The global COVID-19 pandemic caught everyone on the back foot, regardless of industry. The timing, in particular, may have been most unfortunate though for TV and advertising companies. The May upfront market is supposed to be the networks’ time to shine, when major platforms like Viacom/CBS and NBC/Universal tout their coming content lineups to a salivating ad buyer market. In 2020, like much else, it has been toppled.
With live sports shut down for over two months and the production of scripted shows halted, media platforms have seen their product supply vanish at the exact time on the calendar when sales should be booming. To make matters worse, even though people have been stuck at home with more TV time than ever, the general economic slowdown has decimated linear ad spending. Streaming services like Netflix, Disney+ and Hulu have taken all the air out of the network balloon during quarantine. On the buy side, news reports of ad agency layoffs have become all too common.
The revenue impact in the industry has been swift, exacerbated by massive ad buyers exercising cut-back options in their contracts. This vehicle threatens to cut third-quarter ad revenue from big-name buyers by up to 50 percent.
“Big advertisers from General Motors Co. to PepsiCo Inc. to General Mills Inc. are seeking to walk back spending commitments they made to broadcast and cable networks, a dynamic that is testing the industry’s five-decade-old way of doing business,” according to the Wall Street Journal.
Media companies are moving forward with virtual upfronts, hoping to salvage a piece of the shrinking pie any way they can. A quieter upfront market will lead to a potentially chaotic scatter market throughout the year, especially if the economy rebounds and buyers start opening the purse strings. Adweek had the following to say about the decisions this will create:
“Now buyers and sellers are essentially left with a philosophical dilemma: Do they commit dollars in the upfront, where inventory is guaranteed, but sold at a discount? Or do they focus on executing flexible, cost-effective programmatic buys on the scatter market where prices are more volatile?”
This is a good question, but another comes to mind: Why not do both? Ideally, buyers and sellers would navigate each market with intentionality and awareness. However, as we explored in a recent whitepaper, most media and advertising companies rely on data and sales processes that are far from ideal.
But every business barricade comes with a window of opportunity, if you know where to look. Paradoxically, this pandemic may create the perfect conditions for companies to adopt much-needed transformations in the way they set rates, negotiate and buy/sell their ad mix. The old way of doing things is not going to be sufficient for the coming confusion.
Intention + Awareness – Buy Side
Where is the opportunity then, and how to seize it? Consider the question posed above, from the perspective of an ad agency working on behalf of a large advertiser. The normal budget has been slashed and supply is underwhelming but both parties know that the CPM and demographic guarantees that come with upfront buys are required to get the necessary mileage out of the brand’s promotional efforts. They can’t afford to sit out the upfronts entirely.
At the same time, they will need to be nimble and prescient going forward to get the most bang for their buck in the scatter market. In cloudy times, there are clear advantages to waiting for the right time to pounce on ad spots, and scatter allows for creative teams to build content closer to the actual air date. But the best spots will come at a premium and competition will stiffen as the market rebounds.
In order to act with intention, ad buyers first need to be aware of all the factors that impact their return on investment. In the best of times, that kind of awareness is impossible to achieve with manual, gut-feel approaches. By investing in data science and a modern cloud-native platform, even in these troubled times, agencies can unlock valuable insights like:
- Demographic analysis to help predict the best spots to target in the scatter market
- Intelligent guidance based on market rates, budget and available inventory to optimize spread of ad buys
- CPM negotiation guidance
Agencies have a real opportunity to guide their clients through this difficult year and prove themselves to be essential long-term partners. It will take a reimagined approach to get there.
Intention + Awareness – Sell Side
In a normal upfront season, the networks may hold back 10 to 15 percent of airtime to sell in the scatter market. In 2020, scatter inventory will be much more plentiful by default. If demand returns this inventory can be sold at a higher rate than the upfront, but of course that is a big “if” right now. More than ever before, the scatter markets will represent a high-risk, high-reward tight rope.
With a lack of data-driven guidance, many media platforms will err on the side of dropping rates to collect as much predictable revenue (i.e. upfront) as possible. But will that be the right move? More than likely, this tactic will leave money on the table in the long run. Media platforms need to embrace both markets (upfront, scatter) and tune their mix correctly to maximize revenue and profit.
Given the current climate, it can be challenging to keep rate cards properly aligned with the competition during upfronts, especially if competitors are exhibiting irrational pricing behavior. To the extent that rate cards are difficult to maintain and not market-aligned, this makes them nearly impossible to use as a meaningful reference point from which to bundle or discount.
Intelligent pricing and sales software can optimize the rate-setting process, measure elasticity and automate arduous proposal workflows, leading to better business won more efficiently. It can also provide a comprehensive view of current and historical client ad spend to deliver meaningful price, recovery and growth actions. For companies that gain the confidence that comes from reliable data and intelligent guidance, a kneejerk response (such as settling for lower rates or selling too much inventory upfront) becomes unnecessary.
With the intentionality and awareness only data science can provide, companies can capture as much revenue as can be had in the upfronts while preserving inventory for the more lucrative scatter market. By using advanced intelligence to account for all the factors that affect price in real-time as market conditions change, they can consistently sell that extra inventory at a more profitable price.