The TV networks and basic cable business was already on shaky ground, under siege by cord cutters. The pandemic shutdown may well deliver the killing blow. Netflix has a bigger content pipeline than the networks, Disney+ has more IPs, and networks that are ad supported are now about to have their legs chopped out from under them. As the Wall Street Journal reports.
Big advertisers from General Motors Co. too General Mills Inc. are seeking to walk back spending commitments they made to broadcast and cable networks, a dynamic that is testing the industry’s five-decade-old way of doing business.
TV ad spending fell in the initial weeks of the coronavirus pandemic, but was insulated from an even bigger drop. That is because the majority of the roughly $42 billion spent on national TV ads in the U.S. is bound by contractual commitments that are made well in advance of a new TV season, which starts each September.
Under those “upfront” deals, the first real opportunity since the pandemic struck for advertisers to cut back future spending commitments began May 1. Companies now have the option to cancel up to 50% of their third-quarter ad spending.
Many companies are seeking to take advantage of that option to varying degrees, including General Motors, PepsiCo, Cracker Barrel Old Country Stores Inc., General Mills, Domino’s Pizza Inc. and pharmaceutical giant Sanofi SA, according to people familiar with the discussions
Ad buyers estimate that roughly $1 billion to $1.5 billion in commitments for third-quarter ad spending could be canceled. “The cuts are going to be pretty deep,” said Dave Campanelli, chief investment officer at media buyer Horizon Media.
As a result, national TV ad spending in certain categories—sectors such as automotive, retailers, liquor, and pharmaceuticals—declined about $2 billion, or an estimated 30%, to $4.82 billion from Feb. 17 through April 26, compared with the same period a year earlier, according to ad-tracking firm Kantar Media.
That would deliver a severe blow to the industry, which is already under pressure from peak TV that has run up the cost of programming while dumping a ton of content, driven by Netflix, Prime, and other streamers funded by endless Big Tech cash.
Advertising pulling money out of network TV would be catastrophic.
Network TV was always going to die. But things are speeding up now. What would that mean for us?
Saturday Night Live will no doubt survive and head to Netflix. But network news, NBC News, CBS News, ABC News, would be in big trouble. They might survive as independent ventures. Or they might perish.
But on the down side, this will accelerate the consolidation of the entertainment industry and the news under Big Tech.