Tag Archive: upfronts

  1. Netflix advertising: a new frontier for the ad industry?

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    Following poor Q1 results, Netflix announced that it will be introducing an ad-supported tier to its streaming platform. So what does Netflix advertising mean for the rest of the industry? 

    When the so-called ‘streaming wars’ kicked off, no one imagined that just around the corner was a global pandemic. A global event that would change the face of the world, the economy and consumer behavior. At first, Netflix, Disney Plus and their competitors reaped the benefits of lockdowns across the world. Bored consumers, unable to find entertainment or spend their money elsewhere, signed up to the streamers in their millions. Disney Plus reached 90 million subscribers three years ahead of schedule at the end of 2020. Netflix added an additional 37 million subscribers in 2020, bringing its total to over 200 million. Indeed, this huge increase in subscriptions helped to bring Netflix into the black for the first time in 2021. 

    More than two years on, the world has largely learned to live with Covid-19. Normal life has more or less resumed, so where does that leave the streamers?  

    Netflix – boom,  bust and boom again?

    The new normal has certainly had an impact on Netflix, along with the higher cost of living and other factors. Netflix announced in April that it had lost 200,000 subscribers in Q1 2022 – its first-ever decrease in subscribers. The company blamed the loss on several factors, including high penetration, economic factors, the war in Ukraine (Netflix has pulled out of Russia), and the high number of customers who share their passwords with non-paying households. But whatever you blame it on, it was a bad quarter for Netflix, particularly in comparison to Disney, who announced that they had added nearly 8 million subscribers in the same quarter. 

    It was against this backdrop that Netflix CEO Reed Hastings made his big announcement: Netflix would introduce an ad-supported tier. This was in stark contrast to the platform’s long-standing opposition to ads. Netflix has since announced that the new, lower-priced tier could launch as early as the end of this year.  

    What Netflix advertising means for the rest of the streaming industry…

    In recent years, a belief that 1 billion households were willing to pay for streaming services led to huge investment in the streaming sector. Much of the money from this investment was poured into content creation. The theory was that better content equals more subscribers. Netflix invested so much into content creation that it only became profitable for the first time in 2021. However, it is becoming clear that the market is likely much smaller than originally believed, especially given that high penetration was partly blamed for Netflix’s weak Q1 results. The streaming platforms need to find new ways to deliver growth – and that’s where advertising steps in.  

    Many assumed that Netflix’s lost subscribers were lost to competitors. However, research revealed that in the two weeks after cancelling a Netflix subscription, 87% of subscribers had not signed up to a rival service. This suggests that cost is the key factor. That makes a lower-cost, ad-supported version more appealing – although Netflix will be keen to avoid cannibalising subscriptions to its top tier. 

    Although Disney’s subscribership is healthier than Netflix’s, it is also watching its outgoings carefully; Bob Chapek announced that the company would be cutting its overall film and TV spending by $1 billion this year. It is also launching an ad-supported tier for Disney Plus, which it is in a good position to do thanks to its experience in the space with Hulu. 

    …and for advertisers?

    For a long time, TV advertising has, slowly but surely, been losing its sheen, compared to more measurable and targetable formats such as online channels, and more exciting ones like podcasts. With increasing numbers of consumers cutting the cord on cable and ‘going dark’ to ad-free environments such as Netflix and Disney Plus, advertisers have had to fight it out for live sports programming in order to reach large audiences. But, thanks in no small part to the news from Netflix, it’s back with a bang. Advertisers will be excited about reaching Netflix’s binge-watching audiences and – as a newcomer to the advertising scene – it is hoped that Netflix’s ad offering will be high-quality, prompting many advertisers to truly embrace non-linear channels. That said, viewers who have higher incomes and are therefore more attractive to many advertisers will likely remain on the ad-free version, out of reach to the advertisers who are so keen to reach them. It will be interesting to see if they choose to advertise on Netflix anyway. 

    Netflix’s announcement meant it was to late for the streamer to join the US Upfronts this year, but many advertisers will be excited about its anticipated arrival at next year’s Upfronts.

    What will Netflix advertising look like?

    It is currently unclear how Netflix will approach selling advertising – it could use an outside company, develop an in-house ad sales team (which will require significant hiring), or it could acquire an ad company or a company that already has an ad offering – such as Roku. But no matter which direction it goes in, it will benefit from being immensely data-rich, thanks to its cloud storage, audience insights and email addresses. If it approaches advertising carefully and intelligently, it could potentially set a new standard for advertising on TV, creating an experience which is both enjoyable for the viewer and rich with benefits for the advertiser. It will be undoubtedly keen to keep its user experience as clean as possible, so will likely seek to avoid banners on its homepage. It could also use pre-rolls rather than interrupt shows with ads.  

