The possibility of a walkout by the Writers Guild of America and Screen Actors Guild/American Television & Radio Artists is complicating an already difficult-to-read TV advertising market and threatening to cause a rare decline in the $8 billion upfront advertising marketplace.
The upfront market, which typically starts in mid-May, will break around the same time the Writers Guild and SAG/Aftra contracts expire-the writers' contract ends the first week in May; the SAG/Aftra contract expires the last week in June.
If even one of those strikes occurs, advertisers will be left to sort out a hodgepodge of reality programming, reruns and limited series on network schedules this fall. That uncertainty could lead to less upfront buying by advertisers and result in more money being moved to other TV venues like scatter.
"Unquestionably, this upfront could be complicated," said Marc Goldstein, president of national broadcast at WPP Group's MindShare USA, New York. "There are additional layers of variables and unknowns that we haven't seen since 1988." That's when a WGA strike lasted five months, from March to August.
For this year's market, the key question is whether advertisers will continue to slow their spending on TV-a medium that has shown major weaknesses in the fourth quarter 2000 and the first quarter of 2001. Some ad agency buyers have suggested that as a result of this weakness, they might stay away from buying in the big TV ad-purchasing period in May, and instead play the scatter market.
"Maybe you don't buy the upfront," hinted Bob Igiel, president-broadcast division for WPP Group's The Media Edge, New York, who buys for major advertisers such as AT&T Corp. Mr. Igiel said he is working on strike contingency plans, but he wouldn't reveal details.
The prospect of a softer upfront is no idle threat. At the beginning of the fourth quarter 2000, for example, a rare event occurred when about $200 million to $300 million in upfront prime-time "holds" (prospective deals an agency makes for its clients) didn't become orders. That brought down the $8.3 billion upfront ad level estimated in May of last year to $8 billion.
CBS believes that even with the strike, it will be virtually business as usual. "We think disruption will be minimal because we will go into the upfront" with a lineup of shows ready to sell, said Mel Karmazin, president-chief operating officer of CBS's parent company, Viacom, in a recent conference call with analysts. "The only concern would be that if there is a strike and replacement shows get on the air and they don't perform as well."
Concerning upfront sell-out levels, Mr. Karmazin said: "If we can get the pricing that we like in the upfront, we will probably sell 80% of our [ad] inventory again. If in fact we don't like the pricing, we will sell 55% or 60%."
Still, not every network will be in perfect programming shape in the event of a strike. For both agencies and advertisers, a strike could mean a plethora of complex scenarios when it comes to estimating program share and ratings estimates for the fall television season.
Steve Siskind, senior VP-media and co-op advertising for News Corp.'s Fox Filmed Entertainment, said, "In September, people automatically tune in, thinking there is new programming. Networks will have to build in a cushion. Estimates probably won't be as low as for summer, but they be certainly lower than the traditional premiere week in the fall."
Moreover, broadcast ratings could be significantly down, especially in the fourth quarter. "You'd probably have to take [ratings estimates] down 20%," said Neil Baker, senior VP-advertising sales for E! Entertainment Television.
A strike also may result in networks running more reruns of network-scripted shows as well as more game shows and reality programming, which aren't under either union's domain. ABC, for instance, could run even more episodes of viewer favorite "Who Wants to Be a Millionaire" and there may be more programs such as Fox's controversial "Temptation Island" and ABC's reality series "The Mole."
If networks turn to reruns and more reality shows to wait out strikes, competing media sellers such as cable and syndication are ready to step in. "You'll see cable ratings go up," said E!'s Mr. Baker.
The Media Edge's Mr. Igiel concurs that advertisers will adjust their buys accordingly. "Viewers will have to go somewhere," he said.