With Chrysler reneging on its promise to shift money from national to spot, auto is leading the pack of category losers in the second quarter. It’s off a whopping 41% compared to last year. Other key categories are relatively good. Retail is off 12% despite robust spending by value chains like Wal-Mart. And telecom is down just 11%.
National spot TV sellers are facing a big dose of irony this week, with the debut of Chrysler’s new network TV ad campaign. The first of the spots to air is dubbed “Bright Future.” But thanks in part to the auto maker, now operating under protection of Chapter 11 bankruptcy, national spot is anything but.
Auto advertising spending in national spot is down 41 percent in the second quarter compared with the year-ago quarter, according to a TVNewsCheck forecast survey of buyers and sellers. And it’s a big reason why core advertising is off 25 percent in the quarter (30 percent when political spending is factored in).
No one was expecting miracles. But the future or the spot market looked a little brighter in January when Chrysler said that it was shifting spending out of network into spot. That never happened. Instead, the automaker shifted into reverse, deciding to spend the bulk of its money in network.
Taking some of the sting out of Chrysler’s network preference is news that it its ad spending is also being pinched. The U.S. Treasury’s auto industry task force is allowing it to spend only half of the $134 million that Chrysler had asked for over the course of the bankruptcy period, according to an article in Advertising Age.
Broadcasters report that they have received some Chrysler money in the second quarter. It’s coming in “dribs and drabs,” says Jane Williams, vice president of sales at Cox Television.
But some broadcasters are now worried about getting paid for the Chrysler spots they have already aired. They’re waiting to learn if the judge presiding over Chrysler’s bankruptcy will favor them when determining which of Chrysler’s invoices for services prior to the April 30 bankruptcy filing will be paid.
Sales execs are also being cautious about booking new Chrysler business. “The real debate is whether post-bankruptcy filing dollars are secure,” says Michael Spiesman, president of Continental TV Sales. “There’s the whole notion of burning yourself twice.”
Last Friday, Chrysler pulled all its May bookings from most of the News-Press & Gazette Co. TV outlets “because the stations were asking for cash in advance or a guarantee,” says Nathan Price, the company’s director of sales. “If they want to go back to network, I wish them the best of luck.”
Of course, Chrylser’s pull-back is just part of the national spot’s auto problem. General Motors’ financial perils have yet to be resolved, and that’s immobilized its advertising.
“It’s killing us,” says Chris Rohrs, president of the Television Bureau of Advertising. “Obviously GM is fixated on whether they’re going into bankruptcy or some other form of reorganization. Sales are terrible.”
Complicating the problem is a change in buying habits. The concept of auto companies purchasing national spot on a quarterly or annual basis is pretty much out the window these days. Instead, they’re buying month to month.
“That turns upside down any metrics I use to evaluate where we’ll end up in a particular quarter,” says one TV rep, requesting anonymity.
In the best-case scenario, Chrysler’s bankruptcy status will be short lived, and the government and GM will find a solution to help bootstrap the company out of its perilous state before long.
If that happens, sellers expect both companies to come out with their promotional guns blazing. Both companies need to convince consumers that they are here to stay if they hope to sell cars.
All of national spot’s largest advertising categories are down in the second quarter, but the negative numbers are, well, more positive than some expected.
The financial services/insurance category appears to be the best of the lot, down just 6 percent. It’s benefiting from strong expenditures by Progressive, Geico and American Family, according to Cox’s Williams.
Telecommunications, which has been a saving grace for national spot in recent quarters, is down 11 percent this quarter. The cable and telco video services are still battling it out with ads, and Alltel is spending strongly in the months leading up to its official melding into Verizon.
However, Rohrs notes there’s a lull in the category overall, because the number of hot new tech toys has dwindled. “But that never lasts long because there’s a constant evolution of the technology and products,” he adds.
Meanwhile, retail is off 12 percent, despite robust spending from value chains like Wal-Mart. Fast food/casual dining is down 16 percent. Packaged goods are off 18 percent, although Kraft, Procter & Gamble and General Mills are all feasting at the spot table.
Travel is second only to auto in the worst category list, at minus 28 percent. But national spot’s loss in that sector has become a gain for local spot, as airline spending is being replaced by promotions for vacation destinations only a gas tank away — from state tourist boards, amusement parks and the like.
Needless to say, national spot buyers are in the catbird seat. “Nothing’s completely off the table. If you can think it, you can ask for it,” says Kathy Doyle, senior vice president, director of local broadcast, Universal McCann.
Kevin Gallagher, executive vice president and local activation director at Starcom USA, reports that cost per points are about 20 to 30 percent below their second-quarter ’08 level. “We’re getting our ratings guaranteed,” he says.
That’s new for national spot, he notes. “They used to do that to a certain level, but not 100 percent.”
And Mary Barnas, executive vice president of local broadcast for Carat, says she’s seen CPP reductions of 40 percent. “There are ways to deliver lower rates other than cutting the cost,” she says, referring to “extras” like bonus avails on high-def channels and online.
All three buyers say that advertisers that generally experience sticker shock when considering national spot are warming to it now. But so far, the sellers say that has yet to translate into a significant rise in demand.
And when will there be a real upswing in national spot?
The Olympics and introduction of new car models early next year will help, says Val Napolitano, president and CEO of Petry Television.
And he’s betting things will kick into higher gear by the end of second-quarter 2010, assuming there’s an uptick in housing starts and the financial industry stabilizes.
Political will pick up during the second or third quarter next year too, he says. “The whole House is up for reelection.”