    An article on AdExchanger recommends that it combines content, commerce and commercials into a seamless experience. Gamification, for example through ‘choose your own adventure’ ads, would allow brands to generate more data as well as to build engaging CTV experiences. One-click shopping would enable brands to ‘capitalize on a seamless and closed loop’ to drive conversions and revenue, as well as to collect valuable data. Finally, if Netflix plays its cards right, it could own a vast wealth of extremely attractive first-party data with which it could build and sell audiences. Its existing contextual recommendation platform could be repurposed to handle ad optimizations and outcomes, similar to a walled garden. 

    The future of advertising on streaming platforms

    Netflix’s announcement that it will introduce an ad-supported, lower-cost tier has sent ripples of excitement across the industry. This is the company that almost single-handedly created the streaming category, pioneering a model that has been replicated by many, from the entertainment conglomerates to smaller, specialist streaming platforms. Its move into advertising, after so many years of refusing to even consider it, will be eagerly watched and could – if executed well – create a new standard for ads in both the streaming industry and the wider TV industry. 

    Header image: Venti Views on Unsplash

  2. Key TV trends for marketers at the 2022 Upfronts

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    The US Upfronts recently came to an end, but marketers across the US and globally will continue to buy TV space throughout the year. The rapidly evolving TV landscape makes this challenging – so what do marketers need to bear in mind as they negotiate with TV vendors? In an article for MediaPost, Colin Linggo, ECI’s SVP, Head of Media Investments & Operations, North America, explored some of the key trends impacting the TV industry in 2022.

    This article first appeared in MediaPost on May 12 2022. Discover ECI Media Management’s top 10 insights for the 2022 Upfronts in our whitepaper.

    Another TV Upfront season is upon us — that time of the year when TV networks and media owners are locking up new deal commitments with advertisers and their media agencies for the upcoming 2022/23 programming season. Nothing encapsulates this time like the Masters’ slogan, “A Tradition Unlike Any Other.” An industry tradition that has been radically upended, fueled by post-COVID-19 consumer behaviors, economic volatility, inflationary concerns, industry consolidation and data fragmentation, the 2022 Upfronts are guaranteed to be different and challenging. Our internal estimates indicate that this year’s Upfront market will reach $22.1 billion for the 2022-2023 season compared to $19.9 billion last year  — an increase of 11%. With so much uncertainty, it’s important that marketers are armed with some necessary insights to plan for this critical period.

    The advancement of alternative video audience measurements and new challenges for marketers

    The big picture: Nielsen, the legacy TV measurement currency, is facing stiff headwinds from its competition and media owners. Viewership is no longer linear or siloed on traditional TV sets. Consumers are watching both long-form and short-form content across multiple devices and streaming services. Along with Comscore, iSpot.TV and VideoAmp, including Nielsen, all the key audience and video measurement companies are working at breakneck speed to advance their cross-channel measurement capabilities, reflecting the dynamics of the digital media ecosystem. With all the major media companies investing heavily in their respective streaming services, it’s a top priority for the C-suite to establish an industry “certified” cross-channel/screen measurement system and non-Nielsen currency to integrate and capture all viewership within their portfolio for first-mover advantage. This will allow marketers to obtain conclusive evidence that their advertising investments are contributing to results.  NBCUniversal is partnering with iSpot.TV. The newly formed Warner Bros. Discovery will be partnering with Comscore, VideoAmp and iSpot.TV. While we do not expect monumental shifts with overall negotiation strategies this summer, this year will certainly be a litmus test for all parties. We project that in 2023, 10% to 15% of Upfront deals will be negotiated on non-Nielsen alternative currencies.

    Measurability is everything and is becoming flexible across platforms

    Why it matters: Initiatives such as those mentioned above — including NBCUniversal and iSpot.TV — will allow advertisers to procure media inventory cross-platform, with ad impressions served across all creative assets, including linear TV, connected TV (CTV) and AVOD services. There will be a shift from legacy GRP planning and negotiations to impression-based planning, similar to how digital media is transacted. The measurability of non-linear platforms allows for incremental reach through de-duplication across cross-channel platforms and unified data measurements. However, the deployment of anything new and limited beta testing bring unexpected challenges and complexities. While the benefits of CTV have been well-documented by many sources and reports, ad fraud, overexposure and frequency capping limitations currently permeate the CTV supply chain.

