In a fierce battle for ad dollars, TV networks and big streaming services are locking horns like never before. With the rise of streaming ‘rollbacks’, the landscape of media and entertainment is shifting. The question looms large: Is the era of TV networks over? Join us as we dive into this dynamic clash of titans in the digital age.
Big Media Faces a New Ad Market Dilemma
Turn on your TV, and you might be witnessing the latest installment of a fire sale. The media giants that have long dominated television are now confronting significant obstacles as they navigate the industry’s current upfront market. Traditionally, this is the time when TV networks sell the bulk of their commercial inventory for the upcoming programming cycle. However, big advertisers are pulling back, questioning the value of TV advertising.
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Streamers Versus Traditional TV: A War for Ad Dollars
Advertisers are now commanding significant “rollbacks” on rates, particularly for streaming inventory, which was once seen as the future of the medium. This dynamic allows them to purchase ad slots at reduced rates, known as “CPMs,” or the cost of reaching 1,000 viewers. These rollbacks come at a double-digit percentage decrease for streaming, whereas traditional broadcast and cable CPMs have dropped by up to 4%. Surprisingly, some linear TV slots, specifically for sports and major events, are still managing to command modest increases in CPMs.
Overabundance of Streaming Inventory
The introduction of ad-supported tiers on platforms like Amazon Prime Video, Netflix, and Disney+ has swamped the market with new streaming inventory. This influx has created a buyer’s market, causing advertisers to hold back unless they are offered extremely favorable terms. As one media buyer put it, “It’s my party. I’m not late to anything.”
Streaming Platforms’ Varied Success
Companies like Disney, NBCUniversal, Paramount, and Fox have managed to close significant deals by offering attractive rates for their streaming ads, especially on Hulu and Disney+. Conversely, Amazon Prime Video and Netflix have struggled to seal deals, as their aggressive CPMs and pricing schemes have met resistance. Warner Bros. Discovery also appears to be lagging in securing commitments. Some major advertising groups, such as PMX, OMG, and Magna, have written upfront deals, while GroupM has yet to commit fully, preferring a more cautious approach to allocating ad dollars.
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Industry Challenges and Unique Obstacles
Hollywood’s recent labor strikes have constricted the pipeline of new content, impacting one of the industry’s most reliable ad genres—movies and TV shows from streamers. Pharmaceutical companies, significant sponsors for TV programs aimed at older demographics, are negotiating fiercely. These companies are pushing for lower rates as they are obligated to air longer commercials to disclose medication side effects, adding pressure to the overall ad market.
The Danger of Long-term Rollbacks
This year marks the second consecutive upfront market where traditional media companies have accepted substantial rollbacks, a dynamic typically reserved for severe market recessions. The risk of agreeing to these reduced terms is apparent—higher CPMs could take years to return, if they come back at all.
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Streaming Ads: An Inundated Market
The sheer volume of new streaming inventory has hindered companies’ ability to monetize their advertising space effectively. According to media analyst Michael Nathanson, the addition of ads to Amazon Prime Video has pressured CPMs across the sector, with platforms offering abundant inventory but lacking must-have content and precise targeting.
Consumer Preferences and the Future of Ad-supported Streaming
Many advertisers are eager to follow consumers to new streaming platforms. However, hubs like Max and Hulu promote themselves on having fewer ads compared to traditional TV. Even ad-supported tiers on platforms like Netflix and Peacock limit commercial breaks to a few minutes per hour, keeping individual ad breaks short, typically under 90 seconds.
- Higher streaming CPMs used to be standard, given the premium viewing experience.
- Some buyers are now pushing to align streaming CPMs more closely with traditional TV rates.
- This pressure leaves streaming companies scrambling for viable solutions.
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Shift Toward “Scatter” Advertising
With upfront commitments dwindling, TV networks are increasingly relying on “scatter” advertising, which involves selling ad slots closer to the actual broadcast date. Last year’s upfront market saw a 3% drop in primetime broadcast TV commitments, while cable TV witnessed an even steeper 7% decline, according to Media Dynamics Inc.
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