TV Upfront

P&G Shift to TV May Hit Resistance -- From the Networks

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Credit: P&G

It's no surprise that Procter & Gamble, which has been vocal in its displeasure with digital advertising, is planning to shift more of its marketing dollars back into TV during this year's upfront ad talks.

Less expected, perhaps, is the double edge that carries for TV. While it would seem like a win for the TV networks, which have been losing share to digital behemoths like Facebook and Google, they might not actually want P&G's money. At least not as much as they'd like it from someone new.

P&G is looking to meaningfully increase the volume of its ad commitments during the annual negotiation, where networks look to sell a bulk of their commercial inventory for the next season, according to both buyers and sellers who are familiar with the budding conversations.

But the maker of Crest toothpaste and Downy detergent could find it hard to place all the additional money it would like. That's because P&G is one of several major marketers that have been grandfathered into legacy ad deals that reward marketers for decades of consistent business by guaranteeing relatively small price hikes on relatively low bases. TV networks are tired of those old deals and ultimately want to strike agreements with advertisers whom they can charge higher rates.

Representatives of Procter & Gamble and TV networks declined to comment on their plans for upfront negotiations.

When the market is weak, like in the 2009 recession, TV networks are happy to have these agreements in place, encouraging long-time big spenders to keep it up.

But when business is robust, like last year, the deals leave little wiggle room for the networks to increase rates. Several major network groups actually turned away money from advertisers at the lower rates in 2016.

"It will be tough for them to get that money down, though this year's marketplace should be a bit easier if the indications of down to flat budgets overall are accurate," one media buyer said.

What the networks are willing to accept this year will depend on the health of the marketplace. Upfront negotiations are expected to truly kick off next week, and while it is still too early to predict how it will all play out, media buyers say overall budgets are expected to be flat to slightly down from last year. And broadcast is projected to fare better than cable.

Advertisers are still getting their budgets in order, but there are indications that the retail and automotive categories will be weaker. Consumer packaged-goods and pharmaceuticals are expected to show more strength, but both of those categories typically have these legacy ad deals in place.

The 2016 upfront marketplace was unusually healthy, with broadcasters snagging high-single-to-low-double-digit percentage increases in the cost to reach 1,000 viewers, an industry standard known as CPMs, and dollar volume up in the mid-single digits.

While this year marketers might hold back more money to place closer to air time in the so-called scatter market, networks will certainly play up their reliability and brand safety at a time when marketers are seriously questioning digital advertising.

It's what's bringing P&G back to TV. Marc Pritchard, P&G's chief brand officer, has been vocal about the need for digital to clean up its mess. In January, he gave a speech at the Interactive Advertising Bureau conference demanding industry-standard viewability metrics, fraud protections and third-party verification.

At the time, he said come January 2018 P&G would stop paying for any digital media that didn't get its audiences measured by outside firms accredited by the Media Rating Council. Facebook and Google have begun the process of seeking MRC accreditation for their auditing processes, but it's not clear whether or when they will succeed.

In an interview prior to another speech to an Association of National Advertisers Media Conference in March, Pritchard said the company has plenty of alternatives if digital players don't meet its demands. That leaves hundreds of millions of dollars in play. Historically lenient option terms for the giant advertiser could then allow P&G to pull back some of that upfront spending for use on digital media should the MRC accreditations come through.

Contributing: Jack Neff

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