Credit: Stephen Webster for Ad Age
TV Upfront

The Truth About the Upfronts

Those Numbers That Circulate Every June Signify a Whole Lot of Nothing

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A number of years ago, during one of those upfront seasons when the negotiations come to a standstill in mid-June and nobody seems in much of a hurry to get back from lunch, I received a most valuable piece of advice while standing at the bar at the Four Seasons.

I'd been summoned by an ad sales exec who'd been waiting out what would prove to be his final upfront. After a recap of a recent calamitous round at Shinnecock Hills ("goddamn seventh green's a billiards table!"), the sales boss got to the matter at hand. "The way this upfront's going, everyone you talk to is going to try and make a mushroom out of you," he said, as if reciting some kind of Zen koan. "You know: Feed you bullshit, keep you in the dark. … Don't be a mushroom."

Now, if you're going to impart some wisdom to someone in a bar, the Four Seasons is the place to do it -- largely because it's so expensive that it's nearly impossible to get forget-stuff drunk. While so much other sage counsel has been left in the back of taxicabs and crosstown buses, the "don't be a mushroom" thing has really stuck.

So here we are on the eve of another upfront bazaar and, at long last, it's time to put those words into action.

The upfront has devolved into this peculiar spectator sport in which people with no firsthand knowledge of the negotiations have their snouts pressed against the glass, and they're fogging up the pane. There is no inherent value to this kind of uninformed voyeurism, and in many cases, the reports that begin circulating in the early stages of the upfront can have a significant impact on the marketplace itself.

A modest proposal, then, and we promise that no Irish babies will be devoured in the course of this thought experiment.

This spring and summer, let's not treat the upfront numbers that circulate everywhere like they're dollars in someone's bank. Not since June 2005, when ABC disclosed its upfront business in a press release that it subsequently filed with the Securities and Exchange Commission, has any reckoning been truly accountable. And the figures around this upfront are likely to be no more substantial than swamp gas.

"The upfront is definitely changing, and the point that everyone seems to keep missing is that it is just a moment in time," said Donna Speciale, president of Turner Broadcasting ad sales and the former head of investments and activations at MediaVest. "To make determinations and predictions on what the overall marketplace is going to look like based on the upfront is just wrong. You can't use the upfront as a prediction. Especially now."

The curious practice of publishing what amounts to layaway dollars really started getting out of hand once every Wall Street media analyst began handicapping the upfront.

Adding to the complexity for buyers since then, to say nothing of the observers keeping score, programmers have started bundling digital video inventory along with traditional ad time (even though the ratings sample doesn't yet integrate digital viewing). Some networks are pitching data products that promise to make certain commercial buys more effective than relying on standard demographics. They're exploring programmatic sales and making a full-court press for ratings that count viewing over longer and longer time frames.

A sober accounting of the actual dollars flowing through the system this go-round probably won't be possible until next year's upfront kicks off.

The tallies were only ever placeholders anyway. Until the upfront's holds are converted to real orders, they're about as meaningless as the millions of dollars dancing around the margins of an unsecured NFL contract. Even when the orders are locked in, clients still have the option to change or cancel a percentage of their upfront buys in three of the four fiscal quarters; in other words, the figures don't become tangible dollars until the checks clear.

The disparity between the loamy mushroom tang of upfront numbers and the sharp bite of taxable revenue is nakedly apparent upon even the most cursory glance at any given first-quarter earnings report.

"We have a pretty good handle on where everyone is netting out, and yet our numbers never seem to match what gets printed," said one buyer. "So much variance! So much bullshit! I can't remember the last time anyone's reported upfront was supported by their Q1 filing."

And now the growth of alternative ways to put video ads in front of consumers is changing the calculus for buyers. BTIG analyst Rich Greenfield said he can see a day when the upfront is no longer as big of a deal. "In a world where there is an ever-increasing number of ways to reach consumers with video advertising, the entire concept of the upfront appears dated," Mr. Greenfield said. "Why should brands or advertisers lock in such significant portions of their advertising and marketing dollars so far in advance?"

This is not to say that the system itself is somehow flawed.

Every few years someone comes along and proclaims that the upfront is deader than the Diplodocus, only to drop the argument before talks are even done. The upfront remains a pretty spiffy way for both sides to do business -- while the client secures the inventory and flights of its choice with investments that are backed by ratings guarantees, the seller can lock in the rates the market will bear and, in the event it doesn't get the price it's after, can always hold out some extra inventory for the scatter market.

Even the Gremlins-esque proliferation of newfangled video platforms like Periscope and Meerkat won't change the fact that heavy buyers of TV still see nothing but upside when they buy up front, especially if they're trying to move cars off the lot or get fannies in theater seats in the fourth quarter.

Let's just agree that the static and manipulation in the system have reached levels that make visibility something far less than 20/20. And there's no reason to believe that this year's upfront won't be just as drawn-out as last year's, although the networks are praying it won't be as soft. The longer it takes to write business, the more time the numbers will have to spread to the four winds like so many mold spores.

Good advice bears repeating. Don't be a mushroom.