TV networks seek to settle advertiser debts ahead of expected tight fourth quarter

NBCUniversal’s instantaneous management of Olympics make-goods appears to reflect an effort by TV networks and advertisers to settle the advertising debts that have accumulated year after year as linear viewership declines but advertiser demand holds steady.

In this year’s upfront negotiations, TV networks angled for advertisers to agree to so-called “fluidity” deals that allow ads to be run across their linear channels and equivalent streaming programming, in part,  because that flexibility would help the networks to guard against piling up even more advertiser liabilities. “That’s allowing us to control the under-delivery,” said the first TV network executive.

Another way that networks’ are looking to control under-delivery is by wiping their debts before the fourth quarter when this year’s upfront deals will take effect and competition among advertisers for the remaining TV inventory will heighten as brands pounce on a holiday shopping period that will hopefully be less impacted by the pandemic than last year. “We’ve effectively gone out of sale in third quarter. We’re close to being fully out of sale just to get liability into place going into the new [upfront] year,” said the second TV network executive.

Among advertisers, the urgency to have their viewership guarantees fulfilled is fairly obvious: Brands run ads to sell products and the more people they can reach with those ads, the more products they stand to sell. On the TV network side, the consideration is two-fold: Honor their deals with existing ad advertisers, and open up inventory to sell at higher prices to new advertisers. “There is an aspect of ‘Can we sell it for a better price?’ to getting [the liabilities] off the books,” the second TV network executive.

However, for all the effort by TV networks to manage their advertiser debts, there remains an expectation among advertisers that make-goods, also called “audience deficiency units,” are simply a part of the TV ad business and will continue to accumulate. “When we plan, we realize that we’re going to have ADUs,” said a second agency executive. 

That may be especially true in the fourth quarter of this year. While linear TV will have the return of the traditional sports calendar and typical fall programming schedules, streaming services like Netflix plan to have similarly revitalized programming pipelines that could siphon away people’s attentions. Plus, with people beginning to return to their pre-pandemic routines like commuting to the office and attending kids’ soccer games, there will be even more competition for people’s time.

“I think there is going to be mass under-delivery again,” said the first agency executive.