TV networks, already suffering an ad-revenue fall due to the COVID-19 pandemic, look set to receive a further blow later this year as big-name brands plan to claw back up to $1.5 billion from ad commitments.
According to The Wall Street Journal, this spending squeeze is due to the fact that most advertisers with broadcast and cable networks have contract clauses allowing them to cancel as much of 50% of planned spending.
Pepsi Cola, General Motors, General Mills and Domino’s Pizza are among those set to cancel commitments in the third quarter of this year, the Journal says, quoting sources.
TV ad spending has already been hard hit by the pandemic, but revenue was protected to a large extent in the early weeks of the outbreak because most of the approximately $42bn spent on national ads is booked under contract well in advance.
Under these deals, advertisers are usually required to give 60 days’ notice of cancellation. The first real chance for them to cancel began on May 1, the Journal says – brands can now opt to scrap as much as half of their third-quarter commitments.
Estimates from ad buyers suggest these cancellations could amount to between $1bn and $1.5bn.
While cancellation options have been part of advertising contracts for years, cuts on this scale and by so many big-name brands is unusual. Earlier this week the World Federation of Advertisers reported that multinational companies with a total global ad spend of $46bn are intending to cut ad spending harder than originally planned, and for longer, in response to the COVID-19 pandemic.
As well as contracted ad deals, brands are also able to buy space much closer to when ads air. Spending here has also been hit hard by the pandemic.
There are now fears among TV executives that the migration of marketing dollars away from traditional platforms will happen even faster because of the COVID-19 crisis. Digital marketing channels, such as Google and Facebook, and streaming video platforms, will be the beneficiaries.
“We’ve seen a lot of great returns with Facebook and Instagram,” Chris Brandt, chief marketing officer at Tex-Mex chain Chipotle Mexican Grill Inc., told the Journal. These results have drawn some dollars out of TV, he added.
General Mills, the makers of Cheerios, also said it was shifting some TV spend into digital video and e-commerce, as these are areas where people are spending more time during the pandemic.
Sourced from The Wall Street Journal; additional content by WARC staff