Each year in May the initial TV presentations take place and each year the initial negotiations that follow are different. “Initial” negotiations can be as short as a few days or they can span months. It can be a buyer’s ad market with little to no cost per mile (CPM) increase or it can be a strong sellers market with double-digit percentage gains CPMs. The initial amount of 2021 can be classified as a sellers market.
The initial 2021 contract was completed in stages. Several media companies concluded their negotiations with advertisers a few weeks after their presentations in mid-May. For others, the negotiations were not completed until a few weeks later. With the exception of Discovery, the eight leading media companies had completed their initial negotiations by July 4. As a rule, the media announce the results of advances with little information on prices. Additionally, ad dollars or CPM information from networks, or even ad buyers, may or may not be accurate.
The lead to 2021 was far from the year 2020, when the pandemic and economic downturn wreaked havoc on the initial advertising market. The bullish start of 2021 is another indication that the advertising market has rebounded from the pandemic.
Among the reasons cited for the seller’s market were the emergence of ad-supported streaming video (AVOD), the continued popularity of premium live sports (i.e., the NFL) combined with linear television. In addition, the advertising economy grew after the pandemic as a number of product categories increased their advertising engagements, creating demand. Often cited categories were travel, finance, retail, and film. Additionally, there were a number of new TV advertisers looking to build brand awareness that TV often provides. Regardless, with the return of ad dollars to the market, strong increases in CPM have been reported, reaching over 20% or more, down from less than + 5% last year.
With the addition of new video platforms, the networks have also introduced new tools to help manage their growing portfolio and provide better audience information to advertisers. These include NBCU’s Platform One, Viacom CBS’s EyeQ, and WarnerMedia’s Xandr. Despite the surge in CPMs, collectively, when the first elements are all said and done, approximately $ 20 billion in ad time will have been traded on par with previous years.
Here is, in chronological order, a look at the initial negotiations for the eight leading media companies with comments from the executives of the network.
The CW: In an unusual move, the CW had chosen to bypass their initial annual presentation to advertisers scheduled for every mid-May. However, The CW was the first network to complete initial negotiations with the advertising community which concluded negotiations on June 11. For the 2021-22 season, the network has added a seventh (Saturday) night to its programming. The CW has been reported to have received increases of 19% to 21%.
NBCU: On June 14, NBCU announced that it had concluded its advances by saying it was probably the strongest in its history and even called the negotiations a watershed moment for the company. Similar to their competitors, NBCU had presented advertisers with a unified strategy of Peacock, the Spanish-language Telemundo network and their English-language linear networks. Despite claiming a strong advertising market, NBCU did not disclose any information on pricing or the amount of advertising inventory sold.
Disney: Later, on June 14, Disney announced that they had completed their initial negotiations. Disney had announced strong CPM growth of around 20%. The interest of advertisers in live sports has contributed to the increase in prices. Disney noted that 40% of advertising dollars went to interactive and streaming video platforms such as Hulu and ESPN +. Hulu is expected to generate $ 3 billion in advertising dollars comparable to Disney’s linear television networks.
Fox: On June 16, Fox announced that it had completed its initial negotiations with advertisers. It was reported that the network had received a 20% increase in CPM on its linear networks and digital platforms. The commitment in advertising dollars for Tubi had tripled. A Fox spokesperson described this year’s initial negotiations as “one for the ages” with a number of ad categories (ie movies, travel) returning to normal ad spend levels. Fox also cited strong demand for live sports (NFL and college football).
Univision: On June 21, the top-rated Spanish-language network concluded its initial negotiations with advertisers. Univision reported double-digit increases in CPMs as well as increases in ad volume. The network, under new management, has completed its initial negotiations in front of several English-speaking networks, a sign of the growing interest of advertisers in the multicultural market. In addition, earlier in the year Univision launched a new streaming video and video-on-demand service that supports advertising, Prende TV.
ViacomCBS: On June 29, ViacomCBS concluded its initial negotiations. In describing the advertising market, one executive referred to it as “historic demand,” resulting in historic pricing. The network reported strong demand for live sports and CBS prime-time programming. Additionally, Paramount + and Pluto TV have expressed significant interest as advertisers use AVOD to increase their reach. Variety reported that ViacomCBS was looking for slightly higher CPM increases of between 20% and 20%.
Warner Media: June 30, WarnerMedia announced that they have completed their initial negotiations with advertisers. Citing significant demand, Warner Media called it the most successful initial marketplace (for securing global engagements) in the company’s history. For the first time, WarnerMedia cited numerous returning advertisers as well as first-time advertisers. Earlier in June, AT&T announced the launch of HBO Max as an AVOD provider. There are also plans to launch a standalone streaming service for CNN. WarnerMedia has not provided any information on the amount of advertising dollars allocated to linear television or their streaming platforms.
Discovery: As of mid-July, initial negotiations for Discovery were still ongoing, a month after a number of their rivals concluded their negotiations. Discovery had called for significant rate increases for its cable networks, in an attempt to narrow the price differential with its broadcast network rivals (which has been around for decades), resulting in the delay. In the second quarter of 2021, during prime time, five of the 15 most watched cable networks were owned by Discovery. On July 15, Discovery launched Chip and Joanna Gaines’ Magnolia Network available on Discovery + and as an app. Pending regulatory approval for next year, WarnerMedia and Discovery will become Warner Bros. Discovery.
The 2020-21 season has been negatively affected by the temporary shutdown of production studios and the cancellation or postponement of trial sports resulting in significant losses (and problems) with Nielsen ratings. For example, in the 2020-21 broadcast season, year over year, prime-time adult ratings of 18-49 year olds were down for every broadcast network run by. Fox which fell 36% and NBC which fell 21%.
This loss of audience can actually help create demand forcing advertisers to buy more business inventory to meet their media goals. As a result, demand helps maintain pricing in the form of CPM. The return of leading live sports and the continued adoption of AVOD (with their limited supply of commercial inventory which also bolsters demand) is better targeting young viewers than entertainment programming on linear TV. Network leaders cited both as determinants in the initial 2021-2022 negotiations.
Despite the strong initial advance, the trend lines are clear. In the coming years, media forecasters forecast double-digit increases in ad spend on digital media platforms such as social media and search, with linear TV ad dollars to either be stable or with marginal increases. Much of the growth in video ad revenue will come from digital expansions, including connected TV and AVOD.
As an example, on July 12, Roku announced that they had completed their initial negotiations with 42% of business coming from advertisers for the first time. While similar to networks, no ad volume was mentioned, Roku has said year on year that they’ve doubled their initial spending commitments. A spokesperson for Roku said the start “was even stronger than we expected.” As a first step, Roku was negotiating with advertisers at the same time as the initial broadcast and had finalized its deals prior to Discovery.
Prior to the upfronts, media experts had spoken out on the suitability of upfronts as an effective method of buying advertising. However, with “record” increases in CPM and comments from network leaders as a “watershed,” “historic demand” and “one for the ages,” the advances will continue into 2022 and into the foreseeable future. Despite decades of ratings erosion, the original ad buying model still works for networks and now streaming video providers, why would they want to change it?