Future of TV Briefing: 5 trends to track in this year’s upfront market

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This Future of TV Briefing covers the latest in streaming and TV for Digiday+ members and is distributed over email every Wednesday at 10 a.m. ET. More from the series →

This week’s Future of TV Briefing looks at the changes that may — or may not — transpire during this year’s upfront cycle.

This year’s upfront cycle is likely to be lengthy. This not only gives TV and streaming ad buyers and sellers more time to firm up their annual commitments, but also for sorting out how this year’s deals could reflect changes in the broader marketplace.

To that end, here are the top trends and developments to keep an eye on as this year’s upfront market unfolds.

Streaming’s share of spending

At some point, the majority of ad dollars committed in the upfront may be earmarked for streaming. Will this be that year? Probably not, according to agency executives.

“It’s definitely going to increase in share. I think, though, it’s probably still going to be less than 50%,” said one agency executive.

The reason for that is twofold. First, traditional TV still has a hold on many advertisers, especially those looking to lock up sports inventory and/or those who have been transacting in the upfront for years, if not decades, and enjoy legacy pricing. Second, streaming inventory is pretty easily available outside the confines of an upfront commitment.

So while streaming seems destined to eventually overtake traditional TV’s share of overall ad spending, that isn’t guaranteed to happen in the upfront market. Consider how Disney’s share of upfront ad dollars earmarked for streaming has hovered around 40% for the past two years. Now, if Disney notches a significant uptick in streaming’s share this year, then perhaps next year could be the year.

Streaming pricing

One factor affecting streaming’s share of upfront spending is how expensive streaming impressions can be in ad buyers’ eyes.

The top-tier streaming ad sellers have been pitching CPMs in the $30 to $40 range. With streaming ad supply outpacing advertiser demand, ad buyers are hoping to see those prices come down, as agency executives discussed in Digiday’s recent “The Future of TV” video series.

But streaming ad sellers aren’t necessarily looking to lower their rates. “We’re hoping to do better than last year on pricing,” said an executive at one TV network and streaming service owner.

Advanced audiences and outcomes

Avoiding a pricing stalemate is one reason that there will be an increased emphasis on advanced audiences and outcome-based measurement in this year’s upfront market. Another reason is that traditional TV audiences continue to age, making demo-based pitches less alluring.

Nonetheless, the last bastion of legacy brand advertising is becoming more performance-oriented. Ad buyers are pressing for better returns on their investments, and ad sellers feel that pressure and feel like they’re in position to prove out the value they deliver for advertisers.

“If you’re in the business of only selling top of the funnel, you’re in trouble. The last money to get cut is the money that matters tomorrow, and the first money to get cut is the thing that’s going to be impactful in 18 months. So you have to be able to tell those stories now,” said a second TV network and streaming executive.

Will that mean the CPM gives way to the CPA as the primary pricing model for upfront deals? No, not exactly. At least not this year.

Measurement currency changes

This year won’t be the year for the upfront’s major measurement currency changeover. But there are still measurement currency changes afoot.

Nielsen, VideoAmp, Comscore and iSpot.tv are still vying to become the successors to Nielsen’s legacy position as the upfront’s primary measurement currency. And ad buyers and sellers will once again use this year’s upfront to, ahem, test and learn these alternative currencies.

But with all the interest around advanced audiences heading into this year’s upfront market, this part of the market is advancing beyond that test-and-learn phase. Depending on how much of advertisers’ and agencies’ upfront deals are oriented around advanced audiences, perhaps the industry will come away from this upfront having decided that age-and-gender-based measurement was the currency of the past but that the currencies(!) of the future will be centered on advanced audiences and outcomes.

“Age and demo, it’s still important. But I think the networks are pivoting to where they think the ball is going to be two years from now,” said a second agency executive.

Upfront volume

For all the changes that this year’s upfront market may have in store, a major fluctuation in the overall amount of money committed in the upfront is unlikely to be among them.

Instead, upfront ad buyers and sellers expect upfront spending amounts to be up slightly — by single-digit percentages — compared to last year. According to Digiday+ Research, 48% of surveyed brand, retail and agency professionals said they expect to spend more in this year’s upfront versus last year’s.

By contrast to the potential recession that loomed over last year’s negotiations, upfront ad sellers have seen the ad market recover to the point that they’re feeling more optimistic this year. “There’s more stability than there was last year,” said the second TV and streaming exec.

What we’ve heard

“There’s a lot of work that needs to be done around ad products and tech to hold brands by the hands and bring them back to the news ecosystem. … We’ve got some ad formats that de-risk brands from being next to breaking news and hero ad formats that present brands as the hero sponsor that we’ll be launching in the next year.”

TV news network executive

Numbers to know

2%: Percentage share of Netflix subscribers, on average, who cancel their subscriptions each month.

35%: Percentage of Hulu and Peacock subscribers, respectively, who have been subscribers for at least six months.

24%: Percentage share of households reached by free, ad-supported streaming TV services.

$1.5 million: Minimum spending commitment for advertisers to purchase CNN’s top-tier U.S. presidential debate package.

$16.99: New monthly subscription price for Max’s ad-free tier.

$28: New monthly subscription price for Philo’s “Core” tier.

What we’ve covered

A year after a revamp by Epic Games, the Fortnite ecosystem is having its YouTube moment:

  • The video game’s Creative mode and revenue-sharing program have helped to attract creators.
  • Dude Perfect created a dodgeball game inside Fortnite that was sponsored by GoPro.

Read more about Fornite’s creators strategy here.

What we’re reading

Paramount’s backup plan:

While Skydance Media seems on the verge of officially scooping up Paramount, the latter’s three-headed leadership has drafted an alternative plan that includes clearing $500 million in costs, selling assets and forming some kind of streaming joint venture if the Skydance deal falls through, according to CNBC.

Reality TV’s troubles:

Last year’s writers’ and actors’ strikes did not spark a surge in development and production for unscripted shows, which have suffered from the broader contraction in programming costs, according to The Hollywood Reporter.

TikTok abandons its European shopping cart:

The ByteDance-owned platform is holding off on launching an e-commerce business in Europe while it tries to protect its business in the U.S., according to Bloomberg.

Instagram’s unskippable ad test:

Instagram is testing unskippable ads breaks — and users’ patience — that appear in feed when people are scrolling through videos, according to TechCrunch.

Disney and Comcast’s Hulu standoff:

Five years after Disney agreed to acquire Comcast’s stake in Hulu, the companies still can’t agree on how much money Disney should pay Comcast to buy out the latter, according to The Wall Street Journal.

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