Major media companies have all taken measures to cope with losses since the start of the recession, reporting pay cuts, layoffs, content restructuring and outright suspension of publications or channels. Almost always, a drop in advertising revenue is blamed for a loss in profits. But what are they doing to attract and retain business? How much have prices come down, and which advertisers are healthy enough to take advantage of the deals?
In order to make advertising more attractive, any media has three options, says Rob Young, SVP planning and research, PHD Canada. ‘You can either reduce the rate, which everybody is doing in some way, shape or form. You can provide bonuses, or you can add additional merchandising benefits, promotions, website space – that kind of thing.’
Recently, Ford of Canada launched an all-brand ‘Drive One’ campaign on television and in print, emphasizing the automaker’s record in safety and quality. Cindy Worsley, director of invention at Ford’s media agency Mindshare, says that in a year that’s all about making the budget go further, newspapers were chosen for their ability to inspire immediate results – and the bonusing helps. ‘If they’re offering added value, and we’re getting more for the budget, then absolutely we would consider that more than usual,’ Worsley tells MiC. ‘We’ve had things like free colour…free premium positioning.’
Young says he’s seen evidence of reductions between 10 and 15% on the newspaper front and in television, where pricing is based on demand – and demand is decreasing. A lot of television money is tied up in long-term, annualized deals, but spot market prices over the same time last year would be down by about 15% or lower, he says.
Laura Gaggi, president of Toronto-based Gaggi Media, agrees with this figure. But it’s not the massive, deep discounting that some advertisers might think it is. ‘Everybody thinks the media should be free now!’ she laughs. ‘But there has to be integrity for media companies with their very valuable properties.’
However, the deals are out there – especially on secondary and tertiary media, which Gaggi defines as smaller out of home properties, digital outdoor properties and smaller free dailies. ‘We’re getting those at way more than 20%,’ Gaggi says. ‘Those negotiations are because of the economy. It’s fundamental supply and demand. A lot of clients have cut back on their budgets, no question.’
Luxury categories like high-end retailers and alcohol brands, the government and automotive companies have reduced budgets – some holding back by as much as 50%. Others are still holding steady, and they are in an excellent position to lock in some good deals. ‘Many packaged goods aren’t cutting at all – they’re increasing,’ says Gaggi. Other healthy advertisers that have not reduced budgets are chocolate bar manufacturers, entertainment, drugstores and grocery stores.
‘If you are a client who’s investing at 2008 levels, then you would definitely benefit in most cases from either price breaks or added value and bonusing beyond what you would typically receive,’ says Cynthia Fleming, COO Carat Toronto. ‘I would say the number one thing that we’re dealing with is uncertainty. Suppliers don’t know how to price, because they don’t know how to do their projections for the year. They don’t know how to sit down and provide a business plan in today’s economy,’ she says.
The time when most broadcast plans are set – the upfronts – is fast approaching. Florence Ng, VP broadcast investments at ZenithOptimedia, says in light of the economy, advertisers will demand flexibility from the networks because they want to hold on to their money longer. ‘They have to make it more attractive,’ says Ng, adding that the way to do this will again be through bonusing, prime positioning and discounts.
‘Buyers should be demanding more from suppliers. For the first time in a long time it is a buyer’s market,’ says Doug Sinclair, Genesis Vizeum broadcast manager. And due to suppliers’ attempts to incentivize spending, CPMs will decline, he adds.
The other major change in the business model, Ng says, has been later approval allowances. ‘I don’t think that right now the avails are going as quickly as in the previous year, and going into market at a later day would allow advertisers to maximize flexibility to their business. Obviously there are certain timelines that we absolutely need to adhere to, but whenever we feel that there is sufficient flexibility for a delay approval that will not compromise programming efficiency, that’s when we would try to accommodate our clients’ needs,’ Ng says.
But the long-term commitments made during the upfronts are still the ‘best deal in town,’ says Ng. ‘It still gives advertisers superior efficiency, and they can lock up on programming they’re looking for, most importantly for the higher-demand periods.’ If they avoid the long-term deals, advertisers may find themselves paying more for prime time later on in the year. ‘I really want to maximize my flexibility, but what do I have to trade off? Do I have to end up losing some efficiency? How much am I losing? At the end of the day that is going to help determine what the next step is going to be.’
Meanwhile, in the past few months there’s been a higher-than-usual proportion of infomercials on major networks, as well as promotional material for stations’ programs. ‘A really good example of how the economy is changing the presentation was the Superbowl,’ Young says. ‘A very large proportion of the commercial time was not in fact commercial time, it was promotional time, and I don’t think we would have seen that kind of activity a year ago.’
But while rates, which normally rise, have managed to stay flat this year, says Ng, that may not be the case for advertisers who normally rely on Canwest’s E stations. Ng says if the network isn’t successful in selling the stations, prices will increase. ‘Usually we go to E for efficiency reasons. If E ceased to exist it would impact the overall avail situation of supply within the marketplace, and consequently, cost will go up,’ she says.
But Sinclair thinks Canwest’s situation could introduce more players, and turn into a positive for the marketplace. ‘Over the past few years there has been a significant amount of amalgamation, which has limited the competition. If Canwest’s troubles continue, it could pave the way for new competitors to join the fold and shake up the marketplace,’ Sinclair says.
Otherwise, buyers consider Canwest as a major player, and are treating the network as if it were business as usual. ‘Down the road, if there’s going to be changes, I would assume that changes would be to the ownership. The stations will still exist,’ Ng says.
