If ever I see a need to train and develop new, long-term direct business it's now..
Dr. Philip J..
Broadcast and cable hit as agencies take second-quarter options
By Claire Atkinson -- Broadcasting & Cable, 2/3/2009 1:53:37 PM MT
Second quarter option taking has begun in earnest and cuts are beginning to take place across the board. Agencies began handing down the news on Friday and have been working their way around the industry for the early part of this week. According to executives in the market on both the buy and sell side, certain clients are taking double digit options with some cable networks, and in some instances clients have asked to pull out as much as 50% of their ad commitments. That extreme scenario might not play out for the rest of the business since option taking has only just begun and will take a process of weeks to complete. One unnamed cable executive dramatically described it as “mass slaughter,” while another said it was “horrible,” while confirming revenue losses were 15%. But other cable executives disputed that characterization and said things were playing out as expected with some clients firming up and others cutting back. Top tier programming networks were thought to be less affected than lower tier players. Advertisers commit money to their TV partners in advance each year, and every quarter allow marketing partners take back up to 50% of that commitment. Since the economy is in such bad shape, clients have been expected to take back more money than in previous years. Typical cancellation rates are between 8% and 10%. Last week one major media buyer, Rino Scanzoni, chief investment officer at Group M, predicted rates would be between 10% and 12%. Still, one executive said the packaged goods category was particularly heavy with the cuts. Procter & Gamble is said to have been a strong contributor to the trend. P&G said last week it would not cut its overall marketing spend, but would move more money into other marketing disciplines such as coupon programs. It also said it was driving media partners for efficiencies. A spokeswoman for Procter & Gamble said: “We don’t comment on our talks with our media partners or our spending.” CBS could be among those exempt from any cut-backs since it has a long term pact with the packaged goods giant. Retailer Macy’s, which also announced it will lay off 7,000 staffers, has made some cuts, as predictably have the hard-hit auto and financial services sectors. The broadcast network market is still difficult to assess since not all clients have made up their minds. One agency side executive reported that money was coming out of the network prime market, and possibly late night and daytime. Some of that money was being re-spent in the traditionally cheaper cable market. “The broadcast side is actually holding up relatively well, and the softness on the cable side is to be expected,” said one major media executive. "There is no risk in pulling back from a lot of the cable networks, because if you want to buy back in later, there will be real estate available.” Another broadcast network said the cuts were in the range of what they were expecting, while another said second quarter was running at a similar pace to first quarter. Disney reported Tuesday that fiscal first quarter revenue for its Media Networks division dropped 5% to $3.9 billion for the quarter while operating income at cable networks decreased $69 million. Other media companies report this week. The fear is how the option taking will play into upfront market, which like Wall Street, is driven as much by emotion as reality. One agency executive predicted that CPM (cost per thousand) pricing could drop as much as 10 per cent. Another sales side executive dismissed that figure completely. “It’s a double whammy. The scatter market will be weak and you don’t want a weak scatter market as your lead-in to the upfront," said one cable executive.
No comments:
Post a Comment