Our US Business Director Victoria Potter explores how the Upfronts format might finally be changing – and why that’s good for advertisers.
A few months ago, I questioned in another of our ECI Thinks posts whether the pandemic would force through seismic changes in the Upfronts landscape. There has been a growing appetite for such changes in recent years, but it takes a lot to change the course of a huge, 60-year-old ship. Then the global coronavirus pandemic came along, and it seemed like the kind of storm that could expedite that change in direction: transforming consumers’ consumption priorities and their paths to purchase, and therefore affecting the media strategies of B2C brands.
But the change in direction didn’t happen as we anticipated. The Upfronts went ahead, and many advertisers bought their inventory. However, there are now indications emerging that some transformation is on the cards. Marketers are demanding changes to help them cope with the uncertain environment:
Just a couple of weeks ago Marc Pritchard, Procter & Gamble’s Chief Brand Officer, declared that fundamental changes must happen, and must happen by next year. This is particularly important because P&G is such a key player in the Upfronts, and indeed has been a driver of the ‘FOMO’ (fear of missing out) that other advertisers experience, and which has been fundamental to the continued existence of the current format. Pritchard said the Upfronts are ‘inconvenient at best’ and that the system must change because ‘a level playing field means planning and negotiating when it fits the business – that’s calendar year for most.’
So, what exactly is behind the desire for change – and the apparently increased willingness of the Upfronts system to accommodate that change?
As Marc Pritchard observed, the Upfronts have long adhered to a schedule that suited the TV networks best, from October to September. Most advertisers work to a calendar-year agenda, so having to purchase TV inventory in a different schedule is disjointed. What’s more, the Upfronts format obliges advertisers to purchase inventory for almost a year away; as pandemic has laid bare, plans can change dramatically just a few months into the future. The old format was therefore driving inefficiency, with the purchase of too much inventory driving frequency and waste.
This year, however, was a buyers’ market, thanks to the deflation in media pricing (see our recent Inflation Report Update for more details) and a lack of content. Buyers could negotiate options that suited them more, forcing TV vendors to introduce more flexibility. Buyers were able to commit dollars by quarter, and to negotiate better conditions such as the ability to cancel a certain percentage in a larger window.
Traditionally, streaming and linear ads were sold in two separate packages, with the former offering more flexibility than the latter. However, vendors are increasingly selling the two as a combined package, again because of advertiser demand. This has resulted in less flexibility for streaming but more for linear – and that benefits most advertisers because the majority of investment is still in linear. It will be interesting to see if and how this changes in the coming years, as streaming becomes increasingly prominent.
Linear TV used to be the foundation of any media plan for the larger advertisers, but TV budgets are now divided across a number of areas, including linear, streaming, programmatic and addressable. Committing spend so far in advance, as per the ‘old’ Upfronts format, limits the opportunity for advertisers and their agencies to adjust to the rapidly changing landscape and optimize their buys.
It’s no secret that the media landscape is fragmenting, and that the most effective ad campaigns are optimized across all channels. Buying advertising separately, at the Upfronts, NewFronts and the podcast upfronts means that optimization is more difficult to achieve. Merging them, as 39% of media buyers favor, would help them to better understand measurement and research across screens, which would intern improve performance. The IAB’s new CEO, David Cohen, pushed for this ‘coming together’ to happen over the summer.
Optimization and measurement are key factors in the combined linear and streaming packages that vendors are increasingly offering at the Upfronts. Viewership is changing dramatically, particularly this year as more and more consumers have subscribed to streaming platforms during lockdown, and this is leading to an increase in streaming dollars at the Upfronts. However, a recent Wall Street Journal article highlighted that measurement problems are holding back advertising in Connected TV. Keeping track of who is watching what, and where, as well as how many times they see the same ads, is becoming a source of frustration for advertisers seeking to move their dollars into the medium. Ad-supported streaming from the likes of Amazon.com and Roku is attracting more and more viewers, but a fragmented media-buying landscape can mean that viewers are hit repeatedly with the same ad. Ad inventory purchased from multiple sellers often shows up in the same ad break; the problem is exacerbated by the fact that there is a smaller pool of advertisers in streaming than in traditional TV. There is a lack of transparency on when and where ads run within streaming platforms and apps; while it is slowly improving, the situation is far from resolved and this is causing significant wastage for advertisers. We’ll be exploring this in more detail in an upcoming post on ECI Thinks.
Advertisers are demanding transparency and that their media buys work together to drive maximum efficiency and effectiveness. The old Upfronts format is without doubt in need of an update so that it aligns more closely with the current media landscape. Furthermore, the vendors have work to do to ensure that measurement is unified and keeps up with the pace of change. The times they are a-changin’, and the Upfronts need to change accordingly.
Image: Andrey_Popov / Shutterstock
Rumors have been swirling in recent weeks about AT&T’s plans to sell off parts of its business, and even whether it will pull out of its media play altogether. In recent years, it has purchased a number of companies – including, most famously, Time Warner – in order to become a major player in the digital advertising sphere. Pursuing a line of business outside its traditional telco remit has become increasingly important in order to ‘keep up’ with key competitors Verizon and Comcast, who have both expanded their offerings: Verizon invested in a fiber-optic network for high-speed internet, while Comcast has focused on bundling content, mobile, internet, cable and landline. AT&T’s proposition, on the other hand, was seen by many as somewhat antiquated; this could only be remedied by upping its technological capabilities through investment or acquisition. AT&T chose the acquisition of companies that would make it a major player in digital advertising. This, said new CEO John Stankey, would allow it to ‘compete with companies that are incredibly strong and capable, like the Googles, Amazons and Apples of the world – and so we’re playing big’.
