TV Is Dead? Hardly, as Upfronts Defy Gravity in Unexpected $9B Cash Grab

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Never mind those sagging ratings. Broadcast networks likely will see ad revenue on the upswing for the first time in three years: "Digital has not turned out to be the shining hope that was forecast."

The broadcast networks head into the critical upfront advertising market with one debatable new hit (NBC's Blindspot), while the last series to break out (Fox's Empire) is showing weaker live ratings compared with its meteoric inaugural run. CBS is the only Big Four network that isn't down in the critical 18-to-49 demographic, thanks to airing the 2016 Super Bowl, while ABC has fallen the most (nearly 20 percent).

The industry is in a state of flux — yet the market still is expected to be good to broadcast TV this year.

NBCUniversal CEO Steve Burke asserted that NBC will be "in the pole position" going into negotiations. And CBS Corp. president, chairman and CEO Leslie Moonves says he's "salivating" at the chance to dive into the upfront season. Despite the increasingly pitched battle for consumer eyeballs — and advertiser dollars — spending commitments are expected to increase for the first time in three years for broadcast and two years for cable.

"What you're seeing when you look at the numbers is that TV isn't dying that quickly and may not die at all," says Ed Papazian, president of Media Dynamics Inc.

The upfront, when networks sell the bulk of their primetime ads, last year generated more than $8 billion for English-language broadcast and close to $9 billion for cable. Analysts are predicting a 3 to 5 percent increase this time.

"It will be reaffirmation that there is nothing like premium content," says Linda Yaccarino, chairman of ad sales and client partnerships at NBCU.

But drooping primetime ratings mean buyers have to spend more to hit their targets. The anticipated uptick will be a result of more volume in the upfront market overall, say analysts. Buyers who decreased spending in 2015 found they were caught paying higher CPMs (cost to reach 1,000 viewers) in a robust scatter market — when ad time is purchased closer to air — so more money likely will be committed this year.

Industry watchers also predict spending that went to digital will return to TV. To that end, expect network ad sales chiefs to allude to the sketchy digital space, where there is a paucity of premium content and a lack of consensus around "viewability" of digital ads.

"What's actually happening is a gradual transformation and partly a disaster," adds Papazian. "The fact that 18-to-49 ratings are down is a function partly of [SVOD] and partly just more channels. The real digital guys, meaning Netflix, Amazon, are not selling ads. So you can't buy a lot if you wanted to. Digital has not turned out to be the great shining hope that was forecast."

So the networks will tout premium content on VOD, watch apps and online platforms. Ad sales chiefs invariably will talk up the virtues of proprietary data tools. "Hundreds of millions of dollars have been pumped into investment to come out with data products that enable us to bust out of the handcuffs of Nielsen," says Yaccarino. And that data shows "the incredible dominance of right audience, right time, right content. And you can only get that on television."

Nielsen once again will come under scrutiny. The ratings company recently doubled its TV panel to 40,000 households for a total of 100,000 television sets and more than 50,000 connected TV devices. It announced March 23 that the public rollout of its Total Audience Measurement, which will gauge all the ways users consume content, will be delayed until the end of the second quarter. Audience lift with other platforms — including DVR, VOD, mobile and connected TV devices like Apple TV — averages about 10 percent but can be much more. So the concerns about Nielsen are not just industry carping.

For a network like CNBC, where much viewing is done on stock market floors, accurately measuring out-of-home viewing is critical. That's why, in October, NBCU execs removed CNBC's business-day programming from Nielsen in favor of its own measurement tool. Sponsors were OK with it. There are no immediate plans to remove other networks in the NBCU catalog, but that could change.

Still, network executives know that they have to address systemic problems with the advertising model, and they will use the upfront to tout a better consumer experience, a necessity in the SVOD era. Several network groups (Turner, Viacom, A+E) and even some shows (Saturday Night Live) have vowed to cut back on ad minutes.

"We've all had to take a step back and say, 'OK, what does our experience look like?' And we said, 'You know, it really just doesn't cut it anymore,' " says Turner Ad Sales president Donna Speciale. "But if we can slowly start chipping away at this and make a difference to the consumer, it ultimately will raise our value proposition."

This story first appeared in the May 20 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.