In Depth

TV Advertising May See Permanent Changes Due to Strike

Even if the Writers Guild of America strike is settled soon, television advertising isn’t immediately going to return to business as usual, ad buyers say.

“There’s going to be a lot of repercussions that are going to be felt for a long time,” said Chris Boothe, president for activation at Starcom USA.

Those repercussions will affect what kind of programming appears on the network, how it’s presented to advertisers and when it is bought and sold.

“I think the networks want to use this as a springboard to make some changes,” said Andy Donchin, director of national broadcast at Carat. “We realize the networks need not to throw money out the window, but we also need good shows on the air.”

The strike has helped focus advertiser attention on the broadcast networks’ shrinking prime-time ratings and forced them to find alternative ways to get their marketing messages to consumers. Those ratings are likely to continue to suffer until the networks can put new episodes of their top shows on the air again.

“We started in a situation where we’re living in a world of decreased ratings and increased costs,” said Louis Roloff, VP and director of video investment and activation at MediaVest. “The writers strike just drove further potential ratings erosion, and I think that accelerated discussion about TV budgets and questions about should TV dollars be re-expressed in other media, and the damage has been done.”

TV money could shift to other video screens, to VOD or to other media such as print, Mr. Roloff said. MediaVest also is in the middle of discussions that could send $100 million of its clients’ broadcast spending to movie theater advertising instead.

Ad prices in the scatter market spiked as the supply of ratings points was threatened by the strike.

“Right now there’s no incentive for the networks to do anything about ratings erosion,” Mr. Roloff said. “People just proverbially drive an armored car into their lobby and pitchfork money at them. That gives them no incentive to do anything if people keep throwing budgets their way.”

But the trend of lower ratings and higher prices could change that.

“This is going to drive clients to find other ways to not be so dependent on television. And that’s coming from a TV guy,” Mr. Donchin said.

One of the most immediate effects of the strike will be a change in the lavish presentations the networks make in New York each May to unveil their fall schedules, especially if they don’t have pilots to screen or schedules to announce in Radio City Music Hall, Lincoln Center or Carnegie Hall. NBC Universal CEO Jeff Zucker has led the talk about canceling or scaling down the network upfront bashes.

“We’ve been talking for years about [whether] the upfront presentations make sense,” Mr. Boothe said. “They can use this as a reason to change the whole way the upfront process happens in terms of the presentation.”

Up in the air is how the strike will affect the actual upfront advertising market. Some advertisers have been pushing to buy advertising on a calendar-year basis rather than hewing to the traditional TV season, and the strike may create an opportunity for them to try that approach.

“Is there going to be a traditional fall launch? I think advertisers need to be very flexible and keep their eyes open as to how to handle that,” Mr. Roloff said. “But if there’s not a traditional fall launch, does that beget a traditional upfront buying season?”

Buyers say the strike has caused problems for some of their clients.

“We bought these shows in the upfront and paid premiums for these shows because we thought they were better for us, we thought they were more engaging,” Mr. Donchin said. Many of those shows have been preempted by the strike. “A lot of effort was put forth to try to get us back on track and get our [spots] in the appropriate programming,” he said.

But there may not be enough appropriate programming for every client, and agencies will be pushing the networks for make-goods when audience guarantees aren’t met.

Particularly hard-hit were sponsors who went into the upfront to secure commercials in a small group of programs.

“If you’re married to two or three programs and don’t have as many programs to choose from and they’re all scripted, you’re in trouble,” Mr. Boothe said. “But if you can be somewhat flexible and nimble and move around more, you end up being in a better position when all is said and done. Some people had some great luck with some of this reality stuff that was out.”

Buyers were concerned that the strike could drive the networks to run more unscripted reality shows, which don’t employ writers and are quick and cheap to produce.

“I think it’s been shown in past years that too much reality just doesn’t work,” Mr. Donchin said. “It has to be good and we still need very engaging scripted comedies and dramas to fill out the schedule.”

Even if the strike is settled soon, it isn’t clear how soon scripted shows would return to the broadcast networks and how many episodes of those shows would be produced before the end of the season. Buyers said they’d like to see the season finished and run through the summer.

“If ratings continue to fall and there’s no scripted programming to help bring ratings up, the networks and some of the clients could get too far behind, and the networks are still just cleaning up from last year,” Mr. Roloff said. “They have all told me they don’t want to get into a big hole, and the end of the writers strike could help keep that from happening.”