TV advertising deal-making could be pushed back amid coronavirus outbreak
The coronavirus outbreak is poised to upend the way TV ad dollars are negotiated this spring, pushing deal-making to later in the year, according to multiple network and agency executives.
“This could be the catalyst for something that probably should have happened 20 years ago — move to calendar upfront,” says Peter Olsen, exec VP, ad sales and content partnerships, A+E Networks. “My guess is the fall season will get delayed because they can’t produce pilots.”
Much of the TV ad business is negotiated during the upfronts, when the networks look to sell the bulk of their commercial inventory for the September-August period. Deal-making officially kicks off with network presentations in the spring, which roll into negotiations that take place from around Memorial Day through July 4th and sometimes into the better part of the summer.
But with little visibility around when business will return to normal amid the COVID-19 pandemic, as each day passes the idea that negotiations will actually be able to take place this summer is becoming less likely.
While TV networks are preparing to stream or digitize their presentations to ad agencies and their clients in the wake of social distancing, there are too many what-ifs to even prognosticate what deal-making could look like.
The majority of TV productions are currently shut down due to the coronavirus. This includes pilots for new series. Those would need to be ready by May for the networks to plan their fall schedules. But depending on how long the pandemic lasts, there may be little in the way of new content to showcase to advertisers.
But perhaps an even biggest issue to contend with right now is the lack of live sports.
“Production issues aside, any discussions about the upfront are theoretical until we get a fix on how the billions of dollars that’s already committed across all sports platforms - including the Olympics, NBA, NHL, MLB – are going to impact supply and demand,” says Catherine Sullivan, chief investment officer, North America, Omnicom Media Group.
Then there are ad budgets to plan. Right now, most advertisers are scrambling to re-allocate their 2020 ad budgets, let alone think about 2021. Even those brands that aren’t directly impacted by coronavirus are asking to shift commercials to later in the year, according to one marketing executive at a large consumer brand.
“We are very focused on what clients are doing in next two months; most clients aren’t focused on what they are doing in the fourth quarter next year,” says Michael Law, president, Dentsu Aegis’s Amplifi.
One option could be to do business in scatter for the fourth quarter and then negotiate in the fall for the first through third quarters, and then in the spring of 2021 go back to the typical May negotiations, Law says.
“I think we will see a slower-moving market,” he adds. “I don’t see how a market can move faster with any truth to it…The economic impact is so unknown. There are companies right now fighting to keep their business alive in some cases. They can’t make a 12-month forward commitment. As of today, March 19, the market is going to take a deep breath and try to figure this out instead of trying to accelerate on pure predictions.”
There are some marketers that already strike deals on a calendar basis, but these are a smaller part of TV networks total deals. The Big Four broadcasters and The CW typically bring in about $10 billion in ad commitments during the upfronts.
“For better or worse we have been bellyaching about the upfronts for years,” says one long-time industry executive. “We’ve said the timing is not right, the format isn’t right, the silver lining coming out of this could be an entirely new way of doing business.”
Of course, none of this can happen in a vacuum. There will be a point in time where the industry will need to get together and decide how to proceed, much in the way they might decide on a new currency, and that decision is unlikely to happen in the near-term.
And ultimately there will likely be at least some brands that feel their business won't be impacted as negatively, according to one media buyer. "A certain subset of advertisers thinking that way means it will happen in some capacity within that traditional time frame."
Either way, it will be hard to call whatever happens this spring business as usual.