Advertisers Plan on Spending One-Third Less in This Year’s Upfront

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Many media companies and buyers expected that this year’s upfront marketplace will be softer in the midst of a pandemic, but a new survey of advertisers reveals just how seismic the ad revenue losses could be this year.

Advertisers are planning on spending 33% less in this year’s upfront, according to a new survey from Advertiser Perceptions. That would mean that of the roughly $20 billion in ad revenue usually transacted during upfront negotiations, one-third of that—close to $7 billion—would be MIA.

“The upfront strikes at the heart of the uncertainty advertisers are struggling with,” said Justin Fromm, evp of business intelligence at Advertiser Perceptions, in a statement. “They can’t commit long-term but they can’t afford to get caught flat-footed in a tight scatter market, either.”

Advertiser Perceptions surveyed 151 advertisers between May 1-5, and the findings represent an increase over one TV ad sales chief’s prediction to Adweek last month that half of that business will be conducted later in the summer, a quarter will move to a calendar upfront model and the other 25% will shift entirely out of upfront into the scatter market.

In a March Interactive Advertising Bureau survey, buyers said they expect to spend 20% less than originally planned in this year’s upfront marketplace.

Nearly half of advertisers surveyed (48%) said that networks should not expect them to commit to more than one quarter’s worth of TV inventory in this year’s upfront, and 50% said they can replace linear TV’s reach with OTT/connected TV and digital video ads. Meanwhile, 41% said they think media companies will be forced to scrap the upfront model altogether as a result of Covid-19.

Among the biggest concerns from advertisers in this upfront is whether TV viewership will decline again as shelter-in-place orders are lifted, how the gaps in content due to production shutdowns will affect audiences in various dayparts, how they will reallocate spend if major sports events are canceled, whether pricing will flex to reflect actual linear and digital viewership and what their protection will be due to the current unreliability of any audience guarantees.

“Linear TV networks face the same uncertainty,” said Fromm. “They need to take the dollars they can get now, on whatever terms they can. Mostly, that will mean flexibility, being creative to allocate advertising across a network’s platforms and a willingness to return money as needed.”

Indeed, flexibility is a word that has been coming up frequently in talks during the past two months.

“Flexibility is something that’s key, and it’s going to be more important than ever before,” one buyer recently told Adweek. “How do we work that into how we do business on a daily basis? Does that mean less committing up front, changing the way we work the upfront?”

Overall, “everybody is being far more creative than we ever have been in terms of looking for solutions, finding solutions, trying to push things out and being more adaptable because of what’s going on,” Gibbs Haljun, total investment lead at GroupM’s Mindshare, said last month. “And I think this could be a great way to change the business a little bit and evolve for the better. Where it’s not about saying, ‘No’; it’s about saying, ‘Hey, let me see what I can do.’”

All this uncertainty is why this year’s upfront marketplace will operate on a staggered timetable, with buyers entering negotiations whenever their clients are ready to think about their long-term spend. For some categories that are thriving now, such as consumer packaged goods, that will be in the next month or two, but for several others—including those hit hardest by the pandemic such as travel, dine-in restaurants and automotive—it is more likely that they’ll negotiate later in the year and shift to a calendar upfront.

Ahead of this year’s talks, many media companies are working with agencies to determine how upfront deals will be structured in this new environment, how much flexibility will be built in and how the deals will be structured to provide value to an agency’s portfolio, which will include clients that will be ready to start talks in the next month or two and those that won’t be ready until closer to the end of the year.

Disney is among the companies that has told buyers it will not penalize any brands that need to delay their upfront talks until later in the year in an attempt to be flexible for its long-time clients.

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