TV’s “upfront” ad-sales market has started to simmer. What will be required to bring it to full boil?

TV networks and media buyers hope to answer that question in coming weeks – if not days. In this annual market for advance commitments to buy commercial time, Madison Avenue and TV sales executives haggle over the cost of ad inventory, and this year appears more contentious than in the recent past, according to three media buyers and other executives familiar with the tone of these early discussions.

Talks have become “a little more adversarial than last year,” said one of these buying executives, who suggested “there is more of a frustration level across the board on the buy side and the client side.” The sentiment surfaces even as some prognosticators expect upfront volume to increase slightly in 2019.

At issue: The ad rates the networks are seeking. The two sides are bickering over the cost of reaching 1,000 viewers, a measure known as a CPM that is critical in these annual discussions. Buoyed by a healthy economy, new data-based methodologies that help advertisers carve out narrower slices of audience, and an influx of demand from direct-to-consumer advertisers like Peloton and Wayfair, networks are making the case they deserve CPM hikes that are well in excess of anything they got last year, according to executives.

Indeed, some buyers have been told the networks are seeking CPM increases of as much as 18% for primetime broadcast inventory. But in 2018’s market, NBCUniversal sought CPM hikes of more than 11%; ABC pressed for rate increases of 10% to 11%; CBS and Fox worked for hikes of 9% to 10%; and the CW sought CPM upticks of 10% to 11%. Madison Avenue this year would like to keep NBCU, whose NBC led networks among viewers in the coveted 18 to 49 demographic, to a CPM hike of no more than 12%, one buyer suggested – essentially flat with the rate it won in 2018.

The nation’s five English-language broadcast networks secured a gain of between 3% and 5% the volume of advance advertising commitments for 2018 primetime programming, according to Variety estimates. The networks secured between $9.1 billion and $10.06 billion, according to Variety estimates, compared with $8.69 billion and $9.55 billion in 2017, marking the third consecutive year that the networks have seen increasing volume for their primetime schedules

To be sure, asking for eye-popping rates each year is par for the course of an upfront market. Networks bid high, buyers try to keep things low, and things begin to lurch forward somewhere in the middle. Media buyers, who have an interest in cooling the market, may be attempting to do just that at a time when several indicators point to a robust market.

But even at middle ground, CPM rates are moving skyward, and with some reason. Networks are expecting heavy demand. Some big advertisers, including AT&T, Procter & Gamble and Unilever, have signaled their discomfort with audience-measurement and/or content issues in certain digital venues. What’s more, the influx of new tech-savvy advertisers like Spotify or Warby Parker gives the networks a new set of clients who won’t have the relationships required to knock down a CPM demand.

That dynamic could cause some complications, several buyers suggested. If CPMs remain high, advertisers will essentially have to pay more to reach TV’s dwindling audiences – the result of an ebbing supply of viewers, who are moving rapidly to embrace streaming video. And that could force Madison Avenue to be choosier in the way it allocates its ad dollars.

Two buying executives suggested higher CPMs will force clients to try to get their money down with the media companies that provide the biggest reach among audiences. Those two would be NBCUniversal, with its tendrils in traditional broadcast, cable and Spanish-language TV and Walt Disney, which has bulked up thanks to its purchase of FX and National Geographic from Fox Corp. If advertisers rush to Disney and NBCU, these buyers suggested, they may have less money to spend with smaller companies, particularly lagging cable networks.

Talks have already started. Disney has held early discussions with Publicis Media, according to two people familiar with the matter, and possibly Omnicom Media Group. These discussions likely centered around deal frameworks, said one of these people, and it is not clear that any deal would be consummated until clients have a chance to approve terms. Spokespersons for Publicis Media and Omnicom Media declined to comment.

Don’t count out other players. Pharmaceutical advertisers, who have spent heavily in recent years, are at it again, according to executives on both sides of the bargaining table. That will likely lend momentum to CBS, which counts medical advertising among one of its top categories. Other advertisers may see a need to put money down with that network as pharmaceutical spenders take up spots in traditional parts of the schedule, including daytime and late-night.

There is no guarantee the market will proceed in the way these executives have described. If the stock market should fluctuate severely as the U.S. and China haggle over trade terms and tariffs, who knows how Madison Avenue will feel about the money in its pocket? Meanwhile, TV networks see an advantage and hope to press it.