Weak TV Upfront Market Has Advertisers Pushing for Pricing Rollbacks (EXCLUSIVE)

The bill may be coming due for continued declines in TV ratings.

Advertisers are pressing for rollbacks, or declines in the rates they pay for reaching TV viewers, in early “upfront” talks with TV networks, according to two 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. 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, and offer a signal that the continued migration of viewers to streaming and digital-video options is eroding the marketplace leverage of both traditional TV companies and some of their new-tech rivals as well.

The networks and the digital-video companies are in the middle of discussions, according to the buying executives, who expect that deals could start being made as soon as this week. Recent discussions have called for CPM increases of around 5% for the strongest TV properties, like sports, and for rollbacks going as deep as -5% for weaker linear inventory and even for digital, according to executives. Some networks have sought CPM increases as much as 7% to 8%, according to some of the people familiar with discussions, and there is a chance that some of the rollbacks could be deeper.

In a sign of how much weaker the market for TV advertising has become, TV networks in 2022 struck deals that called for CPM increases ranging from 8% to 12%.

The five broadcast TV networks secured around $9.9 billion in primetime sales in 2022, up 6.4%, according to Media Dynamics Inc., a consultancy that tracks the marketplace. Cable networks sold $10.2 billion, representing an increase of 5.2%. In total, linear TV saw ad commitments last year increase 5.8% to $20.1 billion.

The economy poses just one challenge this year, the buyers suggest, along with the continued splintering of TV audiences and what is looking like a protracted Hollywood writers strike. One-time couch potatoes have a dizzying array of choices when it comes to enjoying their video favorites, and many of them pull crowds away from watching a drama or comedy at a specific time and date. Getting the masses of viewers advertisers and cable distributors crave has become an onerous task, and it is affecting the economics of the TV business in marked fashion. The strike threatens to make things worse; Madison Avenue has little clarity at present if media companies like Paramount or NBCUniversal will have new scripted originals to showcase come autumn.

Many advertisers have reduced budgets, according to media buyers, or are waiting to register them until later in the haggling session. But there is a sense that spending from some TV stalwarts is down. Pharmaceutical advertisers, who have been robust spenders in TV for the past several years, are showing mixed support in 2023, according to one buying executive. Auto marketers, hurt in recent years by supply chain issues due to the coronavirus pandemic, have been hesitant so far. Technology advertisers, another big supporter of TV in the recent past, have cut budgets after seeing some stock downturns and significant layoffs. A bright spot has been consumer packaged goods companies, which are trying to keep market share even as the cost of their products has gone up due to inflation.

Buyers expect the total volume of dollars committed to broadcast and cable networks to be down as much as a double-digit percentage, with digital volume staying flat or falling in a single-digit percentage range.

Disney is said to enjoy the most leverage in the marketplace, according to buyers, thanks to its large ESPN sports portfolio. Buyers said the company is also using Hulu, a mature streaming outlet that has always run advertising, to generate interest in its properties. Fox is said to be eager to move money to its Tubi streaming video hub, and seems willing to be flexible when it comes to deals for its linear broadcast and cable networks. Warner Bros. Discovery has backed off aggressive demands it wielded last year, buyers say, but the company’s stance in 2022 angered many clients, who may not bring their budgets back in full. A person familiar with the matter says Warner Bros. Discovery is optimistic it can grow its share of ad dollars more than its rivals.

Some newer players to the upfront are pressing for volume as well, but may not meet with great success. Netflix and Amazon are among those eager to secure new levels of advertising, but buyers note that the ad-supported tier that Netflix offers has yet to demonstrate it can generate the sizable impressions would-be sponsors need and Amazon has to grapple with declines in viewership over the course of its first season of showing “Thursday Night Football.” “As we look ahead to our second season of ‘TNF,’ which includes the first-ever NFL Black Friday game, we’re seeing strong interest from customers and brands as we further innovate to add unique viewing features and to create value for brands aiming to reach a young, highly-engaged audience,” Amazon said in a statement.

In another sign of the difficult market, Paramount Global is said to be seeking $6.5 million for a 30-second spot in its 2024 broadcast of Super Bowl LVIII, according to one of the executives familiar with discussions. The company is, at least for now, not pushing for big increases in price, as most networks typically do. Fox, which broadcast Super Bowl LVII to a record audience earlier this year, asked for $6 million to $7 million for 30-second spots, with some commercial berths going for more than $7 million. Paramount is likely to seek a “match” from Super Bowl sponsors that would have them pay a similar amount for other types of advertising inventory, a typical demand in negotiations around the pigskin classic. The buyer indicated that in this market, clients may push back on even that ask.

Paramount Global, Disney, NBCUniversal, Fox, Warner Bros. Discovery and Netflix declined to make executives available for comment.

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