TV Ad Sales Execs Worry the Biggest Covid-19 Revenue Losses Are Still to Come

With May’s arrival, Americans are entering their third calendar month under quarantine. But with some states lifting shelter-in-place orders, and others starting the process of determining how they may reopen, it is tempting to hope that the worst of the Covid-19 pandemic may finally be behind us. Yet several TV ad sales execs—who have already weathered billions in lost ad revenue since March as live sports and Hollywood productions remain on lockdown—tell Adweek they are concerned that the biggest ad sales revenue hits are actually yet to come. That’s because no one knows when regular business operations will be able to resume, and more importantly, whether consumers will return to their pre-pandemic spending habits—particularly the 30 million people who have filed for unemployment since the coronavirus began to shut down the country. That is a daunting prospect, given the massive ad revenue hit that media companies are already seeing from Covid-19. According to eMarketer, U.S. TV ad spending will decline by between 22.3% and 29.3% in the first half of 2020 compared to previous forecasts, a loss of between $10 billion and $12 billion in revenue. “The business is going to come back. We just don’t know what the next six months is going to look like,” said one TV ad sales exec. And depending on when companies have their fiscal year, “potentially, next year could be tougher than this year.” After all, consumers will be going from one “unprecedented” situation—sheltering in place for months due to a pandemic—to another: uneasily returning to public life with the lingering threat of the coronavirus’ resurgence. As that occurs, “there are all these sociological and psychological things we’ve never really dug deep on [before],” said one TV ad sales exec. “What will the consumers’ attitudes be about creative, or about going out to a restaurant? If [movie] theaters open, will people want to fill the seats? Will there be social distancing? … There's so much that goes into this that is different than how we [usually] look at it.” Added another TV ad sales exec, “Do they have less to spend because they’re not having the foot traffic in stores they thought they would? What about the purchase power of the [30] million people that don’t have jobs right now?” [kickout id="1" label="Quote 1"] One ad sales exec recently talked to a wireless company that before the pandemic hit had planned to shift its business away from prepaid wireless plans. But now, that company has decided to double down on its prepaid plans, given that a large portion of its subscriber base is among the 30 million unemployed and might not be able to afford a monthly phone plan until they can work again. “It was a big reality check. It was eye-opening to me,” said the exec of that conversation. “You have to reprioritize their product stack in order to service these people. How long is it going to take before people have their core customer base the same way they did before? We don’t know.” It’s an uncertainty that will apply to several advertiser categories, including automotive, financial services and retail. Even for those companies that think they will be on solid footing, “there’s a lot of unknowns,” and plans could change once new data comes in about consumer sentiment and spending. Already, media companies are telling investors to brace for ad revenue losses resulting from the pandemic fallout. In Comcast’s earnings call on Thursday, CFO Mike Cavanagh said that going forward, “we anticipate advertising revenue will materially weaken from the first quarter” due to the continued absence of live sports and economic recovery as the country reopens. Preparing for a staggered upfront [article_summary section="2"]All this uncertainty is why this year’s upfront marketplace will operate on a staggered timetable, with buyers entering negotiations whenever their clients are ready to think about their long-term spend. For some categories that are thriving now, such as consumer packed goods, that will be in the next month or two, but for several others—including those hit hardest by the pandemic, including travel, dine-in restaurants and automotive—it is more likely that they’ll negotiate later in the year, and shift to a calendar upfront. Unlike most years of upfront negotiations, “we won’t be going home on July 4 with all our deals socked away,” said one TV ad sales chief. This exec predicted that of the roughly $20 billion in ad sales transacted during a traditional upfront, half of that business will be conducted later in the summer, one quarter will move to a calendar upfront model, and the other 25% will shift entirely out of upfront and into the scatter market. Ahead of this year’s talks, some media companies are working with agencies to determine how upfront deals will be structured in this new environment, how much flexibility will be built in and how the deals will be structured to provide value to an agency’s portfolio, which will include clients that will be ready to start talks in the next month or two, as well as those that won’t be ready until closer to the end of the year. Disney is among the companies that has told buyers it will not penalize any brands that need to delay their upfront talks until later in the year, in an attempt to be flexible for its long-time clients. As companies prepare for the upfront marketplace, their plans for what will replace traditional upfront presentations—most of which were supposed to take place the week of May 11—remain up in the air. That traditional upfronts week collapsed last month, with most companies delaying their virtual events. But in the past week, both NBCUniversal and Univision said they would hold livestreamed events for advertisers during the same time they would have held their upfronts week events: the morning of May 11 for NBCU, and the afternoon of May 12 for Univision. However, both companies stressed that the events are not replacements for their originally upfront presentation, and will instead be more focused on the current state of the marketplace. Other companies are still finalizing their upfront presentation strategies, including ViacomCBS, which hasn’t yet decided on the format and rollout for its virtual event (mid-May is still a possibility). That presentation will tell a story across the whole newly combined company, allowing clients and agencies to take deeper dives into its new capabilities. Disney, meanwhile, is focusing on a presentation that will be more personalized to each holding company. That approach, sources say, wouldn’t have been possible in a one-size-fits-all presentation that is streamed to everyone. Scatter slowly picks up [article_summary section="3"]While upfront remains up in the air, the scatter market has become active again—though not as robust as it had been pre-pandemic—with some clients adding to existing buys, or returning with new creative after pausing their spend in March. Other brands that had perhaps cut their spend too aggressively two months ago are also coming back into the market, in part because they now have data about how their business can move forward during and after the pandemic. The late-night daypart has heated up now that those shows have resumed producing regular episodes—and in The Daily Show’s case, expanded episodes. And clients have been eager to be part of new shows whenever those are announced, including NBC’s Parks and Recreation reunion and several new quarantined-themed HGTV and Food Network series. With the Summer Olympics postponed until next year, some companies are eyeing the possibility of third-quarter money that will be available to the entire marketplace, not just on NBCUniversal, which would have broadcast the games. All eyes on live sports Some usual scatter players, however, are remaining on the sidelines for now, waiting for live sports to resume—an eventuality eagerly anticipated by publishers and marketers alike. [kickout id="2" label="Quote 2"] Ad sales execs said they are most frequently asked by buyers and clients about when live sports will return, a topic that is much more top of mind than when general Hollywood production can resume. There are some early signs of life in the sports world. Nascar racing will resume in mid-May, beginning with May 17’s Nascar Cup Series on Fox, and the PGA Tour plans to resume June 11, with CBS airing the Charlies Schwab Challenge in Fort Worth, Texas. If live sports are up and running in the third and fourth quarter, “everybody’s going to be going after those sports GRPs,” including categories that are still unsure of their long-term plans. “But if there’s no live sports, how are we going to fill up those GRPs? You can model this thing to death,” said one TV ad sales exec, who is doing just that. In the interim, ViacomCBS is the latest media company to hold virtual town halls with the sports investment teams of various agencies, featuring execs such as CBS Sports chairman Sean McManus and president David Berson sharing the latest info from various sports leagues about when games might be able to resume and taking questions from buyers. Last month, Fox Sports and NBCUniversal held similar events, which included their own sports execs. With so few concrete answers about what TV advertising will look like after the pandemic, several media companies have been using the extended quarantine to spend more time virtually with their clients, and working them to navigate the industry's massive upheaval as a result of Covid-19. “Everybody’s leaning in because we are going to have to solve a lot of these issues together,” said TV ad sales exec. “You can’t be that outlier, because you’re going to lose out.”