This past year saw some return to pre-pandemic normalcy, both to live events and pricing. For 2023, we anticipate a buyer-driven marketplace with a continued evolution for how buyers access inventory and for how advertisers reach (and pay for) their desired audiences.
- Upfront spend is predicted to be flat to slightly up overall, with a decrease in linear dollars combined with an increase in digital dollars.
- 2024 is expected to be a tight media marketplace given the political race for President and other key offices. Though we don’t expect this to impact the Upfront market much, we do anticipate more advertisers entering the marketplace early to circumvent a potential tight scatter marketplace and undoubtedly tight local marketplace for larger regional advertisers.
- Networks will once again seek volume over high CPM increases and hold back less inventory to try and mitigate another soft Scatter market. Empower predicts Scatter pricing increases to be much closer to Upfront pricing if demand for linear continues to decline.
- Linear and OTT will continue to move as a singular marketplace, with a push towards programmatic buying. Pricing increases for premium networks, live sports, and streaming are projected in the mid-high single digits. Low-mid tier cable networks increases are predicted to be flat to low single digits.
- Data-Driven Linear (DDL) and alternative currencies will continue to grow and become more commonly used. Nielsen will continue to see pressure from companies such as Comscore, VideoAmp, and iSpot as more advertisers seek an alternative for audience measurement and currency. We see 2024 as the breakout year for one or more of these companies as they build out more sophisticated solutions.
- Increased flexibility on options will play a significant role in negotiations. Advertisers are going to want greater flexibility, including more optionable dollars, shorter cancellation windows, and later order dates. We believe this will result in a slow-moving Upfront marketplace.
“Fluidity,” in various forms, is shaping to be the hot topic for the ’23-24 Upfront Season. The term itself, simply meaning “subject to change or movement,” will be crucial for buyers and sellers alike to embrace as we embark on the next buying season, particularly if both want to avoid a drawn out Upfront.
To kick off, in late December 2022, Paramount announced that it would no longer hold a traditional presentation during Upfront Week in 2023, instead focusing on small, personalized meetings in April with key partners and clients. This marked a major change as the company has held an event during this week for decades. Quickly after this announcement, Netflix swooped into this prime spot, revealing their first Upfront Presentation on May 17th.
In early 2023, networks like NBCUniversal and Disney began pushing for early Upfront conversations wanting to move the market, and fast. Scatter dollars are reportedly down almost 40%. Publishers are trying to avoid having excess inventory next year. To mitigate this problem, prepare for Network groups to push volume this Upfront, convincing partners to lay down their media budgets sooner rather than later.
Despite this push for early movement, brands are hesitant to lock in too much of their budget this far in advance for 2024 as they are preferring to see how the economy plays out for an anticipated recession. Marketers want flexibility on when to spend their media dollars, with many preferring to place their dollars closer to execution to plan for any business uncertainties-despite the risk of inventory and pricing constraints. Others are holding off as their approach-to-market changes, seeking performance-based opportunities, often found more on Digital platforms. A recent Myers Report forecasts that a 6.3% decline in legacy linear advertising investments would be offset by 6.5% growth in digital spending in 2023. However, Media Post recently reported that according to a panel of marketers surveyed in February, upfront spending would be down in 2023.
With 2024 anticipated to be a highly competitive cycle for politicians, the ad spend is projected to be at unprecedented levels for select media channels – specifically linear TV and CTV. Historically, we haven’t experienced a major impact to the Upfront marketplace, but election years have seen scarcity of quality inventory being available, significant pre-emptions in the local marketplace, media inflation, and a tight scatter marketplace. Because of these, we suspect this could increase the number of advertisers entering the Upfronts in 2023 which could have an impact on pricing and inventory – especially those national advertisers who also rely on a local media presence.
Currency and Measurement
Nielsen’s accreditation status remains suspended as we enter the ’23-24 Upfront season. We saw a rise in partnerships last year between publishers and media companies like VideoAmp and iSpot, offering an alternative view of currency. VideoAmp continues to make headway, announcing relationships with NBCUniversal, Warner Bros Discovery and Disney – all surrounding various forms of cross screen measurement and/or currency options.
NBCUniversal announced that 40% of its Upfront deals last year included non-Nielsen currencies, and it is clear they are encouraging more advertisers to enter their “alternative currency” world this year. NBCUniversal, through their partnership with Amazon Web Services, will also now be able to treat linear inventory more like digital, using an
“In-Flight Linear Optimization” to adjust ad placements within an NBCU network to make sure the campaign is shown to an optimal audience.
However, the idea of using more than one “currency” for TV buying does have implications due to a lack of consistency. Part of the reason Nielsen has been used for years is because of the standardization between publishers, even if many would agree it wasn’t 100% accurate all the time. Measurability also remains an issue, with different capabilities and datasets available to each partner; it is hard to know which methodology is most accurate. This brings a challenge of which data source to trust if you have multiple results, particularly proving out incremental reach of digital, overall campaign frequency and attribution metrics.
