Procter & Gamble, the country's largest advertiser, is thought to have drastically cut TV budgets, especially cable. One knowledgeable executive said the package-goods company cut broadcast and cable budgets by 20%, or $150 million this year. Of the $2.7 billion P&G spent on all media last year, $705 million was spent on cable, according to TNS Media Intelligence, while $858 million was spent on broadcast.
As if this were not enough of a concern for the TV business, sellers find themselves waiting anxiously to see where GM-which last year spent $1.58 billion on TV and is the second-largest advertiser in the U.S.-will spend its dollars. The auto giant has been preoccupied with other business problems of late and has yet to make any deals, executives report.
According to one executive, GM's media-buying agency, Interpublic Group of Cos.' GM Mediaworks, received its budgets only late last week, and those close to the automaker said they were down from last year. The struggling auto giant has already outlined its intention to shift money from straight cable airtime to new-media alternatives such as video on demand. GM, which has already tested a VOD showcase in Philadelphia with Comcast, is looking to expand that into a year-long pilot.
An executive familiar with P&G's negotiations said: "This is not clients saving it for scatter. It's the economy and a combination of shifts to different avenues; new media and broadband." This person said that P&G wasn't alone in cutting budgets, that General Motors and Masterfoods and many other marketers had held money out of the TV market. "The money will go where there are the best deals and partnerships," predicted one buyer.
THE BIGGEST LOSERS
P&G's media shop, MediaVest, registered budgets with cable sales chiefs June 9, according to cable executives, who were informed that ad commitments would be cut across the board. The biggest losers could be the places where P&G spends most: women's oriented network Lifetime, Discovery and MTV, though they would not be alone. According to TNS, P&G spent $127 million with Lifetime in 2004, $73 million with MTV and $50 million with Discovery. (Lifetime could not be reached, while MTV declined to comment. Discovery's Joe Abruzzese, president-sales, said P&G "continues to be a very good partner.") A separate executive familiar with P&G's media plans said that the company wants to move the money to event marketing, the Internet and branded-entertainment deals such as its Crest toothpaste tie-in with NBC/Mark Burnett show "The Apprentice."
A P&G spokesman declined to comment on the report of a 20% cut, saying: "We're still in negotiations, and until we're all done, we're not going to comment."
The shifts aren't surprising given that this it the first upfront following implementation of P&G's new communications-planning agency assignments to Starcom Mediavest and Aegis Group's Carat last year-a system many predicted would lead to a shift of funds from TV to a broader mix of communications vehicles.
P&G is also facing pressure on its profit margins from two sources that weren't major factors a year ago-higher oil prices that are now reflected in ingredient costs across all P&G brands and a sudden reversal in the dollar's long slide against the euro, which could mean lower profit contributions from Europe that must be made up for in the U.S. While P&G has taken price increases in many categories, Unilever hasn't followed along yet in laundry detergent and Costco has fought back with a $100 million-plus hit to P&G's top line by delisting Pampers.
GM, meanwhile, is struggling to return to profitability in its home market after posting a $1.3 billion loss in the first quarter in North America. Chairman Rick Wagoner announced at GM's annual meeting last week that 25,000 North American plant jobs would be axed by the end of 2008. Annual production will be reduced by 1 million units, meaning GM will produce just 5 million vehicles this year. He said the result will be annual savings of $2.5 billion. Nevertheless, people familiar with GM said the company would not let foreign auto giants steal marketing ground, despite its internal problems. Others said GM is likely looking for another "Apprentice"-style product placement along the lines of its Pontiac Solstice launch.
In 2004, GM spent $765 million on broadcast and $304 million on cable, according to TNS. Cable networks where GM spent heavily last year include ESPN, CNN, Discovery, MSNBC and HGTV.
Betsy Lazar, GM's general director-advertising and media operations, told Advertising Age last month, "It's safe to say the next move is from cable to VOD."
"We used to do 30-second spots on network; now we think more about our video assets and how we use them across different mediums," Ms. Lazar said in May. "We don't think 30-second spots are dead, but we just changed our thinking about them." Ms. Lazar declined through a spokeswoman to comment on the status of the auto giant's participation in the upfronts. She would only say GM will be using broadcast TV for its launch products. (The buying portion of GM's account is moving to GM Planworks, part of Starcom MediaVest Group in October. GM Planworks already plans the firm's media.)
contributing: jean halliday, jack neff