Thursday, May 23, 2013

What’s in a name: Newfront is an affront

A long time ago in a galaxy far, far away I led the media department of Leo Burnett in Amsterdam and I helped usher in the commercial TV revolution to its clients. The Netherlands did not have commercial TV until 1989. Before that date, the state owned TV channels (there were 2!), sold advertising once a year in September, and in that month all advertisers had to commit for the whole of the following calendar years’ worth of TV advertising. It resulted in an up-front commitment made in September of one year all the way to Christmas the next year. It was ludicrous and fell apart when commercial TV was launched with far more flexibility and commercial openness.

In China, once a year, national (and government owned) TV network CCTV puts on a big event in a ballroom somewhere in Beijing. And when I say event, I mean an auction, with paddles and shouting and showrooming and everything else that comes with a frenzied auction atmosphere. CCTV auctions off its most prized assets for the upcoming TV year. Very often, Chinese advertisers pay ridiculously inflated prices for airtime well into the next year, as the auction frenzy sets off a battle of "mine is bigger then yours" in terms of budgets and commitments. Last November, CCTV's haul was $2.5 billion. Nice for an afternoon's work.

Both events are stupid and would never happen anywhere else. Right? Wrong: something quite similar happens every year in the United States of America and is called the Upfronts. 

The Upfronts is an old media buying tradition that somehow just won’t go away. And I am not the only one saying that.

In 2011, the always insightful Nigel Morris from Aegis Media (@nigeldmorris) was a newcomer to the US media market (one of the many media agency “Englishmen in New York”), and posited “The upfront has a genuine role to play, but it's not necessarily in the long-term interest of the TV market to force monopolistic pricing in the short-term, and it's quite insular” (note from Maarten: as a then newly minted US based media buyer, he had to say that first part of the sentence of course).

And this year, USA Today columnist Michael Wolf (@michaelwolfnyc) had a front page article on the phenomenon. He said, amongst other zingers: “Forget the fact that there really is no longer a fall season, that a hit now is hardly what a hit was then, that television networks are themselves pale imitations of what they were”.

Simply put, once a year, all major TV networks present their new program line-up to the agencies and their advertisers so they can plan their TV schedules accordingly. It used to be only a select few big events, as there were only three national TV networks (ABC, NBC, CBS). Then came FOX, cable, the CW, and digital newcomers HULU, Amazon, YouTube and Netflix.

Stubbornly, the Upfronts didn't go away. In fact, they have grown into a cavalcade of splashy meetings in NY where every network tries to outdo the other in their selection of awesome location, participation of celebrities, handing out swag bags full of goodies and offering original and "different" food for the spoiled media agency reps and the gossip hungry news media.

There is a second thing that happens during the Upfronts season. It is the deals that are done between TV conglomerates and the major media players (advertisers and agencies). These deals are usually done between sometimes no more than two people: the biggest honcho buyer from any of the major media agency players or advertisers and his/her counterpart from the media owner. 

Typically, a lunch, dinner or round of golf is involved. During this get-together, the two honchos will discuss the overall volume the agency group or advertiser thinks it is going to pass to the media owners, and what said agency group or advertiser is getting in return in terms and conditions. Think CPM's, payment terms, discounts, preferred placement options, exclusive research opportunities and the like.

In the olden days the deal would be closed literally with a handshake between men. Mad men, perhaps, but it had a certain romantic and gentlemanly ring to it (my Leo Burnett bosses Bill Hadlock and Dick Hobbs as well as Coke boss Chuck Fruit used to tell me colorful, alcohol infused stories about these).

Don't think that today's Upfronts are small deals.The combined networks book around $9 billion in TV commitments, and the cable networks do another $9 billion on top of that. Wall Street pays eager attention to the deal books.

And in today’s world of razor thin margins, agencies have ventured into making far more complex deals. They aren't true agency commitments of course because that would be illegal. Media Agencies deliver independent media buying advice to their clients so they will – of course – steer clear from making any firm TV billing commitments that could influence their client recommendations. My lawyer made me put this paragraph in.

The reality is of course that most agencies build every client plan with one eye firmly on what the client really needs, but the other on the latest status of their term sheets with the media owners. In most cases this works fine because today's agency dealmaker comes prepared with 20+ years of experience and computer algorithm calculated budget scenarios and term sheets so he/she is not agreeing to ridiculous financial commitments. But there is, for sure, a double interest at play when your buying agency is pulling together your media buying proposals.

So that is the madness of Upfronts. But what about the Newfronts?

Well, the digital media community had a brilliant idea. The thinking was something like this: “Wait a minute, we are still getting digital pennies while TV amasses upfront millions. What if we out-upfront the Upfronts? What if we go before the agency and advertiser community before the Upfronts happen and the money is spent? We can play that game!”

And so the “Newfronts” were born. Before we roast the idea of Newfronts, let’s first roast the name. Because, really? Newfronts sounds like it was invented at the time we called the internet “The Infobahn” and the digital bubble was about to burst around the turn of the last century. New what? You are newer then the word “Up”? You are newer media? Is the Upfront therefore Oldfront? Well, yes it is, but so is the idea of Newfronts.

Anyway, it doesn’t matter if it is called Newfronts, Digifronts or Bullfronts. Well, actually, that last name would be very appropriate.

Here is something else that's weird to consider. The Newfronts is not just focusing on Online Video (as if that would make Newfronts somehow acceptable). Oh, there is a lot of talk around online video. It is, in fact, what the earlier mentioned USA Today article is all about. And the budgets are definitely on the rise as well:

But Newfronts cover the full gamut of online media. Twelve month banner commitment anyone? Here is a sample schedule - make sure you bring your check book.

The whole idea of Newfronts flies in the face of all things that are unique, great and attractive about digital media. All things that make it not TV. Digital media is in principle unlimited in supply, it is dynamically priced using actual user data, it is electronically traded in real time, and even less predictable then the predictability of new TV shows in terms of what will be a success, failure or dud. Can you say Groupon? Did you know you were going to worry about your Tumblr page a year ago?

The whole notion of giving a digital media sales company an upfront commitment for 12 months in the future is absolutely ridiculous. Even if it is to secure a spot on Netflix’s (excellent) series House of Cards.

You would think that at least some parts of our paid media ecosystem would agree that up/new/any front is out of touch with reality. Sorry, I am going to squash your optimism.

Because after Upfronts and Newfronts it was time for the youngest kid on the paid digital media block to get in on the action as well. Presenting: the Mobile Upfronts (I think they missed an opportunity when they didn't call it the Mobfronts, but then again I can see how that might confirm some of the suspicions people might already have around the deal making). 

Remember those razor thin margins (for which, by the way, the agencies and advertisers are wholly responsible, but that is for another blog post). If you are a Starcom Media Agency client, expect a firm amount of Twitter on your forthcoming schedules...

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