NEW YORK — The war is barely a week old, but the doomsday scenario of disastrous advertising losses for TV nets seems far less likely now.
Early fears that blanket news coverage would zap out all commercials, send advertisers into self-imposed blackouts and put mainstream program schedules in limbo have subsided. The nets’ unexpectedly quick return to regular programming — with war reports interspersed — has soothed investor jitters, at least for now. And most of the advertisers who had pulled their ads during the first days of the war are returning.
A new crop of estimates suggests that advertising losses from TV program disruption will be smaller than many had feared, with networks so far reporting few cancellations and pacings looking strong into the second quarter.
It’s too soon to know whether this is wishful thinking, however, given the ever-tightening supply of commercial airtime available and the increasing uncertainty over the duration of the war.
New York-based media pundit Jack Myers on Tuesday pegged the worst-case scenario for TV biz ad sales losses at no more than $200 million, assuming a four-week war with the pace of coverage continuing much as it has in this first week.
He estimates that $130 to $150 million was postponed during the first week of the war, when TV stations and networks pre-empted regular programming for live war coverage. Most of those losses, Myers believes, will be recouped in future weeks through make-goods and replacement schedules.
ABC, the weakest of the major broadcasters, opted to preempt the most of its primetime sked last week for “sustained” news coverage (more than 7 hours).
CBS has so far retained much of its NCAA college basketball tourney coverage, while even newsies CNN, Fox and MSNBC saw the return of some national advertisers over the weekend and are slowly rotating commercial breaks back into their war — and increasingly non-war — news coverage.
“Nearly 75% of all advertisers who had opted to eliminate commercials during the first 48 hours of the war are either already back on the air or planning to return later this week,” Myers noted. CNN and Headline News are now running roughly 60% of the usual commercial load.
These back-of-the-envelope estimates are well under other industry prognostications that war coverage could cost the industry up to $100 million a day in lost revenues.
The primary difference in forecasts comes from varying estimates of just how much displaced advertising can be successfully postponed to new slots and how much will have to be cancelled. Myers reckons that out of his estimated total loss of $230 to $250 million, between 45% and 60% percent will be recovered by the industry and re-invested in future advertising schedules. This, of course, assumes there are no major terrorist acts on U.S. soil and no significant escalation in hostilities abroad, either of which would necessitate more blanket coverage.
But it’s still unclear whether all networks will have sufficient airtime inventory for make-goods. The strong demand for broadcast airtime, compounded by constrained supply due to under-delivery of ratings on some channels, will limit make-good space. This will also help push up prices, particularly for March ratings winners like Fox.
“Broadcasters need to maintain their relationships with advertisers and they will refund if they have to,” said Soundview Technologies analyst Jordan Rohan, who anticipates a strong upfront market given the tight inventory and attendant price hikes for what limited scatter market remains on the national networks.
Myers is confident the TV industry can accommodate whatever commercial airtime gets displaced. “The networks can beef up their commercial load or shift (advertisers) to other day parts that are typically less sold out,” Myers told Daily Variety. Otherwise, he said, sister cable channels and other outlets should be able to absorb any shortage, resulting in minimal industry losses.
Network execs won’t comment on current losses and say programming and commercial decisions are still a fluid process. Sources indicate that preempted advertisers will get first-dibs on make-good slots in the future, while those advertisers that choose to “black-out” their ads will lose priority.
Eyeing the economy
Myers says the biggest determinant of the health of the upfront market is whether the overall economy can regain its fourth quarter 2002 vigor with healthy consumer spending trends. “If February levels, which were down, continue, we might see a much softer upfront,” said Myer.
Nevertheless, Tuesday’s realization that nets need not scrap their schedules entirely to meet war coverage demands helped media stocks claw back some lost ground Tuesday during a wild market ride buffetted by uncertainties about the war’s duration.
Viacom, Disney and AOL Time Warner shares all gained on Tuesday, along TV station groups Univision, Hearst-Argyle, Tribune and Acme Television.