The ad industry generally accepts that reducing TV's commercial clutter would be valuable for marketers. But just how valuable it would be is shaping up as a flashpoint at this year's upfronts, where networks will offer the bulk of their commercial inventory in the upcoming season.
While ad buyers and sellers agree that fewer interruptions are key to fighting Netflix and other rivals, the economics of really doing it are daunting.
"Conceptually, improving the commercial experience on linear TV is a great idea. It's a no-brainer," says David Campanelli, co-chief investment officer at Horizon Media. "They have overloaded commercials and you have to compete with no commercials or limited commercial platforms. But how you do that is the real challenge."
Fox plans to shrink commercial loads within episodes of its Sunday night animated and comedy programming—shows such as "The Simpsons" and "Family Guy"—by as much 40 percent next season, according to media buyers familiar with the network's pitch.
It intends to implement so-called "just A and Z" pods, or JAZ for short, according to buyers.
The "A" and "Z" positions in a typical commercial pod are the first and last ones to run, with others in between. An ad break under the JAZ model would include only those two spots, and last no more than 60 seconds.
There are no plans to extend programming to make up for the reduced ad load. Instead, Fox is also out selling "Fox Blocks," three to six minutes of branded content that will run before or after a show.
NBC Universal, meanwhile, has said it will cut the number of ads in its original primetime programming next season by 20 percent and decrease ad time by about 10 percent. Fewer commercials will run in at least 50 shows across its broadcast and cable channels, which include NBC, USA, Syfy and Bravo.
The company is also pitching a "prime pod," which it says uses artificial intelligence to comb through a show's script to match advertising to the content of the program. The program could identify a sad scene in an upcoming "This Is Us," for example, and suggest a contextually relevant ad from Kleenex appear after it. The resulting 60-second pod will run either in the first or last ad break of the show and be available to no more than two advertisers.
The strategies all sound appealing to advertisers. Then they see the cost.
For Fox, initial pricing is "more aggressive than what they indicated it would be," one media buyer says. In some cases, a unit in a JAZ pod would cost double or triple the price of a traditional ad on Sunday night, according to two buyers.
And unlike normal commercials, Fox will not be setting guarantees for these units, the buyers say. That means advertisers will not receive so-called makegoods if ratings don't meet expectations.
A 30-second spot in "The Simpsons" during last year's upfronts cost advertisers $140,699 on average, according to Ad Age's annual survey of media buyers.
Of course, these are new products, making it difficult to compare the price to traditional 30 or 60-second spots.
NBCU has yet to set a price in the marketplace for programming running with reduced ad loads, according to multiple buyers. But any network that wants to maintain overall ad revenue while cutting ads will have to raise prices.
Another complication is that every advertiser comes to the upfronts with a different recent history of prices paid, and buyers will expect networks to charge any premium according to that base.
And the proper premium for a less-cluttered environment is a matter for debate. "I don't know if we have enough data points to say definitively what it is worth, but it is definitely worth something," says David Cohen, U.S. president, Magna Global.
Commercial ratings in the three days after a show first airs, the industry standard known as C3, have been mired in a long decline. But next season's ad reductions could improve C3 results in those shows where there are fewer commercials by anywhere from 10 percent to 25 percent, Cohen ventures.
Advertisers will probably conduct modest experiments with lower commercial loads and novel ad formats during this year's upfronts, but next year the tactics will likely hit their stride, he says, adding that he has several interested clients.
"There will be ones that do it because it signals to the market a degree of innovation," Cohen says. But the industry needs to try something beyond signalling. "How do we not have Netflix eat our lunch and how do we support the ad-supported environment?"
For Fox, JAZ pods are likely just the first step in grander ambitions. At least right now, JAZ pods will only be available in Fox's national inventory. But down the road, Fox ad sales chief Joe Marchese has pitched ideas that include working with affiliates to to revamp local ad time, moving local spots around or reducing them to reduce clutter, according to media buyers. But that part would depend on negotiations with stations.
This is Fox's latest effort to clean up commercial clutter. Last month, Marchese said he wanted to reduce the commercials running in primetime to just two minutes per hour by 2020 from more than 10 minutes currently.
And in perhaps an early test of Fox's Sunday night plans, in March the network ran an episode of "Family Guy" with no commercial breaks. PlayStation sponsored the extended episode with one 60-second spot airing before and after the show.
Fox has been selling six-second ads in some of its big live programming like the "Teen Choice Awards" and NFL games.
Losing the lead-in
Some buyers are skeptical of Fox's idea of lengthy branded content blocks.
"In some ways it counteracts some of the reduction in commercial clutter," the media buyer says. There also aren't "a ton of advertisers out there who have something interesting to talk about for three-and-a-half minutes. So you create a better viewing experience during 'The Simpsons' and then you put three minutes of commercials at the end of it and lose people going into 'Family Guy.'"
Fox and NBCU join networks such as Turner's TruTV that have been working to reduce commercial loads over the past several years. TruTV began reducing advertising in original primetime programming in 2016; as of January, about 15 percent of its entire schedule aired with limited commercials. It says its entire day-long schedule will feature limited ads by 2021. (It will take five years in part because it needs to build up enough programming to fill the gaps.)
And when Viacom rebranded Spike as Paramount Network in January, it launched with 30 percent fewer ads in its original scripted shows.
If there are potentially meaningful changes in the works, however, TV ad loads today remain bloated.
Commercial time in all Nielsen-tracked programming averaged 11.2 minutes per hour in March, up nearly 4 percent from a year earlier, according to Pivotal Research Group. That's up from 10.8 minutes in March 2017.
Viacom has the highest ad loads in the industry, with 14.9 minutes per hour in March, down ever so slightly from 15 minutes a year earlier. NBCU's commercial time remained steady at 11.3 minutes per hour, while Time Warner, whose networks include TBS, TNT and TruTV, increased to 9.4 minutes from 9.3 minutes. Fox was up to 10.6 minutes per hour from 10.4 minutes a year ago.
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CORRECTION: An earlier version of this article identified David Campanelli as executive VP and managing partner of video investment at Horizon Media. He was recently promoted to co-chief investment officer at Horizon Media.