It took a little while for the negotiations to heat up, but with just hours to go before buyers and sellers begin their annual star-spangled exodus to the far-flung beaches of the Hamptons, Montauk and the Jersey Shore, the 2016-17 broadcast upfront is, for all practical purposes, a wrap.
Well, at least for three of the Big Four networks, anyway.
More or less.
As is always the case with the TV's summer sell-off, assessing the ontological status of the dealmaking calls for a certain Clintonian parsing of verbs. Are the networks done with their upfront deals? That depends upon what the meaning of the word "done" is. Qualifiers abound: Sellers say they are "pretty much" done or "directionally" done, which is another way of saying they're, um, not quite done. This isn't a Butterball turkey -- there is no pop-up thermometer to indicate when the bird's good and cooked -- so what we're left with is a sort of mushy imprecision, a $9 billion cloud of unknowing that will only truly dissipate when the first quarter earnings reports drop in the spring.
Fair enough. Unless you're a seller or buyer who's promised the kids they'll be riding the Splash Mountain log flume this weekend, it doesn't really matter when the upfront deals get hashed out, provided they're done in time for holds to be converted to orders ahead of the start of the new broadcast season. With that said, here is what there is to be known about how TV's futures market is shaking out.
1) Fox and ABC have joined CBS and the CW in the "effectively done" category. As parity is the byword for this year's bazaar, ABC's results largely concur with the way things shook out for CBS, with CPMs (the cost of reaching 1,000 viewers) up as much as 10% and dollar volume up in the mid-single-digits versus 2015-16. Fox's volume increase is expected to be more pronounced on a percentile basis, as it is building on a degraded base. (The broadcaster's year-ago bookings were down 5%.) Meanwhile, it's worth noting that every CPM hike for Fox cements its standing as the most expensive broadcast net on the dial, a function of its decade-plus run as the TV's top source of viewers in the 18-to-49 demo. While the 2011-12 campaign marked the last time Fox won the annual ratings race, the gap between it and the top-rated network each year averages out to just four-tenths of a ratings point. Again: Parity is the byword.
A quick aside about pricing: Buyers caution that talk of low-double-digit CPM hikes is largely a function of broadcast's increasing enthusiasm for writing deals against the more expansive C7 ratings metric.
While networks may be achieving low-double-digit price increases on the still-industry-standard measure known as C3, which covers commercial viewing over the three days since a broadcast airs, they may not get the same boost for C7, which gives them seven days to meet their guarantees to advertisers.
"You can say you're writing 10s and 11s in C3 and then when you get to C7, there's the rollback," said one national TV buyer. "So you're really looking at an 8." Given that more deals are being written against C7 than ever before, the truth of where the price points are landing lies somewhere between the two extremes.
2) NBC is also in the home stretch, although sources in the know say that the Peacock and its cable networks have yet to finish negotiating with GroupM, the largest buyer of advertising on the planet.
NBCU ad sales boss Linda Yaccarino is said to be aggressively pursuing the greatest possible rates of change, as the Peacock continues to close the pricing gap between it and its rivals.
Speaking two weeks ago at a Guggenheim Securities investors' conference, NBC Universal CEO Steve Burke recalled that the distance between NBC and the other broadcasters' rates was once oppressively vast. "What we found was that, on a CPM basis, NBC was getting 20% less than Fox or CBS," Mr. Burke said. "For the same number of eyeballs we would get 20% less, and that happens when you're consistently underperforming. [But] once you get to be number one, you can eat away at that."
Indeed, as befits a network that has secured the highest ratings in the 18-to-49 demo two times in the last three years, NBC has made great strides toward bridging that gap, cutting as much as seven points off the lead last year alone.
As an example of how long it can take for a network to improve its pricing after a significant setback, however, look no further than the 2001-02 upfront. When the lightbulb counters at GE exhorted then-USA Network and Sci Fi ad sales chief Jeff Lucas to slash his CPMs in exchange for dollar volume, he wrote deals at a 10% discount compared to the year-earlier bazaar. It took more than a decade for USA to fight its way back to a CPM that was consistent with its status as cable's top-rated network, and by the time the dust cleared, the ill-advised practice of making deep cuts had transformed the well-liked, much-respected Mr. Lucas' surname into a verb. (A slash-and-grab was referred to as "Lucas-ing the market.")
3) Demand for the NFL packages was predictably high. Of course it was.
4) Pharma, retail, telco, insurance and quick-serve restaurants are among the strongest advertising categories, while movies and automotive commitments are down slightly versus last year's market. That both categories tend to spend a disproportionate amount of marketing cash in scatter makes the disaprity between this summer and the 2015-16 upfront less of a concern to ad sales execs.
5) With NBC still at the table, it's too soon to make a final estimate on how much of the available broadcast inventory has been snapped up, but people familiar with the marker believe the final tally will fall somewhere around the 80% mark. This is a reflection of the recent strength of the so-called scatter market, where marketers buy ads they didn't reserve during the prior upfront. Pricing for late TV buys remains at around a 20% premium versus the year-earlier quarter.
None of the broadcast networks is commenting on the strength of the market, and most of the networks will let their respective holding companies' Q2 earnings calls do the talking for them. Not since June 2005, when ABC disclosed the tenor of its upfront business in a press release that it subsequently filed with the Securities and Exchange Commission, has any reckoning of the annual sell-off been truly and 100% accountable.
As always, it's worth remembering that the upfront is a futures market, and the dollar figures that get kicked around are not cash money in the bank. Caveat emptor.