Guest Commentary: Is the Upfront Broken and Can It Be Fixed?

Nov 17, 2003  •  Post A Comment

The media buying and selling process is lodged in the past and constrained by an upfront market process that is outdated and one-sided.
Developed more than 30 years ago when there were only three national television outlets, the upfront functions as it does under the flawed assumption that broadcast network television stands alone as the vehicle for generating reach among consumers in 100 percent of U.S. TV households.
The truth is that broadcast television is not the vehicle for reaching 100 percent of U.S. TV households; it is the vehicle for reaching 17 percent of U.S. TV households-the households that receive only over-the-air signals (and a less prosperous group that, for most advertisers, has less value as consumers). The remaining 83 percent can best be reached by careful selection from a wide array of networks, most delivered via cable and satellite distribution. The top five broadcast networks represent 36 percent of the channels in noncable homes but only 4 percent of the channels in cable homes.
“But wait,” some buyers will protest. Yes, they’ll say, your stats are correct-as far as they go. But isn’t it true that broadcast programs such as “CSI” on CBS or “American Idol” on Fox set the gold standard because they can capture for their clients’ mass audiences and desirable demographics in numbers few cable shows can match?
Since very few TV media plans are based on placing commercials exclusively in the handful of high-rated broadcast programs, orienting the entire buying process around those shows gives the seller unwarranted leverage and results in unreasonable costs. There is no empirical justification for paying such high premiums for access to audiences that are also reachable in so many alternative television venues. Looking to the future, if the trends of the past five years continue (which is highly probable), within the next three upfronts cable networks will hold a 60 percent prime-time share advantage over the three broadcast networks. This magnitude of change demmands a re-evaluation.
Ultimately, many buyers will say that the key broadcast upfront buy-side question is this: Buy upfront or wait for scatter? But that question begs the real issue. It implies there is only one total reach option for national television advertisers. The perceived risk of taking a stand against this take-it-or-leave-it-tonight upfront buying condition is the myth that keeps advertisers and agencies chained to the broadcast upfront.
A fully informed, unbiased approach to the new television media marketplace requires new priorities and strategies.
First, shift the evaluation equation from 100 percent vs. 83 percent to 17 percent vs. 83 percent. Focus on the media options that allow for more targeted and efficient access to the 83 percent of the market that represents 95 percent of U.S. discretionary income.
Then, change the nature of the competitive environment. In the current environment, buyers compete with sellers and sellers gain the advantage. That occurs because broadcasters require buyers to register budgets before negotiations begin in earnest. Sellers can count and then set the market. In an instant, advertisers are competing with sellers and with other advertisers, regardless of category. As a buyer, I may be willing to declare my intentions to get my only shot at 100 percent coverage. Should I do the same when I am actually shooting for 17 percent?
Furthermore, why should automotive advertisers compete with credit card advertisers in bidding up the price of broadcast time? Far better to develop a media buying strategy that gives an advantage against your competitive set, not the competitive set of broadcast networks.
In the new marketplace, cable provides a way to address this market imbalance.
Multiple options, true partnership opportunities and a favorable supply-and-demand equation in the 83 percent of American homes that receive cable and satellite add up to an ideal environment for intelligent investment. Many advertisers have used targeted strategic partnerships to become category leaders; for example, Wal-Mart, Home Depot and Lowe’s allocate between 55 percent and 60 percent of their U.S. gross ratings points to cable, with only 40 percent to 45 percent to broadcast.
Resisting change in a changing environment is the riskiest strategy of all. The industry should not abandon the upfront overall, only the broadcast focus on the 17 percent.
An existing organization such as the American Association of Advertising Agencies could be used to bring buyers and sellers together to create a more rational, deliberate way to match television media to advertisers’ needs. This should be done at prices based on each network’s intrinsic value instead of whether or not the seller has convinced the buyer that pricing has to be increased to compensate for decreasing supply caused by decreasing delivery of audience. For example, since these decreases apply only to the broadcast networks and are compensated for by cable networks in all but the 17 percent over-the-air households, why not isolate that market segment and deal with it separately? That’s the way the cable market was bought until it reached 70 percent of the market.
There are other issues surrounding the upfront and many points of view. My hope is that a real dialogue ensues through which buyers and sellers can work together to keep the television marketplace current, aligned with advertisers’ needs and as efficient as it can be.
Whitney Goit is senior executive VP of the A&E Networks.