When the economy starts to fray, one of the first things marketing types will say is that the only way brands can survive a recession is to spend more on advertising. They brush off old chestnuts about how they doubled their advertising budgets before the depression. When the dust cleared, the makers of Rice Krispies almost buried far more risk. His hated rival, Post.
There’s something to be said for how Snap, Crackle, and their brood of drum major mantis shrimp guided Kellogg’s through a decade of catastrophe, but today the company has a $25.4 billion market cap. It’s also a bit strange that the analogy that everyone reaches for the grape nut is nearly 100 years old. At the time, radio was still in its infancy, and the only places for advertising were the outfield fences and pamphlets handed out whenever drug shows hit town. The prize at the bottom of the cereal box is usually a small bottle of laudanum, and when a dandy of the era sets his sights on something like Sam the Toucan, he falls from the velocipede into a large, swanky pile.
No top media executive has said as many words, but this earnings season has made it clear that the advertising market is headed for a world of blows.while being a metaphor du jour It’s a “headwind”. This may be too easy to assess for what lies ahead. As for sheer discomfort, the next few quarters seem to offer little more than a steady diet of mouth-shredding Cap’n Crunch.
The pain of squeezing into breakfast cereals that aren’t soaked enough is already being felt.In the second quarter of this year, data from the Standard Media Index showed that national TV ad spend was down 1% year-on-year to about 94%. was a billion dollars. It’s not a disastrous drop, but comparisons to the same period in 2019 are rougher, with ad spending down 20% in the second quarter compared to his pre-COVID period, a loss of $2.4 billion.
While everyone from David Zaslav to Lachlan Murdoch played “headwinds” on this month’s earnings call, Paramount Global chief Bob Bakish softened his message to investors with a multi-pronged approach. “We see both headwinds and tailwinds in advertising,” Bakish said last week, pointing to the slowdown in the advertising market as a direct factor in “the state of the macroeconomic environment.” The CEO of CBS’ parent company has confirmed that microchip shortages are still hampering auto-related spending, but that the packaged goods category (i.e. the media’s drink-stirring straws) will “manage the inflation problem.” , which has a real impact on ad spend. [companies] Be careful to protect your margins. “
If you’re wondering about the compensatory tailwinds Bakish hinted at, Paramount’s boss characterized the ad turmoil as a “short-term challenge,” thanks in large part to a “very tight supply” of TV inventory. It seemed almost an afterthought at the time, but Bakish’s throwaway lines about TV’s resilience should give investors some reassurance.
Sports coverage is primed to withstand the worst of the ad market’s turmoil, with massive reach, ridiculous luck, and the age-old barriers that keep marketers from trying to escape their fall TV commitments. It is due to the work of procedural wrinkles from. Rather than engage in posthumous horse whipping, skip the well-known bits about how the sport bolsters ratings on its own, and instead delve deeper into the far more esoteric rules that govern the summer upfront bazaar. increase.
Here’s how blocking and tackling work. As of today, the network has about five and a half weeks to convert a prepayment hold into an order. In other words, any handshake commitments made since prepayment negotiations began in early June should be formalized before the 2022-23 broadcast season officially kicks off in September. (The NFL’s calendar is accelerating. NFL kickoff just takes him four weeks to check in on Dan Lovinger if he orders a few in-game spots at his game.)
for the fourth time In other words, advertisers who purchased time from the start of the season to the end of the calendar year don’t have much leeway to withdraw. Cancellation options are available in advance of her other three periods. Broadly speaking, an advertiser could cancel his 25% to 50% of the upfront allocation for Q1, Q2 and Q3. A transaction is a transaction. No pick-up or refund.
of course, all This is a negotiation, and even the old-fashioned policy of sticking to fourth-quarter commitments is often swayed by more organic concerns, like the complex relationships between sellers and buyers. No one wants to start a war of attrition over issues that could overshadow the next fiscal year. And many of the most profitable sports advertising partnerships have been around for decades. But with everyone involved familiar with the rules of engagement, it’s extremely rare for an advertiser to pull out of an investment in the fall. Especially when your money is tied to the NFL and college football.