    What they’re saying: Linear TV viewership and ratings continue to deteriorate, with many viewers only tuning into live and on-demand programming. With all traditional broadcast networks offering ad-supported streaming platforms as part of their offerings, such as Disney (Hulu), Paramount Global (Paramount+) and NBCUniversal (Peacock) reach can still be achieved with disciplined planning. Simply relying on TV to drive reach is untenable in today’s fragmented environment. Marketers should pursue a balanced cross-screen planning approach and holistic data strategy for reach and frequency.   In addition, it’s important to note that the audiences targeted on linear TV might not be the same on CTV. Untapped, underserved, underrepresented, high-potential CTV opportunities can be uncovered through effort, timing, research and forward-looking planning.   While all the major media owners and agencies will present bundled cross-platform packages and benefits, remember that legacy siloed operations still exist behind Upfront presentation curtains. These bundled deals are like mutual funds. Deconstruct the Upfront deal components and commitments, and calibrate with agency partners to meticulously evaluate each component. This will ensure the right balance between cost and quality metrics.

    The cost of advertising on TV will increase

    By the numbers: As revealed in our Annual Inflation Report released back in January, even with declining audience viewership, TV inflation in the U.S. is expected to rise this year due to supply and demand. The domestic economy is rapidly returning to normalcy, even with geo-political and energy market volatility. This Upfront cycle will also be heavily impacted by the U.S. midterm elections. The competition for flagship events like the NFL and FIFA World Cup and limited premium inventory will be high, as marketers continue to seek out safe bets for mass reach at the right frequency. Inflation impact will be felt across the marketplace.

    Where it stands: Traditional linear TV inventory is becoming increasingly competitive due to emerging industries. TV advertising spending has historically been dominated by traditional advertisers in consumer products, automotive, telecommunications, food and beverage and pharmaceuticals. In recent months, there have been increased media expenditures from emerging industries with sizable marketing budgets, such as cryptocurrencies, FinTech, gambling and electric vehicles. “Non-traditional” market drivers are paying above industry norms and market rates for high-value, high-demand video inventory. Combined with a lack of premium inventory and ratings erosion, the inventory is becoming increasingly competitive, leading to higher costs. The quality of media-planning strategies will be paramount in today’s marketplace.

    Be smart: When proceeding to the advanced stages of the negotiations with media owners and networks, marketers should ensure that their deal terms and negotiated costs are protected against market factors that the agencies can directly plan, control and influence to offset market inflation with negotiations at the highest agency levels to drive economies of scale. Like a seasoned institutional investor, the agency should provide its clients with the right investment and cost containment strategies to achieve the greatest value. Many Upfront deals will be finalized faster than in previous years, possibly several months earlier than usual. For marketers to lock in prices within internal and/or external benchmarks, Upfront planning cycles will need to be accelerated.

    Between the lines: There is significant value to audience deficiency units (ADUs). Upfront “guarantees” are part of standard deal terms and media owners’ commitments to advertisers and agencies. However, even with the most advanced forecasting models and planning methodologies, under-delivery on performance is to be expected. Shortfalls force TV networks to give clients audience delivery units (ADUs), or “makegoods.” In the simplest terms, ADUs are like store credits. No one likes them or remembers having them. Most, if not all, advertisers will experience under-deliveries from their TV partners. Managing ADUs is tedious and often overlooked by both clients and agencies.   But with careful management, ADUs could potentially be an ancillary benefit during Upfront negotiations — especially with network partners that advertisers consistently spend with year-on-year. These are owed inventory and impressions from a previous period that have not been delivered within the “guaranteed” period. Advertisers should coordinate with their agencies to develop a clear ADU leverage strategy in advance of the negotiation period.

    Independent counsel, impartial insights, integrated strategy

    Heading into Upfront negotiations in such a fragmented and fluid marketing landscape is sure to bring consternation even for the most seasoned marketer.

    Marketers should ensure they have access to independent counsel and impartial insights to inform their negotiation strategy, and by benchmarking rates, setting precise media targets and quality guardrails, all aligned into a cross-channel integrated strategy that will deliver the highest media ROI and transparency.

    Header image: Proxima Studio/Shutterstock

  3. The Upfronts: Is the old ship slowly changing course?

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    Our US Business Director Victoria Potter explores how the Upfronts format might finally be changing – and why that’s good for advertisers. 

    How did the pandemic affect the Upfronts format?

    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: 

    • Increased flexibility: Advertisers feel more comfortable committing to longer-term deals if there is greater flexibility and more options available to them 
    • More streaming: Many vendors managed to keep their revenue flat (rather than dropping) thanks to a shift in investment from linear to streaming. Streaming now accounts for one-third of ad dollars invested in TV. 

    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? 

    Timing

    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.  

    Control

    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. 

    So, what’s the bottom line?

    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

  4. Will the coronavirus pandemic drive seismic changes to the Upfront market?

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    Coronavirus is a catalyst for changes that have been years in the making. Nowhere is that truer than the advertising industry, which has seen the adoption of new habits which might previously have taken years happen in a matter of weeks.  

