Will Stellar Scatter Realities Make Upfront Dreams Come True?

Whether some network sales executives will attract the double-digit increases in CPM rates that they are seeking during the current upfront market remains to be seen. But new data from SMI reveals details about the huge increases in scatter revenue during the current broadcast year. And that indicates why upfront hopes are riding so high among network execs, and why agency negotiators are trying to keep those expectations in check.

National TV networks attracted 19% more scatter revenue between October 2015 and April 2016 than they did during the same period in 2014-2015. Upfront revenue grew 2% in the same period, the first seven months of the current broadcast year. Averaged together, buyers paid 5% more for national TV inventory.

SMI’s numbers show the new broadcast year took off like a speeding train. Scatter spending in 2015’s fourth quarter zoomed ahead 28%, while upfront dollars rose a mere 3%. Then the spending eased off a bit in this year’s first quarter, to a 12% rise for scatter and flat for upfront spending.

The seven-month results for the current broadcast year are a dramatic improvement for TV sellers over the trend they were experiencing a year ago. Scatter revenue was down 2% for national networks during the full broadcast year 2014-15 in comparison with 2013-14. Upfront dollars were off by 6%, for an overall decrease of 5% in national TV revenue.

The largest moneymaking advertising categories for national TV are showing markedly different spending trends during the year now in progress. A comparison of the first seven months with the same period in 2014-15 shows:

• Automotive manufacturers and dealerships spent 16% more upfront dollars, and 19% less on scatter.
• Insurance companies decreased both upfront and scatter spending, by 1% and 22%, respectively.
• Consumer electronics marketers plunked down 22% more for upfront inventory, and 36% more for scatter.

Breaking down the ad-sector results further makes clear that cable and broadcast networks experienced different trends, but in some instances they were similar. In the same seven-month period:

• Automotive manufacturers and dealerships were fairly even-steven: scatter was down 14% for broadcast nets, and off 24% for cable.
• Consumer electronics was another fairly even-splitter in scatter: up 37% and 34% for broadcast and cable, respectively.
• Telecommunications gave broadcasters 12% more scatter dollars, but cable networks 20% less.
• Toys and video games marketers didn’t make anyone happy, overall: down 62% among broadcasters and 48% among cable nets.

When all the scatter revenue numbers are rolled up together, broadcasters showed a 39% revenue rise, and cable a 2% bump.

The push-pull between buyers and sellers involves more considerations than past spending patterns, to be sure. The ratings performance of programs during the current broadcast year, perceived strength of new shows and wide array of opportunities offered up by digital competitors will all play their part in upfront conversations.

But as certain categories like automotive have demonstrated in SMI’s current analysis, spending more on the upfront now may result in lower scatter spending later on. And that is likely to be a key point offered up by network sellers as the negotiations continue.