Digital media to claim over half of upfronts spending, forecast says

Dive Brief:

Ad spending on TV during the upfronts, when advertisers commit in advance to spending a certain amount with broadcasters, is expected to decline 3.6% year-over-year to $18.64 billion amid a rocky economy and the continued embrace of cord-cutting, according to an Insider Intelligence forecast shared with Marketing Dive.
Despite the slide, marketers still clearly value the perks of locking in deals ahead of time. About 30% of all TV ad spending for the year will occur during the upfronts season, a portion that has grown over the past five years.
Losses for traditional TV could also be balanced out by stronger appetites in digital video and connected TV (CTV). Across the upfronts and NewFronts, spending on digital is forecast to grow 28% YoY to $12.48 billion and account for “well over half” of the upfront market.

Dive Insight:

Transition is one theme underpinning this year’s upfronts season. Legacy players are shaking up strategy or even tapping out of the media-buying bonanza — maybe for good — while fresh entrants like Netflix are pushing to get their CTV offerings off the ground. A pandemic-accelerated shift to streaming and CTV continues to take hold, while conventional TV’s backward slide feels sharper in a rocky economy that has seen ad budgets tighten.

Measurement, one of the most hotly contested industry topics, is welcoming more variety, though Nielsen’s promise of a “big data” currency will go unrealized in another blow to the firm that only last month won back its Media Rating Council accreditation. Still, Nielsen stands as the leading currency for the 2023-24 season, per Insider Intelligence.

Even legacy players are putting digital in the spotlight, with Insider Intelligence estimating the channel now makes up more than half of an upfront market that has historically been dedicated to linear and broadcast buys. Overall spending on digital is about two-thirds the size of the traditional media pie. Last year, it was about half the size, underpinning a fast expansion. Meanwhile, more of digital transacting has centered around the upfronts. Advertisers will commit 14.8% of their digital video budgets during the upfronts/NewFronts period this year, with that number forecast to jump to 16.9% in 2024.

“The 2023 Upfronts will be more digital and more programmatic than past events, with digital-first newcomers like Netflix expected to make a big splash,” said Insider Intelligence principal analyst Paul Verna, the author of the report, in a statement.

CTV remains a growth driver despite being a comparatively immature channel loaded with measurement and frequency challenges. Insider Intelligence believes brands will commit $8.66 billion to CTV ads for the current upfronts. On the platform side, Netflix and Disney+ have launched ad-supported tiers in recent months. YouTube also continues to see its CTV bets garner traction with the addition of marquee programming like NFL Sunday Ticket. When factoring in YouTube, 87.2% of CTV ad spending in the U.S. is programmatic, according to Insider Intelligence.

With major platform and media-consumption shifts underway, the upfronts will be a buyer’s market this year, Insider Intelligence said. Some of the biggest demands from brands will be around flexible contracts and fluidity in budget allocations versus the outright cancellation of buys.

“Expect soft price increases (if any) and more flexibility of contract terms for advertisers,” said Verna. “Instead of focusing on price, networks are likely to make a play for volume, seeking the largest budget commitments possible.”

Looming over the upfronts is the WGA strike, which has halted production and impacted some first-look and overall deals at major studios. Uncertainty stemming from the strike could further support the idea that advertisers are gunning for flexibility at a point in time when they’re already being more deliberate with their dollars.