Shift to Digital Video
It is no secret that consumer viewership is shifting away from traditional media channels. Time spent on digital video, including CTV (Connected TV) and OTT (Over the Top) devices, are predicted to surpass traditional TV by 2024.
In response to this ongoing shift, publisher groups have been investing in their own streaming services, but at what price? Increasingly, we see them distribute their original programming exclusively to their streaming platform to attract new subscribers and maintain retention. This strategy cannibalizes their own linear networks as consumers do not want to pay for both Cable and OTT subscriptions, causing cable subscriptions to continue to dwindle.
From a publisher side, Warner Bros Discovery reported a $48 billion dollar debt in 2022, majority of which came from their merger in 2022. This debt changed their original strategy of combining HBO Max with Discovery+. Instead, WBD has decided to continue to develop a medley of programming from each provider on each service. Disney revealed changes coming to Disney+ and Hulu during their annual Tech and Data Showcase, announcing ad-targeting capabilities coming to Disney+ accessed via The Disney Ad Server, powered by Microsoft’s Xandr platform. Paramount was also making headlines when they announced the merging of its streaming service Paramount Plus with the premium Showtime channel, which will come with a price increase for all Paramount Plus subscribers. Finally, Netflix launched their own ad-supported offering in 2022, with an outrageous $65 CPM on P2+ for agencies. Netflix has struggled to grow this subscriber base, turning back as much as 20% in ad dollars to advertisers after failing to meet viewership guarantees. It should be interesting to see how Netflix addresses these issues in their first presentation during Upfront Week.
The Rise of FAST Channels
Another way publishers are generating revenue is by selling their content to FAST channel services. FAST Channels, or Free Ad Supported Streaming TV Services, are set to become the predominate “next video” choice for consumers. Their viewing format is like the linear experience, presented as channels where the viewer does not have control over programming, giving consumers a similar layout to traditional broadcast without the price tag. In 2021, total FAST viewership grew by 103%. Services like Pluto TV and Tubi are predicted to see a massive rise in consumption and their investments in the quality of content are expected to follow suit. Advertisers are also responding by spending heavily in this space. TVREV, a research firm, predicts that by 2025, ad spend on FASTs will surpass that of cable, broadcast or SVOD services. Many FAST channels are grouped by content creating new opportunities for advertisers to reach specific niche audiences.
In general, accessing digital content can be done through a direct deal or through programmatic. FAST channels are primarily bought through the programmatic space. As these deals grow, advertisers are going to continue to push for their direct deals to be offered programmatically, resulting in a centralized audience-based buy with holistic reporting.
Programmatic buying is the use of automated technology to access media inventory. It provided enhanced targeting, better use of 1P/3P data, and enables buyers a more holistic approach to multiple media providers. Publishers continue to release inventory to the programmatic space but continue to maintain some ‘premium offerings’ that can only be accessed direct. For example, NBCUniversal announced in early 2022 that live sports would now be accessible programmatically, but certain premium events, like #1 Prime Time Rated Sunday Night Football, would remain available exclusively through direct deals.
Given the growth of digital video over the last few years, advertisers agree their client’s need to be in the OTT space. As publisher groups continue to build out their programmatic offerings, marketers will want to access that inventory in the most optimal way that gives the most transparency to their buys. In Upfronts of the past, networks have required advertisers to include a digital spend allocated to their streaming platforms to run in complement to the linear schedules. The push for executing these streaming deals programmatically, including premium content, will be on the rise in the coming Upfront season.
Live Sports Programming
Live sports continue to dominate TV viewership. In 2022, sports events accounted for all but 6 of the top 100 telecasts. NFL and college football accounted for the most viewers of any form of programming. Sports have also begun a migration to streaming services, including Thursday Night Football moving to Amazon for the first time.
The shift of Live Sports to streaming services creates an interesting dynamic in the media landscape. Many consumers still prefer to watch the game as it happens and through over-the-air (OTA) broadcast networks, if available. But as more sports offerings become available exclusively on streaming platforms, linear publishers will not be able to rely on subscribers to stick around.
Another year of change is upon us for this Upfront season, with fluidity being the key! Sellers need to be flexible in terms of options, order dates, measurement alternatives and currencies available in the marketplace. Empower recommends clients remain fluid with budget allocations by medium (digital video vs. linear), by path to purchase (direct vs. programmatic) and by partner to continue to capitalize on the most profitable deals in the marketplace. Continue to be open to Test and Learn scenarios including new audiences and currencies, as these will continue to evolve the landscape in this and more buying seasons to come!