Even if things do go into full recession, holding the line in the fourth quarter won’t necessarily get everyone out of trouble in 2023. When the calendar rolls over, the advertising plan is reversed. In 2012, General Motors canceled nearly half of its second-quarter upfront purchases in broadcast and cable. Just three years ago, Procter & Gamble withdrew half of his April-to-June contract, jumping his overall cancellation rate to 15%.
That said, fall sports bonanzas can still see Fox and ESPN even in a protracted recession.In 2021, according to Nielsen, sports will account for 77% of ad impressions on Fox, with just 10. That’s up from 49% a year ago. In the fall, the NFL, college football, and MLB postseason account for over 90% of his Fox sales activity. A company is doing very well if it generates the majority of its advertising revenue during a period when consumers spend about $300 billion more than he did in his first eight months of the year.
The depth of the recession remains to be seen, but the experience of the last three recessions suggests that the sports market should thrive through the worst of times. Watching the Dallas Cowboys on widescreen is a lot cheaper than taking your family to the movies, so ratings tend to improve when money is tight. (Or, for that matter, stadiums.) As with more flash time, viewers and well-funded advertisers continue to flock to sports. Many marketers will choose to weather turbulent times because they seem to keep in mind.
With not enough cars on site, auto-related spending may dry up, but as long as Americans stand in line for personal necessities like toothpaste, deodorant and laundry detergent, the world will continue to grow. Procter & Gamble continues to pour money into TV.In 2021, Kantar estimates that P&G will once again be the top buyer of national TV inventory, pumping $1.72 billion into cable and broadcast networks. During the previous year, which coincided with the lockdown phase of the pandemic, P&G spent even more to reach TV audiences.
By selling larger-than-usual amounts of pre-stock, sports rights holders are preparing for the uncertainty ahead by locking in high-single-digit price increases while reserving fewer units for the scatter market. doing. In nine out of ten years, the diversification rate is higher than the agreed price upfront, but looming macroeconomic threats suggest 2023 is likely to be an outlier. Better to sell as much airtime as possible before the bottom hits than to give up 30% of your inventory and move to a decentralized marketplace that may never materialize.
Such was the path taken by Fox and its broadcasting rivals this summer. “We have been very intentional…choosing sensible ways to sell more volume on this upfront. It felt important,” said Executive Chair Lachlan Murdoch. The Fox Corp. and CEO added on the company’s Wednesday morning earnings call that Fox’s pre-sales were in the “late to mid-80s.” The figure, quoted by Murdoch, represents the percentage of Fox’s available airtime that was sold up front, much more robust than the usual 70% to 75% sell-through for him.
It’s a shame analysts aren’t as familiar with how upfront markets work as they used to be, but Wall Street watchers stopped pressuring TV executives about the order-holding process long ago. How much of the advertising dollars promised at the summer bazaar actually goes into the network’s coffers? Some free-spending categories (insurance, pharma) are looking to further expand their investments in sports in Q4, while others (gaming/gambling) are happy to inflate further. more If only the NFL would allow us to expand beyond the six-spot-per-game limit set a year ago, we could throw cash at television.
One executive who managed to avoid the clichéd “headwind” was NBCUniversal CEO Jeff Schell. “The advertising market is volatile,” Shell told investors on July 28.Some segments are doing well, but it’s really on a segment-by-segment basis [and] Some segments are getting worse. “
As is the case with Fox and other top-tier sports networks, NBC tried to mitigate volatility by increasing the amount of upfront payments. At the end of June, the company announced he had increased his prime time commitment by 20%. Categories that outperformed NBC include pharmaceuticals, consumer goods, streaming services, fast food and technology. All of these play an important role in the establishment. sunday night football As a $1.4 billion advertising juggernaut.
To quote another Kellogg, very! Fall for sports TV. And even if things get dicey, it certainly can.
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