somewhat to its former glory. In fact, in anticipation that it would be fast and furious like 10-15 years ago, marketers scrambled to get their budgets approved and ready to enter the market. Publishers rushed Advertisers to register their Upfront dollars and be prepared to make conceptual deals, but once Buyers were in the ring, the pace suddenly changed from “hurry up” to “wait.”
A few key things delayed negotiations: high double digit CPM increases, low supply, and digital mandates.
- It was a Sellers’ year unlike any other – Networks were coming out the gate with higher-than-expected increases, causing Buyers to pause.
- Linear supply was at an all-time low – Call it ratings erosion, migration to Digital, or a total miscalculation, viable inventory was depleting at a more rapid pace.
- Networks needed advertisers to be flexible – Linear-only deals were becoming a thing of the past, as most networks required some percentage of dollars to run cross-screen. Networks needed to be able to run ADUs on their digital platforms and/or allow for a full portfolio guarantee deal.
Empower predicted +10-20 percent Rate of Change increases. ln the end, the healthy marketplace saw low single digits to upwards of 35 percent increases, depending on the daypart and network.
As the Upfront market wrapped, there was much speculation that the Scatter marketplace would exceed the Upfront marketplace by leaps and bounds, seeing CPM increases anywhere from 30-50 percent over Upfront, but those increases simply did not materialize. They landed in the more modest range of 10-15 percent, with some networks honoring expansion options. Even with a soft marketplace, networks still required a portion of Scatter dollars be spent in digital video.
The primary reasons for the softening of the market were:
- Advertisers placed most of their dollars in the Upfront, leaving little to be spent in Scatter.
- More options were exercised than anticipated, either for business reasons or marketers simply purchased more inventory than needed to keep from getting burned in the Scatter market.
- Networks adjusted rating estimates to better reflect current viewing. This meant there was less bonus weight owed and more inventory to sell.
- Sellers held back GRPs in anticipation of the stronger Scatter market, but were left holding the bag when the above-mentioned factors fell into place later in the year.
Trends to Watch for this Upfront
Measurement
Both Networks and Marketers have expressed a lack of confidence in Nielsen and their ability to measure audiences accurately. The much-publicized reporting woes of Nielsen are resulting in alliances formed between major network groups and alternative measurement partners.
- Fox Corp + ComScore
- Paramount and Warner Bros. Discovery + ComScore and VideoAmp
- Disney + Samba
- NBCUniversal + iSpot.TV
Nielsen has stepped up their game and will launch One Platform (Q4 ’22), which will measure unduplicated views across linear and digital using Smart TV and Set-Top Box Data.
This move away from Nielsen to other measurement partners was inevitable, as clients are asking their agencies to move beyond the traditional age/sex demo guarantees and use custom audiences and performance-based guarantees against sales or other metrics.
To be clear, Nielsen will remain the primary currency for most Advertisers in this year’s Upfront. However, many are utilizing a secondary guarantee as part of an Upfront deal which could set a baseline for eventually moving away from Nielsen completely.
Streaming
Over the past 2 years linear first publishers have found it increasingly more important to add streaming extensions to their portfolios. As consumption has increased, so has the number of paid offerings. Since 2019, five major ad-supported streaming services have been launched: HBOMax, Peacock, Paramount+ and Discovery+, with the fifth being Disney+, which anticipates launching an ad-supported version by Q4’22. In 2023, HBOMax and Discovery+ will combine and launch a 3-tier model that includes SVOD/ad-free, AVOD/ad-lite, and a free streaming version that will feature less viewed content.
This increasing number of ad-supported streaming services (AVOD) are a win-win-win scenario for the video landscape.
- Win for consumers: It lowers their out-of-pocket costs (65 percent are paying for 3+ services a year).
- Win for publishers: It provides another revenue stream.
- Win for advertisers: It allows access to previously untapped network audiences.
