That all-too-familiar annual rite of spring is upon us. The trades are full of prenegotiation rhetoric. Industry conferences are dotted with panels of shadow-boxing buyers and sellers. Every day it seems we get reports from industry equity analysts telling us which networks will see pricing growth and which holding companies are best situated to hold the line.
This year, however, we have a new dynamic. A group of would-be interlopers are trying to nudge their way into the TV advertising futures market, where advertisers and their agencies make billions of dollars in commitments to lock up the best inventory and, they hope, best pricing.
No, it's not the cable networks. They've been trying to crash the party for years, and some have even gotten their own seats at the table. These crashers are the web folks: Google, Microsoft, Hulu, AOL and others hoping to reframe the upfront conversation from "just about TV" to "all about video."
They have some strong arguments. Web video is growing, with hundreds of millions of streams a month in the U.S. Much of the higher-quality web video now carries interruptive video ads, not unlike the ads we get on TV. Web video delivers targeting and measurement, just like the web (it is the web) and; finally, it gives advertisers and agencies the cross-platform product showing up in everyone's briefs this year as we all prepare for a multiscreen, multiplatform digital-media future.
The web guys scored a lot of good points with their presentations. They got some great visibility. However, they aren't going to get cut into that action at the "adult" table that they so cherish, at least not this year. Here is why:
There's not enough reach yet.
The upfront is a futures market where people buy things they need that are precious and scarce. For mass-awareness advertisers, massive reach accumulated quickly is scarce. That is why TV media is so in demand. That is why the biggest and best shows are bought in the upfront. Web video just doesn't have that kind of scale yet. As Nielsen told us just last week in its annual Three Screen Report, 98% of video in the U.S. is viewed on TV. Only 1% is viewed on the web. Web video is not an alternative to TV when it takes a month to deliver as much national reach as two TV networks deliver in one night.
The best stuff will be bundled.
Advertisers do want web video, but the best stuff -- the "premium" video associated with existing TV programming -- is already being bundled and sold by the TV networks in packages. It is largely being sold with TV, not as a stand-alone web product.
Buying streamers means buying heavy TV viewers.
If you dig into the recent Nielsen numbers, you realize that the one quintile of U.S. consumers who stream 95% of the web video also consume four hours of regular TV each day. Advertisers buying TV are already buying the heavy web-video viewers. Thus, if you buy web video, you're not buying incremental reach. You're buying more frequency against heavy TV viewers.
Change is glacial.
U.S. viewers have been spending more time watching cable than broadcast programming for well over 10 years. However, according to Nielsen, last year was the first year that cable networks received more advertising than their broadcast-network brethren, despite now having twice the viewership of broadcast. In this industry, it takes a long time to earn your place at the table. The web folks won't get entirely shut out. Some web video will be bought this year around the upfront. Digital planners created enough noise with the NewFronts that clients are going to demand they get something. After all, web video is this year's bright shiny object. Plus , if nothing else, acquiring some will give the buyers something to use for leverage -- even if it's illusory -- when the TV networks ask for the inevitable double-digit pricing increase. Yes, Google, Microsoft and AOL will get some of TV's scraps. It's progress, even if it's not yet a seat at the table.