- The coronavirus has postponed the annual $20 billion TV upfronts, when advertisers commit to long-term deals with networks to lock in cheaper ad rates and secure inventory ahead of the fall.
- Big ad agencies say they plan to ask for more custom deals throughout the rest of the year.
- The lack of live sports has caused advertisers to sit on budgets until the leagues resume. Two media buyers said that they are most concerned about the return of college football because they will not be able to run ads in games that are canceled or postponed by universities.
- Some sports advertising is tied to the time of year, so a postponed sports schedule might be a hard sell for some advertisers.
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The coronavirus has put TV productions and live sports on hold — and given advertisers a shot at changing the decades-old way they’ve bought TV ads.
In typical years, TV networks would be hammering out $20 billion in upfront deals with big advertisers.
But with economic concerns about the pandemic, agencies are creating deals on a case-by-case basis for clients and asking networks for customized ad packages, said two media buyers.
Upfront deals used to be negotiated over a few weeks. This year, talks are stretching into months, said David Campanelli, chief investment officer of Horizon Media.
Advertiser Perception recently found that advertisers expect to spend 33% less on upfront TV buys this year compared to last year. Fifty percent of the 150 agency staffers and brands interviewed said that digital video including over-the-top advertising could replace the reach of linear TV.
Mike Law, president of Dentsu Aegis Network’s Amplifi, said he expects to see ad buys structured around calendar years instead of networks’ schedules and options to move money around during the year and measurement tools that track what actions consumers take after seeing ads like going to a store or website. This year’s deals could also be a linchpin to changing future deals, he said.
“You’re going to have a real mixed bag of dealmaking over the next six to nine months,” he said. “Then, do we fall back into a more traditional cycle next year or does this continue where there’s a lot more kind of flexibility and fluidity in how our upfront deals are constructed?”
Options trading The cost of TV ads is decreasing
Another pain of the pandemic for networks is that it is causing their scatter prices to fall as advertisers slash their budgets and more people watch TV at home.
Lower ad prices are one of the biggest benefits of the upfronts for advertisers, who like to lock in prices months ahead of time to avoid a volatile marketplace.
Upfront prices are typically cheaper than ad prices in the so-called scatter market, where ad campaigns are sold incrementally. TV data firm SQAD reported that scatter ad prices dropped 39% during April.
Campanelli said that there’s still value in buying ads through the upfronts, though.
“If it took a global pandemic to get scatter pricing even close to upfront pricing, it means that upfront pricing is the place to be,” he said. “Yes, every advertiser wants flexibility, but you have to exchange some of that flexibility for securing that locked-in, efficient pricing.”
Options trading Advertisers’ sports budgets are on hold
The upfronts aren’t the only problems for TV networks. Networks are also grappling with the loss of live sports that traditionally bring in billions of dollars for them.
Companies that typically advertiser around those events have mostly sat on those dollars, and with leagues planning for fewer games than in a regular season, it’s unclear how much of those ad dollars will get spent, Campanelli said. For example, the NBA is exploring a truncated regular-season schedule.
The initial return of live sporting events like NASCAR and a celebrity golf tournament boasted high ratings for Fox and Turner Sports. Amplifi’s Law said that he does not expect those ratings to continue, though as stay-at-home orders loosen up.
In addition to networks, colleges could lose more than $4 billion from a lost fall football season, ESPN reported. College football also spans the major networks including ABC, CBS, Fox, NBC, ESPN, and Turner Sports.
In addition to running ads during the games, advertisers also sponsor content outside of the game, like recap and talk shows.
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Law also said that it’s unclear if a later sports schedule will attract the same kinds of advertisers that leagues and networks are used to, which could make it harder for networks to sell inventory. About 20% of sports dollars come from advertisers who run seasonal ads around sports. For example, a retailer that typically promotes a Father’s Day sale in June might not want to run a back-to-school ad in September, he said.
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