ADVERTISERS' SPENDING BUDGET LIKELY TO DECLINE BY 33% IN UPFRONT

According to a survey directed by Advertiser Perceptions, advertisers are 33% less likely to spend money on upfront television this year, compared to 2019. The research alliance conducted surveys on advertisers and media buyers every two weeks to capture their reaction to the Covid-19 pandemic and the economic uncertainty it has brought. Despite their usual willingness to commit to a full year’s worth of advertising during the upfront, advertisers expressed that networks shouldn’t have any expectations of them to commit to more than 90 days worth of TV inventory this year due to the unpredictability of the situation. “The upfront strikes at the heart of the uncertainty advertisers are struggling with,”  said Justin Fromm, Executive VP for Business Intelligence at Advertiser Perceptions. “They can’t commit long-term but they can’t afford to get caught flat-footed in a tight scatter market, either.”

The reports and forecasts of decline in ad revenues by 20% to 30% in the second quarter  that began to roll out in March instilled a sense of concern for the upfront. It is likely for changes to be implemented for the long-term, with 41% survey respondents stating that networks will be forced to abandon the upfront model as a whole and replace it with a “just-in-time” buying model.  According to the survey, 50% of the buyers and advertisers said they can replace the reach of linear TV with over-the-top and connected TV and other digital video ads. “This is not an economic downturn as usual," Fromm said. "This is because we’re at the virus’ beck and call in terms of when this lets up. There’s not a road map for this."

The Advertiser Perceptions Report is based on 151 interviews conducted between 1 May and 5 March. The respondents were 34% marketers and 66% agency staffers. All of them are involved in media decisions. The study also included 18 in-depth interviews with agency and marketer executives. The advertisers are also looking for guarantees among the uncertainty, given that it will be harder to produce reliable audience estimates. Advertisers also expressed their concerns about whether TV viewing will shrink as states begin allowing businesses to open and people begin leaving their homes, how the availability of content will affect viewing in primetime and other times throughout the day, as well as how to reallocate sports dollars if games aren’t played.

Although advertisers haven’t adjusted their 2020-2021 budgets yet, they expect to spend more in scatter season despite the pricing risk. Others plan to negotiate their fourth quarter buys this summer and continue through fall for Q1. “We don’t want to be the advertiser left behind if we hedge our bets and don’t do a big upfront,” an advertiser said. “Should it turn out that business is normal in October, my company would have to buy in the scatter market and pay massive price increase.” 

Tom Harty, President/Chief executive officer of Meredith Corp., said this advertising drop was more severe and more rapid than the financial recession in 2008. By way of comparison, during that period, initial local TV advertising at Meredith was down 30% with national digital advertising 24% lower. “We do not know when the advertising environment will return to normal or what the new normal will bring,” said Harty. “We have adapted swiftly, focusing on what we can control and emphasizing our strengths.”

Many companies hsare a similar viewpoint, such as Nexstar Media Group and major group, Sinclair Broadcast Group, who says core advertising guidance for its second quarter shows an estimated 32% to 39% decline during the end of March. Sinclair’s core advertising at its TV stations was not in good state before the pandemic. In the first quarter, advertising had risen, largely due to healthy political advertising. But taking political advertising out of the picture, core advertising was down 1%. “In our legacy businesses, we did see attrition from some advertisers very late in the quarter, which caused our core advertising to come in lower than expected,” says Chris Ripley, President, and CEO of Sinclair Broadcast Group. 

Flexibility is the characteristic advertisers are seeking. While typically, flexibility is defined as the ability to receive options and pull back spending commitments, Fromm affirmed that there is more to the process. “It's really about being creative in this new era, helping advertisers understand what the right creative messaging is, helping them find new ways to create new creative because production is shut down, helping advertisers who can't open find new ways to message,”  Fromm said. “All of these things are things that the networks can bring to their partners to encourage spend.”