Data-Driven Linear/Audience-Based Buying
In its simplest terms, Data Driven Linear (DDL) uses big data as fuel to reach specific audiences. DDL utilizes the scale of TV with digital-like data sets to define strategic target audiences based on purchase data, lifestyle interests, and behavior. Partners like VideoAmp and OpenAP ingest First or Third-party data and build audiences based on Nielsen historical data, Set-Top Box data, or ACR data (Automatic Content Recognition is technology built into smart TVs that allow the TV to listen and/or see what is playing on the screen).
So why embrace DDL? It can provide planning inputs like budget allocations (linear vs. OTT), network recommendations that have a high concentration against a strategic target, and offer optimizations and audience guarantees with partners. Back-end reporting provides one holistic view of measurement, including unduplicated reach between linear and OTT, overall video impressions, and average frequencies cross-platform.
There are, of course, trade-offs when executing a DDL buy. Primarily, a higher CPM vs. executing on age/sex demo only. The efficiency lies in the eCPM (effective CPM) which reflects the cost of reaching your strategic target. This means less waste and greater targeting ability. Typically, there is no cancellation flexibility and buys are 100 percent firm.
There are several third-party providers in the DDL space, including VideoAmp, OpenAP, Simulmedia, and TVSquared. Beyond these, many major media companies have come to the table with their own solutions, including NBCU One Platform, Paramount Vantage, Warner Media AudienceNow, and TargetingNow.
Total Audience Guarantees
More TV networks will be pushing Advertisers to buy against their total audience as opposed to cherry-picking demographic groups like adults 25-54. Expect major broadcast groups like Disney, NBCUniversal, and Paramount to follow this path.
Networks are pushing total audience guarantees because they do not want to leave money on the table by not including the 55+ demographic, nor do they want to lose money as younger viewers migrate to streaming, creating an audience shortfall in linear. Shifting to a total audience approach solves for fluidity across liner and OTT, allowing an aggregation of impressions to make up any audience under-delivery.
For any Advertisers unwilling to expand to a total audience guarantee, they could be forced to pay a premium on top of the Upfront Rate of Change.
Focus on DEI
Diversity, Equity, and Inclusion is a common priority we are hearing across all major publishers. Content is showcasing a greater variety of minority groups in their cast and scripts, and being written, produced, and directed by minority groups to ensure authentic storytelling. Network groups are growing ways to reach different audiences, inclusive of all human experiences, ensuring all feel seen, heard, and represented on screen.
- AMC Networks – AllBlk: Streaming service for Black tv and film, by Black creators
- A+E Networks – 4UV (For Unheard Voices): Stand-alone FAST (Free Ad-supported Streaming TV) channel featuring original content developed by diverse team members
- Disney – Onyx Collective (Curated slate of content that lives on Hulu): Content created by people of color and underrepresented voices
Marketplace Predictions
- Upfront spend is projected to increase 4 percent in linear and 32 percent in OTT.
- Networks will seek volume over high CPM increases and hold back less inventory to avoid a repeat of this year’s soft Scatter market. Empower predicts Scatter increases in the range of 10-15 percent over Upfront pricing. If supply chain issues are not solved until sometime in 2023, the Scatter market could be stronger than expected with categories like auto, technology, and CPG.
- Linear and OTT will move as a singular marketplace with prices increasing between 7-10 percent depending on the network, daypart, or streaming service.
- Networks will set parameters around dollars to be allocated to their streaming offerings as part of the Upfront commitment. In some instances, this could be as high as 50 percent to streaming.
- Data-Driven Linear (DDL) will become more commonplace as marketers continue to think beyond age/sex demos and as DDL platforms grow.
- Buying demos will shift to include the Total Audience Guarantees. Advertisers who do not shift could see a higher Rate of Change.
The Upfront continues to evolve and this year is certainly no exception. Advertisers need to be ready for whatever is thrown their way. Empower recommends clients remain nimble with the mix of linear and OTT to capitalize on the most advantageous deals. Budget fluidity is the key, as it allows us to capitalize on getting the best deal with partners. Around measurement, be open to test-and-learn scenarios, as this could be the baseline for shifting away from Nielsen and securing guarantees based on business outcomes or other key KPIs.
