TV Upfronts: Weak Sales Force Media Companies to Use Scatter Ads

The nation’s biggest media chiefs have for months asked investors to be patient. Wait until the back half of 2023, they’ve said, when ad money will start to flow once again.

Now companies like Paramount Global, Comcast, Disney, Fox and Warner Bros. Discovery need to play a waiting game of their own.

Ad budgets are expected to be down in the industry’s “upfront” market, when U.S. media companies try to sew up deals for the bulk of their advertising inventory ahead of the fall launch of their next programming cycle. Big marketers are not only uncertain about what new content will be available come autumn – a writers’ strike has squelched production of everything from late-night programs to scripted comedies and dramas – but what they should expect from the economy over the next few months.

“The overall entertainment advertising marketplace has been challenging,” said Christine McCarthy, the Disney executive who recently stepped down as the company’s CFO, during a quarterly call with analysts. “While the weakness has moderated somewhat, we anticipate that some softness may continue into the back half of the fiscal year.”

TV networks like CBS, NBC and ABC typically sell 70% to 80% of their inventory in the “upfront,” leaving the rest to be traded as “scatter,” or advertising that sells on an as-needed basis closer to the time the commercials need to run. Chances are the networks will hold more back to sell as “scatter,” betting that the economy will improve, and would-be sponsors will be willing to pay a premium after waiting

At present, CFOs at big TV advertisers “don’t feel the pressure to get money down,” says one executive familiar with current negotiations. “Let’s hope it comes later,” this executive adds. “If it comes later in scatter, we will all be fine.”

And yet, ad spending trends aren’t in the TV networks’ favor. Ad spending on national U.S. TV networks is seen falling 7.7% in 2023, to approximately $38.3 billion, according to Magna, a research unit of ad giant Interpublic Group. TV outlets around the world “are hit by continued erosion in live linear viewing and rating supply, a slowdown in pricing conditions and a lack of cyclical events following the record cyclical spending of 2022,” which offered World Cup soccer and important political elections in the U.S. and Brazil, according to a Magna report.

Just a short while ago, some media CEOs were optimistic about the remainder of 2003. “We are seeing signs of market stabilization,” said Paramount Global chief Bob Bakish during a call with investors to discuss the company’s first quarter. “Within the domestic ad market, sports remains an area of strength. We also saw improvement in key buying categories, including pharmaceuticals, food and beverage, travel and auto, though categories like insurance, web services and big tech remain relatively weak.”

Even so, Paramount may be playing the long game. The company, which is slated to broadcast Super Super Bowl LVIII on CBS in 2024, is, least for now, not pushing for big increases in price, as most networks typically do. Fox, which aired Super Bowl LVII to a record audience earlier this year, asked for $6 million to $7 million for 30-second spots, with some commercial berths going for more than $7 million.

Staying away from hard sell might lure sponsors to the Big Game in the moment. And if demand should increase, as the networks hope it will, the market would allow, Paramount to ask for more later on in the year.

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