TV networks hurt by turmoil in car industry

TV’s Big Four are keeping a wary eye on the turmoil enveloping Detroit’s Big Three as the economic crisis worsens.

The prospect of automotive’s Big Three becoming the Big Two, if the General Motors-Chrysler merger that made headlines last week comes to pass, is a sobering thought for net execs.

If GM and Chrysler consummate a deal, it will undoubtedly lead to a winnowing of models produced by the combined entity, which would mean fewer brands to promote with advertising dollars.

Auto biz observers predict the Chrysler and Dodge monikers are likely to be sent to the junkyard, while Chrysler’s Jeep unit could be sold off. GM is also considering what to do with its eight brands. It is considering either selling or shuttering struggling models like Hummer, Pontiac, Saturn and Saab.

Automotive is the single-largest ad category for network TV, comprising about 11% of total ad sales for ABC, CBS, Fox, NBC and the CW. In the first half of 2008, overall spending on auto blurbs on network TV was $1.24 billion, down 8.8% from the same period last year, according to ad biz monitor TNS Media Intelligence.

Automakers — particularly the Big Three — have been among the biggest spenders in “branded integration” deals that weave products directly into programs — and funnel more dollars to the nets and their parent companies.

The total level of automotive spending on network TV has dropped the past few years, but the interest in doing splashy integration pacts has increased as the networks have become more savvy about tailoring those deals. It’s one way the broadcast nets have sought to stem the trend of decline in overall automotive spending on network TV.

Some fear those elaborate integration pacts could be on the wane in a tough sales climate, but others say integration deals will only expand in an environment where networks are desperate for auto ad bucks.

To wit, last week Bravo announced automaker Infiniti as the exclusive sponsor of its long-running “Inside the Actors Studio,” which will entail new branded segments of the show.

As Detroit wobbles, foreign automakers will contribute a greater share of the auto ad spending pie to broadcast and cable nets. So far this year, Toyota is the top auto advertiser on CBS, CBS chief Leslie Moonves noted last week.

GM has been active on the integration front this fall in NBC’s “My Own Worst Enemy,” with its Chevy Traverse and Chevy Camaro SS brands getting plugged onscreen as representing the different sides of the lead character’s split personality.

Overall, however, GM spending on network TV dropped 13%, to $345.7 million, in the first half of this year compared with the same frame last year, according to Nielsen Co.’s ad tracking service.

Ford’s latest model of the Mustang is the chatty star of the Peacock’s “Knight Rider” revival. The Blue Oval’s also pushing its new vehicles in Fox’s “Fringe.” And Chrysler spent big this fall on an integration deal with Fox’s “Terminator: The Sarah Connor Chronicles” to present the 2009 Dodge Ram 1500 truck as the ideal wheels for hunting down Terminators, among other jobs requiring horsepower.

There’s little doubt that automakers, even the top-selling Toyota, will pull back on their U.S. marketing budgets next year, at least until the depth of the nation’s economic woes are better understood.

The real issue for the nets is how much and how fast spending will be curtailed. Cable outlets are a little bit less sensitive to the auto biz’s woes because auto advertising makes up only about 5.5% of total ad revenue, though the percentage is higher for the larger cablers a la ESPN and TNT.

“There’s no question that anyone who is dealing with advertising as their revenue base is going to have to make adjustments as companies are weakened,” says NBC Entertainment co-chairman Ben Silverman, who was the driving force behind the GM and Ford integrations in “Worst Enemy” and “Knight Rider.”

A good portion of auto ad spending comes in the September-January period when new models are being introduced. Those spots for this year and early next have long since been budgeted, many of them in sports programming where multiyear deals with advertisers are common.

“The rest of this year is fine; next year, all bets are off,” says one Big Four sales topper.

There’s also speculation about whether some of the bloom will be off the rose of integration deals, which ad buyers and sellers have touted as a cure for DVR ad-skipping and the ever-increasing fragmentation of TV viewership.

Korean automaker Hyundai, for example, is touting its new luxury Genesis model with an integration and prominent ad purchase in Fox’s “24: Redemption” two-hour special next month. That deal has been in place for many months. In a weak market for car and truck sales, some automakers will likely reconsider making premium commitments, media buyers say.

“They’re probably not going to want to tie up a bunch of money in one place,” says media buyer Andy Donchin, director of national broadcast for Carat North America.

Networks, not surprisingly, covet integration deals because they generally involve an advertiser devoting additional marketing dollars to tubthumping a brand’s association with the program and a fee or some kind of coin delivered to the production entity behind the show. In most cases, integration pacts involve an advertiser buying spots across multiple broadcast, cable and online properties under one conglom’s roof.

Ford’s integration in the upcoming eighth season of Fox’s “American Idol” is also locked in by long-term contract. Ford shelled out $35 million for the integration in season seven, a deal that gave the automaker the right to feature its vehicles on the show, air spots during the broadcasts, stream online content and create its own offline marketing programs that tie in with the competish to push its cars and trucks.

But even with its “Idol” participation, Ford’s spending on network TV dropped 28% in the first half of this year, to $213.6 million. Chrysler, which is in the deepest sales slump of the Big Three, slashed spending by 44% to $68.2 million.

If there’s a silver lining to Detroit’s woes, it’s the certainty that even a merged GM-Chrysler will eventually have to market new and improved brands heavily if they want to have a hope of staying in business.

“They can’t just cut back on all of their marketing dollars — they’ll only fold faster that way,” says the net sales chief.

NBC’s Silverman says he believes the networks will have to try harder to deliver “more value” to advertisers in order to just hold on to existing market share and dollars. That could include more product integration and partnerships.

“We’re going to have to do more for our partners to keep the same budgets when their own budgets are diminished,” he says.

(Michael Schneider and Daniel Frankel contributed to this report.)

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