This week, the television industry will put on its biggest show of the year, the upfront presentations, an annual deal-making ritual that goes back more than five decades. It has become more important then ever.
The upfronts give the major networks a chance to trot out their stars at grand venues in New York to hype their fall lineups for an audience of deep-pocketed advertisers, but they also serve as a pitch for TV’s continuing relevance.
With Netflix rolling out new shows all year long, the idea of fresh TV programming in the fall may seem quaint. But traditional television is still big business. During last year’s upfronts, ABC, CBS, Fox and NBC secured more than $9 billion for prime-time ad slots and cable networks grabbed more than $11 billion combined, evidence that the major brands remain bullish on the medium.
That’s because, although the number of traditional TV viewers is shrinking, the networks offer something rare these days: opportunities to reach millions of people in real time.
On Monday morning, NBC will present at Radio City Music Hall, close to its 30 Rockefeller Plaza headquarters. Fox will make its pitch in the afternoon, at the Beacon Theater, with a gathering afterward at Central Park. ABC will take the Lincoln Center stage on Tuesday, and CBS will close the convention with a show at Carnegie Hall on Wednesday, followed by cocktails at the Plaza Hotel.
Among those filling the best seats will be Procter & Gamble executives from Cincinnati, automakers from Detroit and the so-called Bell-heads from Dallas who represent AT&T, another big spender. Between presentations, out-of-towners will talk shop with ad agency partners based in Manhattan.
The TV stars on duty this week also have a job to do: performing in promotional sketches and posing for thousands of selfies at meet-and-greet events.
Why are they called ‘upfronts’?
The term refers to the networks’ selling of commercial spots upfront, before the fall season.
Advertisers know it’s good business to lock down ad time early. The more favorable rates are offered months before the new season, making the deals attractive to brands, whose early commitments suit the networks, too.
“It truly is a financial model,” said Lyle Schwartz, who leads investments for the ad-buying firm GroupM. “It’s better to get involved early on.”
The networks won’t put their entire inventories up for sale this week. Each one holds back some ad space to sell during the season in what is known as the scatter market, where prices can be 15 to 40 percent higher.
While discounts are available, the upfront market isn’t without risks. Every year, the networks trumpet returning shows with devoted followings, but they also whip up enthusiasm for programs that may well prove to be flops.
It’s not all about raw numbers of viewers, though. Advertisers are happy to sponsor a show with a more modest audience, if it attracts young people with money or generates conversation.
How much are advertisers spending?
Last year, the broadcast and cable networks together secured more than $20 billion in ad commitments. That was up about 5 percent more than the previous season, part of a three-year trend, suggesting that any obituaries for traditional TV are a bit premature.
The uptick in spending comes even as TV audiences are shrinking. For the four major broadcasters, the number of prime-time viewers 18 to 49, the age group advertisers prize most, dropped 38 percent during the current season from five years ago.
What’s noteworthy is that while the number of viewers is on the wane, the value of the prime-time audience is rising, as shown by the higher rates that ABC, CBS, Fox and NBC have been charging for commercial time. Since the 2014-15 season, the four networks have scored rate increases of anywhere from 3 percent to 10 percent a year.
Why are they paying more for smaller TV audiences?
Advertisers like crowds.
Although its overall audience has shrunk, broadcast television remains the most effective medium for drawing millions of people in real time. That’s crucial for advertisers, especially retailers who plan their businesses around new product launches and promotions.
One could argue that the networks are making up for their loss in viewership by charging advertisers more per viewer — but that’s not how they see it.
The logic: Because audiences are more fragmented than they once were, there are fewer places to reach large groups of people all at once. In the current cultural climate, programs that millions prefer to watch in real time, in campfire moments of togetherness, have become rare and especially valuable. A viral YouTube video may generate billions of views, but they don’t occur at the same time.
The ad industry is still big on 30-second commercials meant to appeal to the broadest possible swath of consumers. Such mass-appeal ads are less potent on the internet, which allows marketers to target people whose spending habits are tracked purchase by purchase. Advertisers are also wary of the internet’s unregulated spaces, which can place a brand’s message next to videos featuring hate speech.
“If you look at it in those terms, a brand-safe environment, with no fraud and a guaranteed audience in the demo — maybe TV is a little bit underpriced,” said Mr. Schwartz of GroupM.
And yet the internet has something TV is losing: the young people that advertisers crave. By emphasizing their appeal to the youth market, technology giants like YouTube and Instagram have become adept at stealing a portion of ad budgets that once went to the networks.
YouTube has assembled a roster of homegrown stars who are vetted and safe for advertising, creating the equivalent of TV channels known to media buyers as Google Preferred. The streaming site showcased its stars at a high-gloss event at Radio City this month to an audience of ad executives and fans. Bartenders in the lobby checked wristbands to avoid serving drinks to those who were underage, something that won’t be a problem at the upfronts.
Wait. Does TV even matter anymore?
One word: sports.
There are other reasons that old-school TV is still relevant, like higher production values and the chance of attracting a mass, real-time audiences. But sports programming may be the main driver of viewership now, and it has slowed the cord-cutting trend.
That partly explains the large amount of ad spending that still goes to TV. Factor in what was spent outside prime time and the television industry as a whole is expected to rake in about $67.2 billion in ad revenue for 2019, down slightly from $68.2 billion last year, according to the research firm Zenith.
TV advertising appears to have peaked in 2017, at $68.4 billion. That year — no coincidence — internet advertising revenue surpassed that of TV for the first time, with $75.2 billion in sales.
Sports has become the cornerstone to television programming, and the tech giants are well aware of its role as a defensive wall against online disruption. Amazon, Facebook and Google have yet to broker significant exclusive-rights deals with major sports leagues because, for now, they can’t get more than a few hundred thousand people to watch something at the same time.
Yes, the National Football League sold “Thursday Night Football” streaming rights to Amazon, but the games are also shown by Fox. The N.F.L. relies on the large audiences the networks can deliver, and it is unlikely to trade that for Silicon Valley money and weaker ratings.
That puts a different spin on the upfronts. Despite the song and dance around police procedurals, soaps and sitcoms, the narratives provided by the Golden State Warriors or the New England Patriots are most likely what have kept TV front and center.
How do the mergers figure into all this?
In addition to making the case for network television at a time when it has lost ground to streaming, this year’s upfronts will function as a state-of-the-union for an industry recently affected by two galactic mergers.
In June, AT&T closed on its $85.4 billion deal for Time Warner, taking ownership of channels like CNN, TNT and TBS under the Warner Media banner. Shortly after that, the Walt Disney Company, which already owned ABC, acquired most of Rupert Murdoch’s 21st Century Fox in a $71 billion deal that gave Disney the cable networks FX and National Geographic and control of the streaming service Hulu.
The jumble gives ABC something to brag about, while leaving the Fox broadcast network to argue that it will be leaner, meaner and have more leeway to cut deals with producers of its choosing, now that it is no longer attached to a mighty studio. Warner Media will make its pitch on Wednesday morning at a presentation discreetly tucked in among the network upfronts.
The flurry of big corporate moves has caused some hesitation among advertisers, said Catherine Sullivan, who leads media buying for the North America operations of the advertising holding company Omnicom.
“They’re asking, ‘How do we interact with them this year, versus last year?’” Ms. Sullivan said. “‘Is there a positive or negative?’”
She added that she had advised her clients that it should be business as usual. The future isn’t here quite yet.