Stepping lightly in uncertain times

Sep 24, 2001  •  Post A Comment

The terrorist attacks that brought down the twin towers of the World Trade Center and killed thousands struck a body blow to the American economy, too.
The television advertising marketplace took a multimillion-dollar hit as the broadcast and ad-supported cable networks went commercial free in the disaster’s immediate aftermath, news-gathering budgets soared and worried advertisers pulled back dollars earmarked for advertising and promotion.
“If you put yourself in the position of the corporate CEO [who advertises], if you visualize your sales going down by some number [in the days ahead], whatever that number is, then you have to look at your flexible funds, your retrievable funds, and just put them in reserve to protect yourself,” said Gene DeWitt, chairman and CEO of Optimedia International (U.S.), summarizing the logic of the advertisers who were withdrawing in droves from the market. “Unfortunately, this could be a near universal reaction, because it’s such a logical reaction. You expect sales to go down. You have a limited number of funds that haven’t been spent for the year. The most flexible of funds are advertising funds, usually. So you retrieve them and you bank them.”
On a more personal note, Mr. DeWitt said that in the wake of the terrorist attacks, Optimedia made room for employees from Fallon Worldwide, whose offices were in downtown Manhattan, by giving them office space in Optimedia’s offices near the Empire State Building. At least 20 Fallon employees were accommodated in the media department alone, he said. Both Fallon and Optimedia are members of the Publicis Group.
In the New York and Chicago advertising community last week there was an almost palpable fear that unknowable future events-a war or additional terrorist attacks-would drive the marketplace and the TV season ahead. But that was balanced by an almost universal determination to get back to business as usual and by a recognition that advertising is one of the engines that drive the American economy.
“Television helps drive the economy. Advertising is a very important component of what drives our economy,” said Jamie Kellner in the immediate aftermath of the attacks. Mr. Kellner heads the Turner Broadcasting System, which includes CNN. “It’s important that at the appropriate time we go back to advertising the products, providing entertainment and doing the things that are part of our way of life.”
Advertising executives, just recently on opposite sides of the negotiating table, maintained that competitiveness had been replaced by cooperation, and they compared the situation in the wake of attacks with the procedures that are in place for responding to airline disasters or product recalls. After an air crash, said one advertising executive, airline commercials are automatically pulled for 72 hours. Similarly, when an advertiser’s product is recalled, the networks act to pull ads without worrying first about lost revenue. “That’s where the relationships pay off,” one executive said, “because everybody tries to work with everybody else to try to do the right thing.”
Needless to say, even prior to the terrorist attacks the networks were operating in the worst advertising environment for at least a decade. Estimates of the cost in lost advertising in the aftermath of the terrorist attacks have been all over the board-from $40 million per day to as much as $100 million for all television platforms. Estimates of the effect of lost advertising on the rest of the calendar year and on 2002 vary widely, too.
One informed and simple estimate of the immediate aftermath’s cost to the broadcast networks comes from Jon Nesvig, Fox Broadcasting’s president of sales. According to Mr. Nesvig, “If you just divide the approximate revenue of the networks by 365, you come up with $3 million to $4 million a night of prime time for us. The other guys have an extra hour, 50 percent more, so they’re looking at maybe $5 [million] or $6 [million]. Make that a $20 [million] to $26 [million] range for the four networks, plus The WB and UPN, so make it the high side of $25 [million] a night-and whatever the other guys are losing with the `Today’ show and `Good Morning America’ and `The Tonight Show’ and all the other dayparts.”
Mr. Nesvig, like his counterparts at the other networks, said revenue lost now is likely to be made back later, in part precisely because the marketplace already was soft and there is an unusually large percentage of unsold inventory.
“If this were two years ago, when everything was absolutely full, you’d be talking about money that was lost,” he said. “Most likely we can accommodate [the advertisers] later and mitigate some of the real damage. … Of the dollars that are up now, I would anticipate almost all of it [is coming back].”
“[The situation is] not as awful as it appears, because there was a lot of inventory that was unsold,” said Paul Schulman, president of Advanswers PHD, making the same point from the other side of the table. Advertisers who expected to be advertising in premiering series or in baseball games or other sports events, or even the Emmys, found themselves instead advertising in repeats, if they were advertising at all. Guarantee deals may have to be paid off because of underdeliveries, Mr. Schulman said. “And when the marketplace is soft, the networks have the inventories to pay that off,” he said. “If it were a tight marketplace and you couldn’t make good the advertising rating points that were lost, then it would be a problem.”
At the Turner ad-supported cable entertainment networks, for example, “All of [the] advertisers so far have expressed inventory going forward,” a spokesman said, “meaning they will pay for a spot down the road.”
In the wake of the WTC disaster, many commercials were pulled or converted to simple expressions of sympathy and to public service. New York Life and Subway, to cite just two examples, followed that course. As the second post-attack week wore on, expectation in the advertising community was that telephone companies, financial services companies and, in particular, retailers-whose customers’ requirements for everyday goods and services drive the American economy to a great extent-will be an increasing presence on the airwaves.
“Retailers should be promoting-not just advertising, but promoting-like hell because the consumer needs to be given reasons to spend,” Mr. DeWitt said.
Airlines,-and even tourist destinations-will begin advertising again, too, though United and American, whose jets were hijacked by the terrorists, are expected to have their own “special issues,” as one advertising executive gingerly put it.
Executives at the agencies, who are accustomed to traveling widely to meet clients, now will have to reconsider their own day-to-day business procedures. At least one major Chicago-based agency has banned airline business travel by its senior executives for the immediate future.
Another, based in New York, is considering employing charters, “hiring a King Air or a Lear jet if we have four or five people going” to call on clients, one executive said.
The Association of National Advertisers has canceled its annual meeting in the aftermath of the terrorist attacks. “Although there are compelling reasons to hold this meeting-not the least of which is a public demonstration that the U.S. business community will not allow terrorists to shut us down -the needs of our members and the nation as a whole will be better served by our decision,” said John Sarsen Jr., ANA president and CEO, announcing the cancellation of the meeting that had been set for Naples, Fla., Oct. 10 to 14.
“Over the next several weeks, our members” most important priority is getting back to business,” he said. “In some cases that means fixing operational disruptions, and in other instances it means adjusting marketing campaigns to reflect the nation’s changed circumstances and consumers’ changed attitudes.”
As for the rest of the year and 2002, the question is, in this unsettled and perilous environment, how will the agencies proceed?
“The first thing is to assess the effect of all the cutbacks last week, which means getting our clients’ plans and budgets up to date,” said Mr. DeWitt of Optimedia. “The next thing is to visit every client and assess what we and they think they should be doing for the balance of the quarter. … I’ve requested of my own people weekly reviews of every client’s plans for the fourth quarter and for 2002.”
In addition, Optimedia will need to reassess its own budgets as well, Mr. DeWitt said. “It’s going to be a quarter in which long-term business planning will be about a week.”
As for the home-screen itself, there’s a universal sense in the advertising community that viewers, traumatized by what they’ve seen on television, will want diversion and lighter TV fare in the days ahead. There’s also a sense that promising new series, in particular ABC’s “Alias,” CBS’s “The Agency” and Fox’s “24,” will have to be rethought and perhaps retooled to eliminate or at least tone down terrorist and hijacking references. For example, a promotion for “24” that showed an exploding jetliner is already gone.
Nonetheless, the goal remains “getting back to business as normal so that these bastards won’t win,” Fox’s Mr. Nesvig said. “We all have to continue on.”