Floods and famine

A confluence of developments is triggering steep rate, volume and incentive deals from broadcasters entering their annual negotiations with agency buying consortiums and advertisers on upfront budget allocations for 2025.

Some media and agency executives said Seven is leading an aggressive assault to win marketshare against its broadcast rivals with steep rate discounting and eye-popping incentives to agency groups if they hit certain volume thresholds. It was unclear if Seven’s informal share and incentive proposals are progressing but media agency executives said they had been floated by Seven’s external advisor and former global Mediabrands CEO, Henry Tajer. 

Still, agency executives aware of Seven’s proposals were divided on the impact its strategy is having on the market. Some said it has pushed broadcasters further into a pricing war; others said Tajer was responding to market conditions: “Henry is very senior and he’s looking to get an edge for Seven – that’s his job,” one senior media buyer told Mi3. “He’s being disruptive but there are numerous examples of media owners going early and going aggressive. Henry turning up at Seven is partly their issue – they got rid of some very senior people and all the IP and knowledge that went with it. They’ve put themselves in a tough position – they have gone super aggressive on rates, but they’re not the only ones.”

Seven started its 2025 Upfronts presentations yesterday to agencies and is the last of the broadcast groups to roadshow next year’s content and trading strategy. In an interview with Mi3 and Seven executives this week, Seven's new National TV Sales Director Katie Finney pushed back on pricing pressure in the market and Seven’s position. 

“Price is less of a challenge than previous years because … of the last couple where you had big CPM inflation, you were having to cut rates a lot. With our video growth, that's giving opportunity then for price [leverage] – we're growing at 30-plus per cent in terms of audiences so that means that we can move on rate there. Yes, it's been a tough market …all we need is an interest rate cut.”

Finney’s reference to the past two years being tougher was in context of audience declines on linear TV which spooked the market and resulted in circa $600m in advertising budgets being diverted to alternative TV and video formats – broadcasters say linear viewing and “total TV”, which includes their digital video assets, have now stabilised.

When asked to confirm current market conditions are not putting as much pressure on Seven’s rates for 2025, Finney said: “I think so. Based on audiences, where the TV networks, especially, were having to cut rates based on their audience declines year-on-year, we don't have that upfront [for 2025] with either Seven or Nine.”

Nine and Paramount declined official comment but most media and agency executives Mi3 spoke to were at odds with Finney on the state of the market. 

“It is super aggressive at the moment because we have massive oversupply of inventory, and not necessarily great inventory,” said one media agency executive involved in the current 2025 deals. Said another: “I have never seen so much inventory and such depressed demand – it will create some winners and a lot of losers. Quality is being lost and it means players with quality inventory like Seven and Nine are fighting really hard to be heard. At the moment it’s all about quantity not quality, which is the wrong conversation to be had. Most agencies are following that path, so are advertisers.”

These are my principals...

The ongoing inability of media agencies to halt the downward assault on their fees has resulted in the rapid rise of principal-based buying deals to offset revenue loss – instead of buying media on behalf of their advertiser clients contractually as an “agent”,  media agencies are leveraging media owners to buy up blocks of advertising inventory and on-sell to advertisers with handsome margins.

Others in digital media managed services are doing likewise – they’re essentially specialist intermediaries who stack targeting and user data on inventory they buy in advance and on-sell to advertisers at hefty margins. But these practices are raising concerns about the quality and transparency of advertising inventory being bundled into these packages and the blurring of higher quality media content with what some parallels to the junk subprime housing crisis that triggered the 2008 global financial crisis.

An example unpacked to Mi3 this week involved an advertiser who assumed they were buying broadcaster BVOD in a principle media deal – but the CPM rate was double what broadcasters are selling at themselves and was loaded with cheaper connected TV (CTV) ad slots, not broadcaster video on CTV.

“The BVOD market is twice as big as is being reported,” a broadcast executive told Mi3. “BVOD is about $450m but the actual market is around $900m when you take into account agency principal-based media mark-ups, tech fees, 'magic dust' fees and the rest. It needs to clean up," they said. If the broom was swept by vigilant agents – i.e. not principal media arbitragers – "those channels that do not exist in the real total TV market would be gone in an instant".

They added: "If Seven, Nine, Ten, Foxtel and SBS were being paid the amount of money that an advertiser pays for BVOD, we’d have a very different outlook at the moment – if we received 75 per cent, even 50 per cent of the price advertisers are paying in market it would be different.”

Honesty penalty

Media owners, theoretically, control supply of their ad inventory but one holding company executive acknowledged this too posed a challenge for media because of the risk of being punished on broader media agency client spends if they didn’t play on principal deals.   

“There’s so much [agency principal dealmaking] in the ecosystem now if you challenge them on your own you could get heavily penalised,” the executive said. “It leaves media owners somewhat wedged.”

Some said “without exaggeration” that Australia risked descending into a shattered media sector like New Zealand. 

The past year has seen New Zealand broadcast operations shuttered, newsrooms gutted and local content economics speared by Meta and Google’s march.

“We can see how tough globally it is for traditional [media] vendors versus the big tech platforms and social” said one agency buyer across the troubled New Zealand market.

"New Zealand is just another signal down the pathway of the increasing dominance of a small number of global players in user generated content," they continued.

“What will happen is marketing won’t work. We’re killing the industry with our own short-term greed.”