Upfront Week Lowdown: TV Networks Fight for Relevance as Streaming Dominance Grows

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TV network chiefs prepare to sell themselves a year after streaming swallowed the bundle

upfront week broadcast tv
"Grey's Anatomy," "The Equalizer" and "Chicago Med" (ABC; CBS, NBC)

For years during May’s Upfront Week, television network executives have trotted out stars to sell advertisers on why good old-fashioned linear TV is the best place to spend marketing dollars. That pitch has become harder to make as the number of linear viewers has dwindled and the companies that own those networks have reorganized to prioritize streaming.

But this year, they might not even try.

What was once the enemy is now being welcomed as the roommate. Over the last year of pandemic-accelerated changes in the industry, there has been an explosion of streaming services, many owned by the same companies that run NBC, ABC, CBS and some of big cable networks that will take the virtual stage this week. Those companies (at least those with prized streaming services) are now the ones pushing the migration of ad dollars toward digital.

“What we’re trying to do is persuade advertisers to bring more of their investments over to our streaming services,” one network executive told TheWrap. “We feel like there is a lag in terms of the investment pattern.”

Streaming is still dominated by the likes of Netflix and Amazon, along with the biggest newcomer in Disney+. All three of those services, plus Apple TV+ and HBO Max, do not feature advertising. But there has been a rise in ad-supported streaming, whether through free services like the Fox-owned Tubi or Pluto TV, which is owned by ViacomCBS. NBCUniversal launched Peacock, a streamer that has both free and paid ad-supported options, and ViacomCBS supersized CBS All Access into Paramount+. WarnerMedia is debuting an ad-supported version of HBO Max next month.

All told, there were 6 million fewer households subscribed to some sort of cable or satellite package by the end of 2020, representing a 7.3% loss. The percentage of U.S. homes subscribed to a cable package fell to around 60%, a level not seen since the early 1990s.

That shift from linear to streaming is happening quicker than many imagined. Disney now gets nearly as much ad revenue from Hulu as it does it from its broadcast and cable networks. In its most recent quarter, the company’s direct-to-consumer business brought in $717 million in ad revenue, while its broadcasting segment (ABC plus its owned and operated local TV stations) drove $722 million and cable networks like ESPN and Freeform garnered $711 million.

“I would say the vast majority of marketers, either presently or will in the future, get to a place where they’re making no meaningful distinction” between linear and digital TV content, said Brian Wieser, global president of business intelligence for GroupM, one of the biggest media buying firms. “At the end of the day, if it’s premium professionally produced content, it’s not any different whether it’s delivered through a connected TV, or if it’s delivered through a traditional linear environment.”

However, Wieser noted that despite the decline of the bundle roughly 80 million homes still subscribe to cable or satellite. But the writing is definitely on the wall. “There’s a consumer migration going on; viewing patterns are changing. And, yes, they have grown and that has very much accelerated,” the executive said. “But the reality is that it’s not yet at parity with broadcast television.”

Wieser argues that parity will probably never come, in the sense that broadcast distribution will always have the widest reach. “To view content that’s delivered through an internet-connected device will always require a subscription to some service, unless you’re imagining a world of municipal Wi-Fi, where cities just give it away.”

A+E Networks is one of the larger media companies that isn’t tied to some kind of streaming service, but Peter Olsen, the company’s executive vice president of ad sales, argues that’s not necessarily a bad thing. For one, it makes A+E a content arms dealer — ask Sony how profitable that business can be — with its shows carried on multiple platforms. “We have content on Peacock; we have content on Discovery+; we have content on Hulu,” Olsen said. “We think, in the long term, we can win. Because we’re not placing all of our bets on one platform or on one thing.”

Few network executives are better primed to straddle the line between the old and new model than Nickelodeon president Brian Robbins, who founded AwesomenessTV, one of the first successful YouTube channels. Especially with Paramount+ and Pluto TV in house, he said it’s more important for Nickelodeon to become a brand rather than a singular network.

“Linear cable television is still our biggest reach vehicle today — we reach more kids through linear than anyplace else. But the truth is, we also know that kids are consuming content in many different ways on many different platforms,” Robbins told TheWrap. “The brand was bigger than just linear television.”

Despite the subscription losses, Olsen said the pace of decline is starting to slow, giving hopes that some sort of equilibrium will soon be reached. “We actually are seeing, year-to-date, a slowing of the subscription decline,” he said. “There’s been kind of a market slowing versus the last two years. So, yes, continued migration, continued disruption, but at a slower pace.”

Last year’s upfront season was hammered by the pandemic, which erased ad budgets and rendered sectors like movies and travel virtually nonexistent. Typically, around $8 billion to $10 billion in ad spending is committed for the five main broadcast networks during each upfront period. That final number can be lower, however, since the figure represents commitments and not spending, which can be deflated if ratings guarantees are not met.

At the same time, Nielsen is reeling from the disclosure that it may have been undercounting viewers during the COVID era, which has enraged the TV networks who have complained for years that their viewers were already being undercounted.

Discovery CEO David Zaslav blasted Nielsen earlier this week during the MoffettNathanson Media & Communications Summit. “We’re dealing with this antiquated system of measurement that advertisers love because they can rely on something that fundamentally undercounts all of us. As great as our industry is, we haven’t been able to get Nielsen to get their act together.”

The good news for 2021 is that, overall, ad revenue is going to bounce back, one top media buyer believes.

Magna Global predicts that overall ad revenue for media companies will rise 6.4% to $240 billion this year, an increase from projections at the end of 2020. Digital ad formats will take two-thirds of total advertising sales for the first time, though national TV advertising is set to increase 3.4%. Some of that will no doubt rely on NBCUniversal’s broadcast of the Tokyo Olympics — assuming that they are still held.

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