Each May the TV upfronts presentations occur and every year the ensuing upfront negotiations are different. The “upfronts” negotiations can be as short as a few days or they can be stretched out for months. It can be a buyers ad marketplace with little if any cost-per-thousand (CPM) increases or it can be a strong seller’s market with percent double-digit gains in CPMs. The 2021 upfront can be categorized as a seller’s market.
The 2021 upfront marketplace was completed in stages. Several media companies wrapped up their negotiations with advertisers within several weeks after their mid-May presentations. For others, negotiations were not finished until a few weeks after that. With the exception of Discovery, the eight prominent media companies had completed their upfront negotiations before the Fourth of July. Typically, media outlets announce the results of the upfronts with little pricing information. In addition, any ad dollars or CPM information from the networks, or even ad buyers, may (or may not) be accurate.
The 2021 upfront was a far cry from the 2020 when the pandemic and economic slowdown wreaked havoc on the upfront ad marketplace. The bullish 2021 upfront is another indication that the ad market has rebounded post-pandemic.
Among the reasons cited for the seller’s market was the emergence of ad supported streaming video (AVOD), the continued popularity of premium live sports (i.e., NFL) combined with programs on linear television. In addition, the ad economy has been surging post-pandemic as a number of product categories increased their ad commitments creating demand. The categories often cited were travel, finance, retail and cinema. Also, there were a number of first time TV advertisers seeking to build brand awareness that television often provides. In any event, with ad dollars returning to the marketplace, there have been reports of strong CPM increases reaching upwards of 20% or more compared to less than +5% for last year’s upfront.
With the addition of new video platforms, the networks also introduced new tools to help manage their growing portfolio and provide greater audience insights to advertisers. These include NBCUs One Platform, EyeQ from Viacom CBS and WarnerMedia’s Xandr. Despite the surge in CPMs, collectively, when the upfronts are all said and done about $20 billion worth of advertising time will have been negotiated on par with previous years.
Here, in chronological order, is an overview of upfront negotiations for the eight prominent media companies with comments from network executives.
The CW: In an unusual move, the CW had opted to bypass their annual upfront presentation to advertisers scheduled each mid-May. Nonetheless, the CW was the first network to conclude their upfront with the ad community wrapping up negotiations on June 11. For the 2021-22 season the network added a seventh (Saturday) night to their programming lineup. It was reported The CW received increases from a reported 19% to 21%.
NBCU: On June 14, NBCU announced they had concluded their upfronts claiming it was probably the strongest in their history and even called the negotiations a “watershed” moment for the company. Similar to their competitors, NBCU had presented advertisers with a unified strategy of Peacock, Spanish language network Telemundo and their English language linear networks. Despite the claim about a strong ad marketplace, NBCU revealed no information about pricing or the amount of ad inventory sold.
Disney: Later, on June 14, Disney announced they had finished their upfront negotiations. Disney had reported strong CPM growth in the range of 20%. Helping to drive the pricing increase was advertiser’s interest in live sports. Disney noted that 40% of the ad dollars were allocated to interactive and streaming video platforms such as Hulu and ESPN+. Hulu is expected to generate $3 billion in ad dollars comparable with Disney’s linear TV networks.
Fox: On June 16 Fox announced they had concluded their upfront negotiations with advertisers. It was reported the network received a 20% CPM increase across their linear networks and digital platforms. The ad dollar commitment for Tubi had tripled. A Fox spokesman described this year’s upfront negotiations as “one for the ages” with a number of advertising categories (i.e., movies, travel) returning to normal levels of ad spend. Fox also cited strong demand for live sports (NFL and college football).
Univision: On June 21, the top-rated Spanish language network wrapped up their upfront negotiations with advertisers. Univision reported double-digit increases in CPMs as well as increases in ad volume. The network, under new management, finished their upfront negotiations before several English language networks, an indication of advertisers growing interest in the multicultural market. In addition, earlier in the year, Univision had launched a new ad supported streaming video and video-on-demand service Prende TV.
ViacomCBS: On June 29, ViacomCBS had concluded their upfront negotiations. In describing the ad marketplace, an executive called it “historic demand” which resulted in historic pricing. The network reported strong demand for live sports and CBS primetime programming. In addition, Paramount+ and Pluto TV reported significant interest as advertisers use AVOD to build incremental reach. Variety reported ViacomCBS was seeking slightly higher CPM increases that were in the low-to -mid 20% range.
WarnerMedia: On June 30, WarnerMedia announced they had wrapped up their upfront negotiations with advertisers. Citing significant demand, Warner Media called it the most successful upfront marketplace (in securing overall commitments) in the company’s history. For the upfront WarnerMedia cited many returning as well as first-time advertisers. Earlier in June, AT&T announced the launch of HBO Max as an AVOD provider. There are also plans to launch a standalone streaming service for CNN. WarnerMedia provided no information on how much ad dollars were allocated to either linear TV or their streaming platforms.
Discovery: In mid-July upfront negotiations for Discovery were still ongoing, one month after a number of their rivals had wrapped up their negotiations. Discovery had been seeking significant rate increases for their cable networks, in an attempt to reduce the pricing gap with their broadcast network rivals (which has existed for decades), resulting in the delay. In second quarter 2021, in primetime, five of the 15 most watched cable networks were owned by Discovery. On July 15, Discovery launched the Magnolia Network from Chip and Joanna Gaines available on Discovery+ and as an app. Pending regulatory approval for next year’s upfront WarnerMedia’s and Discovery will become Warner Bros. Discovery.
The 2020-21 season was negatively impacted by production studios temporarily closed and cancellation or postponement of premiere sports leading to significant losses (and issues) with Nielsen ratings. For example, in the 2020-21 broadcast season, year-over-year the adults 18-to-49 ratings in primetime was down for every broadcast network led by Fox which dropped by 36% and NBC which declined by 21%.
This loss in ratings can actually help build demand forcing advertisers to buy more commercial inventory to achieve their media goals. As a result, demand helps to sustain pricing in the form of CPM. The return of premiere live sports and continued adoption of AVOD (with their limited supply of commercial inventory that also builds demand) are better at targeting younger viewers than entertainment programs on linear TV. Network executives cited both as instrumental in the 2021-22 upfront negotiations.
Despite the strong upfront, the trend lines are clear, in the years ahead media forecasters project double-digit increases in ad spend across digital media platforms such as social and search, with linear TV ad dollars expected to be either flat or with marginal increases. The ad revenue growth in video will largely come from digital extensions including connected TV and AVOD.
As an example, on July 12 Roku announced they had finished their upfront negotiations with 42% of business coming from first-time advertisers. Although similar to the networks, no ad volume was mentioned, Roku said year-over-year they had doubled their upfront spend commitments. A spokesperson at Roku said the upfront, “was even stronger than we had anticipated.” In a first, Roku was negotiating with advertisers concurrently with the broadcast upfronts and had finished their deal-making ahead of Discovery.
Prior to upfronts, media pundits had opined on the relevance of the upfronts as an effective method to buy advertising. However, with “record” CPM increases and such comments from network executives as a “watershed moment”, “historic demand” and “one for the ages”, the upfronts will continue in 2022 and for the foreseeable future. Despite decades of ratings erosion, the upfront ad buying model still works for the networks and now streaming video providers, why would they want to change it?