AT&T started its journey into advertising with the acquisition of DirecTV for $49 billion in 2015; however, it made the purchase just as the TV market started to change dramatically and irrevocably. It was a time when the likes of Netflix and Amazon Prime started to make cord-cutting a viable option, and new live TV players like Hulu Live and YouTube TV have since made inroads into the appointment viewing arena. Subscription numbers have been falling, so it is perhaps unsurprising that AT&T is under pressure from shareholders to offload the unit, even though it is now reportedly worth less than half what AT&T paid for it.
Having acquired a source of inventory for its digital advertising capabilities, AT&T then purchased AppNexus to serve as the foundation of Xandr, its programmatic marketplace for targeted TV and digital video advertising. To complete its digital advertising triumvirate, the telco giant famously acquired media titan Time Warner in 2018, giving it access to assets such as HBO, the newly launched streaming platform HBO Max, Warner Bros and CNN.
So have these big purchases, which have left AT&T in a large amount of debt, paid off? AT&T’s rumored sale of DirecTV led to speculation that it was also seeking to offload Xandr (this was later dismissed by CFO John Stephens) and that led some to wonder if Warner Media (as Time Warner was rebranded) was also for the chop. As far as we know, AT&T is not entertaining these ideas at all; WarnerMedia is an important revenue-driver for the telco giant, and Xandr has recently partnered with the Dentsu Aegis Network (DAN) in Asia to create Dentsu Curate, which leverages Xandr’s tech platform to create a new programmatic supply solution. Xandr was struggling to make its product offering appealing as it was unable to pull together inventory from enough platforms to make it interesting to advertisers; the Dentsu move could help address this issue and increase Xandr’s reach. It will also be enhanced by the launch of HBO Max’s advertising-supported tier in 2021.
With the uptick in the streaming wars at the start of this year, many consumers are likely wondering whether they want to pay for several subscriptions at once – the cost could start to look like the high cable costs that led to so many cutting the cord. AT&T’s ownership of WarnerMedia, particularly HBO Max, could make it a viable option to start ‘bundling’ streaming services. These streaming bundles could be used to incentivize consumers to stick with AT&T’s telco services and will, of course, create an even richer inventory list for Xandr – a win-win situation for AT&T.
Image: Connect World / Shutterstock
Advertising is an investment: an investment that organisations make into their future success, to grow their business and secure their future. And those organisations, just like any other investor, must have a thorough understanding of how the market – and their investments – will fluctuate, in order to understand the eventual value delivered.
That’s why we at ECI Media Management we release our annual Inflation Report in Q1 every year, with an update in Q3. Our experts analyse data drawn from our global network of offices, cross-referencing it with industry sources in order to make the most accurate forecasts possible. We provide media inflation predictions for seven media channels – TV, Digital Display, Digital Video, Newspapers, Magazines, OOH and Radio, at a global and regional level as well as for 61 countries across North America, Latin America, Europe, Africa, the Middle East, Asia and Oceania. As media inflation is intrinsically linked to global economies and events, and developing technologies, our reports provide the context that is so critical for brands making important advertising decisions.
Our 2020 inflation report, released earlier this month, revealed the key finding that, while global media inflation in 2020 will remain largely consistent with 2019 figures, video media will experience a significant increase in inflation this year. TV will reach 7.1% and Digital Video will increase to 6.7%.
What’s behind this increased inflation? Given the technological and media context, it doesn’t really come as a surprise. Of course, 2020 is set to be a year of sporting and political drama, with the Olympics, the UEFA European Championships and the US presidential election, to name just a few key events taking place at the start of the new decade. Major events of this nature always inflate TV pricing but, more fundamentally, audiences are fragmenting and ad dollars are following tend to consumer eyeballs to digital video, particularly the growing amount of premium content that digital vendors are producing. As a result, TV vendors have fewer viewers, but increase their prices to maintain advertising revenues.
Despite rising costs, TV remains the best way to deliver mass, quality audiences. Digital inventory is of course plentiful, but it is of varying quality and is susceptible to ad blocking and data privacy laws. The decline of the cookie will exacerbate advertisers’ difficulties with digital advertising, forcing them to rethink how they reach audiences with relevant advertising. We believe that in the medium term this could herald a golden era for digital advertising, with a focus on high quality opportunities such as contextual marketing. In the meantime, TV offers advertisers a brand safe, brand appropriate way to reach quality audiences, build their brands and, with the advent of addressability technology such as Sky’s AdSmart, target specific audiences.
It’s imperative that today’s advertisers take advantage of and respond to the changing media and global landscape in order to drive the highest possible value from their investments. In a context of rising media prices, we at ECI Media Management empower our clients to make the right investments by providing forensic analysis of their media activity, and actionable insights so they can successfully navigate the complex digital market and maximise TV effectiveness. The ultimate goal is to drive higher media value, and media-led impact on business performance.
You can read the ECI Media Management Inflation 2020 report here.