Idle Threat?

GM’s stall tactics chill upfront, but history favors the networks

Sellers who are actively participating in this year’s marketplace were a bit more sanguine. “Look, nobody’s thrilled about this,” said one exec, clearly warming to the subject. “But no single client can control much of the marketplace. Say you do $30 million in business with your biggest client. They disappear altogether, who knows why. So you’re out thirty, and that’s too bad, but say you do $2 billion in overall business. That’s 2 percent of your total. That’s not nothing, but it won’t send you to the poorhouse either.”

And should others follow suit in this entirely hypothetical exercise? “Would they? I’m not sure I follow the logic,” the sales exec said. “There’s a reason the clients invest $40 billion in TV every year. Is it perfect? It was never perfect. But it works better than anything else.”

That sentiment is echoed by Pivotal research analyst Brian Wieser, who in a nod to Churchill, characterizes TV as “the worst form of advertising, except all the others that have been tried.”

As Wieser observed in a recent note to investors, anyone who can demonstrate a credible ability to walk away from the table is likely to command at least some sort of price reduction. Trouble is, broadcast TV continues to hold most of, if not all, the cards.

“Network TV remains a fixed starting point for TV plans, and will continue to serve this purpose for as long as it satisfies goals better than any alternative that may be tried,” Wieser wrote. “Neither cable TV nor online video, nor other media yet provides sufficient credibility to accomplish this goal for the largest brands, even as incremental shares of marketers’ budgets shift to new platforms.”

In the wake of GM’s Facebook divestment, Wieser last month predicted there would be some sort of dustup between GM and the networks. The very public announcement signaled GM’s “willing[ness] to walk away from any given negotiation,” Wieser said.

Facebook aside, the first real rumblings of a GM insurrection began resounding in February, when sources confirmed that the automaker had pulled out of 50 percent of its second quarter upfront commitments.  

Thus far, no one involved in the GM staring contest has blinked. In the meantime, it may be worth recalling a more distant precedent. When CPM premiums swelled to an unprecedented 25 percent during the 1975-76 upfront, J. Walter Thompson, then the largest TV agency in the business, decided to sit it out and wait for more reasonable rates. After all, it seemed a safe bet that the networks would temper their pricing rather than risk losing out on their share of JWT’s $95 million purse. 

It was a bad bet. Ultimately, JWT got burned and wound up paying even higher rates in scatter for what amounted to a bunch of leftovers, and no agency since has tried to play a game of chicken on that scale.