OTT has been making major attempts to replace linear TV, significantly impacting the world of advertising. Whenever something new gains traction, the advertising world shifts to that sector, making linear cable a victim of the trend. But now, this could change, and it could be favorable for OTT players.
The annual “upfront” ad-sales negotiations between TV networks and advertisers are intensifying, though it’s uncertain if they will fully peak soon. Major media agencies are focusing on Disney and NBCUniversal due to their extensive portfolios that include sports, news, and entertainment.
These upfront talks aim for networks to sell up to 80% of their commercial inventory for upcoming programming cycles.
Networks and streaming services seek substantial financial commitments from major advertisers during these negotiations, which are crucial for securing billions in advertising deals for the next year.
This year’s ad-sales market is highly focused on pricing strategies for streaming services, with media buyers aiming to reduce the cost per thousand viewers (CPM), a crucial metric in these negotiations.
Early discussions suggest a potential 3% decrease in CPMs for lower-valued inventory on linear TV and streaming platforms. Conversely, CPMs for high-demand content, particularly sports, could see an increase of up to 5%.
This reflects a broader trend where advertisers are willing to pay a premium for content that attracts more viewer interest while seeking cost reductions for less popular programming.
This dynamic highlights the shifting valuation within the industry, with premium content like sports commanding higher prices amid an overall push for cost efficiency.
If Disney, Fox, and NBCUniversal agree to lower CPMs, it will be the second consecutive upfront where TV networks yield to advertisers. Last year, primetime broadcast TV ad commitments dropped 3% to $9.595 billion, while cable TV saw a 7% decline to $9.52 billion, according to Media Dynamics Inc.
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