Peak TV has taken new meaning this year as many have declared a crest and downturn of the TV business; however, between reports of ad revenue growth among some of the major networks, as well as ad budgets that multiple agencies tell Ad Age have remained relatively stable, the state of TV advertising is far from grim. But what happens next could be.

“I think, for certainly the majority of folks…TV is growing three to four percent,” said Kate Scott-Dawkins, global director of business intelligence at GroupM, adding that the number is up despite reported softness in digital TV and the scatter market, or short-term ad buying.

Disney, NBCUniversal, Paramount, Fox, Warner Bros. Discovery and others took the stage for an ostentatious round of in-person upfront presentations in May just months after the declaration of war between Russia and Ukraine and as inflation was beginning to creep into day-to-day living. At the time, the specter of economic headwinds became a buzzy topic from sell and buy sides alike, mostly in the context of the resilience of the TV ad business. That has since proved to be true as each network group has since reported robust commitments from upfront negotiations.

Upfront media investment in the second quarter was up 3% compared to the same quarter in 2021, according to data from Standard Media Index. At the same time, SMI reported a year-over-year drop of 15% in the scatter market, signaling that while the overall TV ad market remains healthy, budgeting for more near-term deals is tight.

Brands

Microsoft caused a stir in June when it announced it would withdraw from TV upfront negotiations altogether. And although the company stated its reasoning was not related to macroeconomic concerns, the move ratcheted up fears that other major brands would follow suit. Indeed, Pepsi and Burger King are among those who have recently taken a conservative approach to TV ad buys.

Across linear TV, the three companies reduced marketing in the first half of 2022 compared to the same period in 2021, according to data from Kantar. Microsoft, including Xbox, reduced its spend from $157 million to $85 million, while Burger King and the Pepsi brand, including its Diet and Nitro variants, dropped more modestly, from $114 million to $92 million and $52 million to $40 million, respectively. As of writing, the three marketers have not responded to requests for comment.

Agencies

One agency buyer told Ad Age that across its client portfolio, TV ad budgets have only declined 2% to 3%, while a second buyer has seen low single-digit growth in budgets.

The first buyer further said the biggest recent market change is a larger number of clients pulling back order commitments, caveating that each case is unique and not all are directly a result of the economy. 

The pandemic era has defined a shift in upfront dealmaking for buyers that has persisted and become crucial to this year’s negotiations. Networks both expanded inventory, allowing for better cross-portfolio packages, and in some cases relaxed strict time frames in which an advertiser could back out or adjust its upfront commitment.

The second buyer explained the new flexibility has had benefits in spreading budgets across a seller’s portfolio, allowing for brands to get better bang for their buck by reaching a broader audience with lower investment. With the rise of cross-portfolio selling not based on specific programming, a point of interest in this year’s upfront, the buyer said clients might choose to favor larger partners such as ​​Disney, NBCU and Paramount that can allocate ad placements across streamers, allowing for a re-shuffling of committed dollars from original placements.

But both buyers said the true impact of inflation and a potential recession remains to be seen in how budgets stack up for the 2023 upfront season.

Networks

In their respective quarter earnings reports, Disney, Fox and Warner Bros. Discovery each showed year-over-year growth in ad revenue for their TV divisions, while NBCUniversal shared near-flat numbers at a loss of 1%, and Paramount, softer than the rest, declined 6% in ad revenue.

The networks face other hardships related to macroeconomics, including the effect of inflation on production costs and subscriber numbers. Also complicating matters, of course, is the effect that the rise of ad-supported streaming options, including Netflix’s planned early-2023 addition of an ad-supported tier, will have on inventory. One buyer told Ad Age that Netflix’s effect on the TV ad marketplace will depend on pricing—the introduction of a new premium stock of inventory won’t result in a one-to-one subtraction from other, cheaper streamers.

Broadly, TV industry players are focused on maintaining whatever momentum they have by staying flexible—a word that has come to define dealmaking during the continuing climate of economic uncertainty. 

“How we advise clients is to just keep budgets fluid across both partners and platforms to yield maximum flexibility,” said Stacey Larson, chief investment officer at OMD. “You can’t get stuck in any one place. You want to be fluid across partners and platforms, keep the money fluid [and] let us make our decisioning based on where we can create the greatest flexibility, which will give them the ability to take money back if they need it.”

Larson added, “In an economic downturn, the knee-jerk reaction is just to go for those quick conversions—go lower-funnel, go cheaper. But you don’t want to sacrifice your long-term goals for short-term gain.”