Key insights:
- TV execs say there have been no overall declines in the scatter market.
- Experiential may be particularly hard hit.
- Agencies are getting used to what might be a new normal.
- Production companies are moving forward, at least for now.
The global advertising industry is no stranger to disruption and turmoil. Agencies and media companies have endured everything from natural disasters to overthrown governments, but these scenarios rarely spill beyond national borders.
The current outbreak of COVID-19, however, is different. Between widespread travel restrictions and a dense cloud of uncertainty, the global advertising machine is slowing to a crawl in some ways and rapidly pivoting in others.
Some corners of the industry already have been hammered by the spread of the coronavirus that causes COVID-19. Several events have been canceled (Editor’s note: Since this story published, South by Southwest was canceled after all). Next to suffer will be the advertising production industry—a world ruled by tight deadlines, inflexible budgets and seamless travel—as its schedules are thrown into disarray. And most holding companies are mum, not wanting to spook investors.
On the other hand, TV executives and media agencies are barreling ahead as the TV ad market remains strong, speculating that audiences could grow as consumers stay home.
What’s clear is the large-scale disruption has the potential to transform the industry, forcing brands and agencies to adapt and consider options like letting staff work remotely, using local resources that don’t require international travel and creating virtual events that are more than just lifeless videoconferences.
Could this period of uncertainty mark an inflection point that marketers and advertisers will look back on as a moment of turbulence and transformation? Adweek spoke with leaders about how the virus will affect four key parts of the industry: ad spend, experiential marketing, agencies and production companies.
TV could continue to thrive
Early indications are that overall ad spending could take at least a temporary hit, but TV could actually benefit from people staying home, tuning in to news and streaming programming.
Publicis Groupe’s Zenith said this week it would lower its December prediction of a 4.3% rise in global ad spending this year due to the coronavirus, according to The Wall Street Journal. Also this week, New York Times CEO Mark Thompson said the Times “is seeing a slowdown in international and domestic advertising bookings, which we associate with uncertainty and anxiety about the virus,” and that the publisher now expects first-quarter digital advertising revenue to drop 10%.
Meanwhile, the consensus from TV ad-sales professionals Adweek contacted was a combination of optimism—fueled by a belief that a ratings increase between the 2020 elections and coronavirus coverage should translate to an increase in ad revenue—and “it’s too early to tell.”
On the strength of the 2020 election cycle and the Summer Olympics, U.S. linear and digital ad revenue had been projected to grow 6.6% this year, to approximately $238 billion, according to Magna’s most recent global ad forecast.
And while coronavirus concerns have already upended some early upfront events, buyers and TV ad-sales execs tell Adweek it hasn’t yet affected any business in the scatter market, which has been robust this TV season, aside from the travel category scaling back its buys.
The industry traditionally sees ratings spikes when major events like bad weather keep people indoors for extended periods, but those could be less noticeable now as TV viewing has become so fragmented. “I think we’ll see an increase in time spent with video, but that will happen across live, delayed, VOD and streaming, so the impact will be tough to measure solely by Nielsen ratings,” said David Campanelli, co-chief investment officer, Horizon Media.
Still, “any time people are at home, there’s a chance their video consumption is going to go up,” said Steve Nason, a research director at Parks Associates, a firm that specializes in entertainment and content services. “So in a way, it could actually boost viewership numbers for a lot of these companies, a lot of these video-on-demand services or even services like Xumo or Pluto that lend themselves to continuous play.”
