NOTE 1: Any further questions? Reach out to me via email! Would love to discuss this more. Have a great week.
The advertising landscape within television has been quietly evolving, with new systems replacing traditional ones often going unnoticed. The era of streaming has brought significant changes, yet many in the industry lack a comprehensive understanding of the relationship between advertising and television.
One clear example is the dynamics behind TV’s 2024 upfront week. Traditional media companies like Disney and NBCUniversal successfully closed deals, while streaming-first companies like Netflix and Amazon lagged behind. Media buyers noted that the negotiation process has become more complex due to the growth of streaming. Traditional media companies benefit from offering a broad portfolio, including sports and general entertainment, whereas streaming companies are seen as lower priorities. Buyers leverage the abundance of streaming inventory to negotiate better prices, with significant rollbacks reported from Disney, Paramount+, and Max. In contrast, Netflix and Amazon have struggled with high initial pricing and ineffective packaging, making them less attractive to advertisers.
This shift in the advertising landscape is crucial to understanding the broader market implications of these trends.
Upfront Week
Before diving deeper, it's essential to understand upfront week. This annual event in the TV and media industry is where major broadcast and cable networks, along with streaming platforms, present their upcoming programming slate to advertisers.
Changing Priorities
Commitments to streaming-first companies have been lower on the priority scale, with some comparing them to cable networks. The heyday of quick deals based on the previous year’s pricing and volume is over. The sense of urgency, deal-making, and relationships have all changed.
During upfront week, Disney, NBCU, Fox, and Paramount led the deal-making, primarily due to their offerings in sports, general entertainment, and streaming. Following them were Hallmark, AMC, and A+E, which focus more on linear properties, unlike Netflix, which is solely focused on streaming. The portfolio offerings are critical to understanding this hierarchy within upfronts.
Streaming Platforms
One immediate observation is the downfall of streaming platforms in upfront negotiations. Traditional media’s dominance and complex negotiations are significant factors.
Prior to this year’s upfronts, Amazon was expected to be a major disruptor with its influx of streaming ad inventory from Prime. Their service launched ads to an estimated 115 million viewers. However, despite initial expectations, Amazon did not steal upfront share from other media companies as anticipated.
The deals being inked reveal an interesting trend: while clients’ upfront budgets are down, they are still making deals now to overhaul pricing at network streamers, achieving reductions of up to 40% compared to prior years. Budgets are down mainly due to the lack of inventory scarcity (with the exception of sports). The high volume in upfronts this year is due to buyers and sellers exchanging volume for price adjustments.
Disney has agreed to pricing rollbacks in the range of 30-40% for its streaming platforms. NBCU’s Peacock, historically more fairly priced, has rollbacks closer to 10-15%.
Another setback for streaming companies is their inability to package solid deals effectively. Companies like NBCU and AMC excel at presenting comprehensive packages that include production, talent, and social media, all in one buy. In contrast, Netflix and Prime Video have struggled with this approach. Prime's aggressive pricing and lack of clear pricing for shows like "Are You Smarter Than a Celebrity?" have further hindered their attractiveness. Streaming platforms often present high initial prices without the same level of integration and flexibility, making them less appealing to advertisers.
Programmatic and Digital Spend
Another key issue is the conflict between streaming platforms and programmatic spending.
There has been a significant shift from traditional buying models to programmatic spending, which is characterized by automation and efficiency. Programmatic advertising automates the ad buying process, reducing the need for manual negotiations and paperwork typical in upfronts. More importantly, it relies on Real-Time Bidding (RTB). Unlike upfront commitments, which are made months in advance, programmatic allows advertisers to buy ad space in real-time. This flexibility lets advertisers adjust their strategies based on current market conditions and performance data, making the static nature of upfronts seem less appealing.
Advertisers have held back digital spend for programmatic purchases and shorter-term buys, reducing the urgency to commit to streaming platforms and other sellers upfront. This programmatic approach has been diminishing upfronts' viability for the past few years.
Programmatic buying allows advertisers to purchase ad space throughout the year, slowing down the pace of upfront negotiations, especially with streaming platforms that have abundant inventory available year-round.
A significant portion of digital advertising spend is being reserved for programmatic purchases rather than committed during upfronts. This shift means that advertisers prefer to keep their budgets flexible, allowing them to respond to market conditions and performance data as the year progresses.
Ambler's Cut
The evolution of programmatic advertising is reshaping the game. However, Ambler's Cut advises against simply going with the flow. Like most flowing rivers, they often lead off a waterfall—and in this case, that plummet is when programmatic spending stops because buyers start to realize the importance of relationships behind the upfronts. As we see a rise in FAST (Free Ad-Supported Streaming TV) and AVOD (Ad-Supported Video on Demand) television, we can't help but notice similarities to past eras. The same could happen to advertising and upfronts.
Comments