Audiences may not be the only thing about TV that continues to shrink.
Advertisers are expected to once again press for “rollbacks,” or declines in the rates they pay for reaching streaming and TV viewers, in early “upfront” talks with TV networks, according to five media buying executives and other people familiar with these annual discussions in which U.S. media companies try to sell the bulk of their commercial inventory ahead of their next cycle of programming.
And while the buyers have a vested interest in cooling any potential hot spots in the upfront market, TV -sales executives this year aren’t pushing back on the assertion. There will be a squeeze, aided in part by a glut of new inventory coming into the market thanks to the addition of the new ad-supported Prime Video tier from Amazon.
Agreements that include reductions in these rates, also known as CPMs and a measure of the cost of reaching 1,000 viewers, have generally been extremely rare. But calls to pull them back are expected to be widespread, except in talks focused on live sports, which continue to generate sizable crowds all watching at once – an advertiser’s dream.
Advertisers and media buyers are likely to press for CPM “rollbacks” across screens, on streaming as well as traditional TV. “Our expectation for this upfront is very much to see a realignment of connected-TV CPMs,” says Kelly Metz, chief investment officer for U.S. operations at Omnicom Group’s OMD, who calls rollbacks on streaming CPMs “our number-one priority.” TV and video remain a bedrock element of many advertisers’ plans, she says, but “we are really expecting and really leaning hard into CTV CPMs all needing to come down. They all need to be in line with traditional linear, or you are going to see advertisers move money, you are going to see investment continue to leave the space.”
If media companies like Disney, Fox and NBCUniversal agree, it will mark the second consecutive upfront in which the TV networks ceded such ground to their ad base. Ad commitments in last year’s upfront market for primetime broadcast TV fell 3%, to $9.595 billion, compared with $9.91 billion in 2022, according to Media Dynamics Inc., an advertising consultancy that tracks the market. Cable TV saw even worse erosion, with advertisers committing $9.52 billion for primetime, down 7% compared to the $10.23 billion in commitments secured in 2022.
Despite claims that the ad market has been improving, it hasn’t seemed to catch fire. Comcast recently said first quarter ad revenue at NBCUniversal was flat, while TelevisaUnivision indicated U.S. ad revenue at Univision was the same. Paramount Global saw a 14% uptick in TV advertising during the period, but that was largely due to the Super Bowl airing in February, not a significant reversal of media fortunes. On Tuesday, Disney revealed ad revenue had fallen at its traditional U.S. entertainment TV networks in the first quarter, due in part to smaller audiences. Even so, the market for sports seemed healthier.
Intriguingly, Madison Avenue’s demands are likely to vex even the digital giants that have come to vacuum up some of the ad money that once went to TV. Media buyers believe Amazon Prime Video is poised to enter its first upfront market with aggressive pricing demands, hoping to use the recent launch of an ad-supported Prime Video tier to wrestle more dollars into its coffers. The company has a short history of high asks. When it first started selling ads in “Thursday Night Football,” Amazon initially sought ad prices on par with those in Fox’s Sunday-afternoon NFL broadcasts.
In a statement, Amazon said it is seeing “strong interest” in its new ad tier, and noted, “We work directly with our customers and strive to be the best place for advertisers to build their brands.”
Advertisers know they need to move their money to venues that snare audiences. But not even Amazon will be immune from current dynamics, say buyers — nor will Netflix, Max, Hulu or any others. “Media partners need digital dollars, and they will do what they need to do to get them,” says one buying executive, adding: “With the exception of sports, I do not believe this is an inflationary market ––nor should it be.”
In recent days, video giants ranging from NBCU to Paramount to Amazon haven been sounding bells and whistles, including new audience measurement-technologies or interactive ads that let viewers shop for the products being shown on screen. But these gee-whiz offers aren’t likely to hold back market dynamics.
At the root of this year’s market, say buyers, is a fear that advertisers will spend less in the upfront. “Marketers are still cautious,” says one buying executive. “They are waiting for the inevitable soft landing. They are watching the Fed and interest rates — are they going to increase again? The marketplace has been relatively cautious.”
Some will really need TV and video inventory. Pharmaceutical advertisers, goosed by intense interest in weight-loss drugs like Ozempic and Wegovy, are likely to increase their spending, even on traditional TV, where they are likely to hit the older consumers who will want to hear about such medicines and their possible side effects. Indeed, some buyers suggest federal rules will spur more pharma marketers to buy ads as long as 75 seconds to 90 seconds, sucking up inventory and impressions that others may want. Big pharma companies spent nearly $5.9 billion on national and local TV commercials in 2023, according to Vivvix, a MediaRadar company, a 12% increase from 2022.
Meanwhile, buyers have a mixed outlook for automobile marketers, and believe tech marketers, some of whom have pulled back in recent years, could be poised to spend again, though not at past levels.
None of this is likely to boost overall fortunes. Early calls are for broadcast-TV commitments to stay level with last year’s totals, with cable seeing a noticeable decline because most of its non-sports offerings are consumed more avidly via on-demand streaming.
TV sales executives suggest that more advertisers are spending money on digital on an as-needed basis, because there’s always inventory available, and it can be targeted more precisely at specific kinds of consumers. So money will flow in outside of the upfront market. They also note that there’s a big difference between the programming their companies make and that being found on social media or lower-quality sites. They have a point. But those arguments will have to be very convincing to buck the market outcome most people are predicting will take place.