TV Networks Hammer Buyers for Big Rate Hikes in Early Upfront Ad Sales Talks

·4-min read

TV ratings are down. But the networks aren’t letting that get in the way of demanding big price hikes in their annual negotiations with Madison Avenue.

Even as advertisers express concern about declines in the live audiences tuning in for TV staples like “Young Sheldon,” “This Is Us” and “Grey’s Anatomy,” they appear to be on the verge of capitulating to marketplace pressure. As part of early but intensifying upfront negotiations over sales advertising inventory for the next cycle of TV programming, the networks are pressing for notable increases in the rate of reaching 1,000 viewers, a measure known as a CPM that is integral to these annual discussions.

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Cable networks are seeking CPM increases of between 9% and at least 12%, according to nine executives with knowledge of parts of this year’s negotiations, while broadcast networks are pressing for increases of between 16% and at least 19%, these people say. The networks have in some cases asked for more, according to two of these people, and continue to hold out expectations they will get the rates they seek.

More TV viewers are migrating to streaming-video services, but that dynamic is lending traditional media companies some ballast this year — as counterintuitive as it may seem. With more advertisers rebounding after a year plagued by coronavirus and with linear viewership on the wane, the networks are seeing a rush of demand even as TV ratings are in shorter supply. That is squeezing the pricing rates and is playing in the TV networks’ favor. In 2020, the networks were only able to secure CPM increases of just 3% to 4%, rather than the double-digit hikes that have in recent years become the norm.

The advertising haggle isn’t in full swing quite yet, the executives say, but conversations are intensifying quickly and people on both sides of the negotiating table are predicting the talks could move fast, potentially reaching completion before the July 4 holiday.

And the rise of streaming is spurring new ways of doing business that may be tied less to specific networks or dayparts and more to the various kinds of audiences that marketers can identify with data and algorithms. More of the networks are offering ways for clients to carve out consumer niches like families looking for a new car or people who decide on the purchase of software for a small business. That means some parts of this year’s upfront talks will be noticeably different than in the past.

“All of our deals are based on new patterns of video consumption, and traditional buying, network by network or daypart by daypart, will not hold,” said Joe Benarroch, a spokesman for NBCUniversal’s ad-sales division. Other networks declined to comment on current talks with advertisers.

There is a lot of ground to make up. Last year’s upfront, crimped noticeably by the effects of the pandemic, showed a noticeable slowdown in the volume of commitments made to TV. The nation’s five English-language broadcast networks could have seen the volume of ad commitments they secured for primetime programming fall in 2020 by at least 9.3% to 14.6%, according to Variety estimates. It is the first time since 2015 that upfront estimates have sagged. Based on conversations with media buyers and other executives, Variety estimates NBC, ABC, CBS, Fox and the CW secured between $8.2 billion and $9.8 billion for their 2020-2021 primetime schedules, compared with between $9.6 billion and $10.8 billion for primetime in the 2019-2020 season.

This year, executives say, they expect not only a rush from marketers who spent last year, but new interest from those who did not.

As Madison Avenue moves to pounce on what linear viewership it can get, it is also showing high interest in streaming video inventory. The media companies are seeking even bigger rates of increase for streaming ads, with the highest CPM increases being sought by the media outlets with the lowest ad loads. Ad buyer suggest they are pushing back on some of these rates and identify NBCU’s Peacock and WarnerMedia’s HBO Max as seeking the top increases in the market.

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