    When and how will the Upfronts occur this year?

    One key area of change for the US market is the TV Upfront ecosystem. With production grinding to a halt and much of the country still in lockdown when Upfronts were meant to kick off, the question is, when and how will the Upfronts occur this year? Many key industry players have long pushed for the Upfronts to switch to a calendar year model, rather than the broadcast year of October to September. At the end of May, the ANA Media Advisory Board recommended a sweeping transformation of the system, causing a huge shake up in the media world. But how will it all pan out? 

    TV has transformed dramatically

    Few would argue that TV’s October–to–September timeframe is outdated. It harks back to a time when TV was mainly appointment viewing, with a set year-round schedule of shows having first runs from October to May, with reruns over the summer. This in turn is rooted in historic business movements: car companies used to unveil new vehicle models in the fall, so TV launched its new season to tie in with that. But the TV sector has transformed dramatically in recent years: the proliferation of channels and programming means new content is available throughout the year. What’s more, appointment viewing has dissolved with the growth of time-shifted viewing, on-demand, OTT and CTV platforms; Nielsen found that the streaming share of TV is now at 23%, up from 14% compared to the same period a year before, and is expected to continue its growth trajectory. 

    Allowing for a better understanding of budgets

    The suggested shift to a calendar-year model would allow advertisers until Q4 to get a good understanding of their budgets for the following year – especially important this year when all industries have experienced so much disruption. However, many of the large, traditional advertisers are set on signing upfront deals under the traditional broadcast-year model; even if the networks do choose to shift to the calendar year model, it would be easy to put aside the inventory that the big players normally go for, leaving newer advertisers with the ‘leftovers’ in the calendar-year marketplace or the more expensive scatter market. 

    The absence of live sports

    Another compelling reason to push back the Upfronts is the current absence of live sports, and how the ‘withdrawal’ that many viewers and advertisers have felt will affect viewership when they are finally allowed to play again. The fact that games will be played ‘behind closed doors’ means that TV audiences are likely to be through the roof; it will be very difficult to estimate prices for ad spots until networks have a better idea of what those audiences will look like. In that light, shifting the Upfronts to Q4 seems like the right thing to do.  

    A chance to align the Upfronts and Newfronts

    Shifting the Upfronts would present an opportunity to align them with the increasingly important Newfronts – a desirable outcome for both advertisers and media buyers. 72% of media buyers say that Newfronts are more important than ever, and nearly half want the Newfront presentations to merge with the Upfronts. A key factor in this is that 39% favor merging the two to help buyers better understand measurement and research across screens – which could in turn improve performance. There is a finite amount of reach available through linear TV and, in order to expand coverage or just reach the same number of consumers as before, advertisers need to diversify their media mix. 50% of marketers will increase their spend in CTV, OTT and Digital Video, while linear TV is likely to see a decrease. Advertisers will be looking to buy audiences agnostically across a network’s linear and digital assets: a compelling argument for merged Upfronts and Newfronts. 

    The time is now

    All in all, it seems that transforming the Upfronts timeframe to a calendar model makes a lot of sense. It will be uncomfortable for a while, but doing it in a year when the status quo has been disrupted so fundamentally and the landscape has transformed so dramatically anyway seems a good time to do it. Time will inevitably tell. 

    Advertisers should re-evaluate their media mix and KPIs

    Regardless of whether the Upfronts shift to a calendar-year format, or whether they merge with the Newfronts, this is a good time for advertisers to re-evaluate their media mix and KPIs, and to negotiate better deals with vendors.  

    • Buy flexibility: Flexibility has been an increasing priority for advertisers over the last few years, and the fact that so much new programming has been shelved as production is halted means that flexibility is more important than ever. Cognizant of the marketplace, vendors are likely to be more willing to provide more flexibility.  
    • Consider scatter opportunities: Marketplace uncertainty means that Upfront commitments are expected to be much lower than in previous years. This means that there will be more high-quality inventory left over for the scatter market – particularly as there is likely to be more certainty around programming and production as time progresses. 
    • Review your TV/digital mix: With 59% of media buyers expecting to increase their CTV/OTT budgets in the second half of 2020 compared to 2019, wise advertisers will consider where their audiences are, and the best touchpoints. 

    2020 has doubtless been a year of disruption and sleepless nights for advertisers and buyers in the US and worldwide, but with strategic thinking and agility, the transformation to the media landscape can be turned into an opportunity for the savvy advertiser. If you would like to discuss with one of our experts how you can identify and exploit the opportunities, please feel free to contact us on value@ecimm.com  

    Image: Vasyl Shulga / Shutterstock

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