The Impact Of The Covid-19 Virus On Programming And TV Advertising

The Impact Of The Covid-19 Virus On Programming And TV Advertising

The Covid-19 virus has put a production hold on hundreds of scripted and unscripted entertainment programs that are expected to air this year.  Simply put, it is wreaking havoc with the network’s annual program development calendar. Although streaming services order programming year-round  and are more likely (than broadcasters) to order a program straight to series without ordering a pilot, the English-language broadcast networks, by and large, continue to follow a programming calendar that has been in place for decades. Below is what the program development calendar characteristically looks like for broadcast TV.

·       First, network entertainment executives are pitched scripts for potential programs from studios, showrunners, etc.

·       In January-February of each year the broadcast networks will order (or greenlight) pilots. After a pilot is picked up, cast members are named.  

·       In March, pilots are being filmed and network entertainment execs are reviewing dailies.

·       In April, network execs are evaluating and audience-testing program pilots. At the same time, ad sales executives are holding program development meetings with ad agency executives, to go over their program needs for the upcoming season and assess their pilot season.

·       In mid-May, the networks announce their upcoming programming schedule for the fall with upfront presentations in front of advertisers across Manhattan.

·       In late May, buyers begin to negotiate ad costs with network account executives in a process called the upfront marketplace. Advertisers buy upfront ad time for a 52-week period that begins in the fall.

·       Depending on the ad marketplace, the upfront negotiations are usually completed by mid-summer with billions of ad dollars being negotiated. In 2019, the broadcast networks secured $10.2 billion for prime-time ads while  cable TV booked another $11.7 billion.

·       The 2020-21 broadcast season is scheduled to begin the week of September 21.

Similar to virtually every other business, the programming calendar and TV advertising have been thrown into disarray by the Covid-19 virus. As Carolyn Finger, the Senior VP of Variety Business Intelligence, says, “The Covid-19 virus could not have come at a more inopportune time in the program development calendar. With the exception of post-production, every element in the program development season is being impacted by the coronavirus.” Because of the Covid-19 virus, many new and returning programs, both scripted and unscripted, have stopped production. The exception has been late-night, where the likes of Jimmy Kimmel, Conan, Samantha Bee and Stephen Colbert have adapted and re-started production.

The live upfront presentations, scheduled to begin on May 11, have all been cancelled, replaced by  virtual and live streaming events. The questions are, what will the upfront ad marketplace look like and how will entertainment executives be able to cobble together a programming schedule at these virtual upfronts?

For the upfront ad marketplace, there have been two disruptive seasons over the past two decades, 2007-08 and 2001-02, although neither of them is comparable to the challenge of coping with a global pandemic.

Writer’s Strike: The most recent writer’s strike that impacted the upfront ad marketplace was in 2007-08. That year, the Writers Guild of America (WGA) staged a 100-day walkout against the studio-backed Alliance of Motion Picture and Television Producers (AMPTP). The strike impacted the production of over 60 television programs in prime time and late night.

Similar to today, there were a number of unscripted reality shows on the networks’ schedules, including top rated American Idol, Survivor and The Apprentice, etc., as well as live sporting events. But, in 2020, both of these genres have also gone dark with the pandemic. Another difference, as Carolyn Finger notes, was that in 2007-08 the networks knew the strike was imminent and had fast-tracked the production of scripted programs to lessen the impact. On the other hand, the networks had little warning on the impact of the Covid-19 virus.

Also, Finger notes, the television industry itself is more global and interconnected now, which creates a wider ripple effect with a pandemic. For example, the L.A. Screenings, which are typically held following the upfront presentations in May, have also been cancelled this year. At the annual event, the studios screen their new series pickups for international acquisitions executives. This year, the in-person events will be replaced by virtual events.

In 2007-08, the networks had other sources for programming. One source for content was original series from their cable partners migrating to broadcast. For example, Showtime’s Dexter aired on CBS and USA’s Monk on NBC. Another programming source was online. NBC, for example, had acquired rights to Quarterlife, a web series which debuted on TV in February 2008, although the show quickly migrated to Bravo after a poorly rated first telecast.

Instead of their cable partners, this time around perhaps the networks could fill the programming void with original content from their streaming partners. Popular content such as The Handmaid’s Tale, Mandalorian or Star Trek: Picard could wind up on prime time in 2020-21. Besides filling a programming need, these programs would help promote Hulu, Disney+ and CBS AllAccess to non-subscribers. Another programming opportunity for broadcasters could come from TikTok, Instagram and similar video platforms. Finger says, “These platforms could also be a source of innovation in user generated content that may aid in new talent discovery.”

In any event, if there are no scripted programs, the broadcast networks will probably incur a notable drop in primetime audience delivery as viewers migrate to streaming video platforms. In the aftermath of the 2007-08 writer’s strike, Nielsen provided a 17-page analysis, which, among its findings, noted the average primetime rating for broadcast TV dropped by 6.8% during the strike, compared to the year-ago period. Coincidentally, the WGA and AMPTP pact is up for renewal and they are currently negotiating another new agreement.

Economic Recession: In 2001-02, the upfront was held amid the “dot com” bubble burst that triggered an economic recession lasting eight months. As typical with economic slowdowns, ad budgets got slashed and networks were faced with lower ad rates. At the time, Mel Karmazin, the president of Viacom which was then (as now) the parent company of CBS,  asserted that if CBS did not get the ad pricing it wanted for the upfront, it would hold back inventory to sell during the scatter marketplace the scatter marketplace takes place after the upfront, and ads are sold on a quarterly basis closer to the actual programming air date).  

Consequently, to build advertiser demand and sustain pricing, CBS sold only 65% of its commercial inventory in the upfront that year instead of the usual 80-85%. Karamzin took a gamble, believing the economy would rebound and the scatter ad marketplace would be more robust than the upfront. With the recession ending in November 2001, he was proven correct.

Depending on the length of the pandemic and the uncertainty of an upfront, perhaps all of broadcast television will be sold in the scatter marketplace in 2020-21. Broadcast and cable television are the only media that have an advertising upfront. Local television and digital media sell ad time closer to when the ads are scheduled to run. Through the years, the upfront marketplace, which has been in existence since the 1960s, has been widely criticized as a method for television advertising sales. Although the upfront has been financially lucrative to the networks, perhaps the COVID-19 virus pandemic will result with the end of the upfront television ad marketplace. 

The media landscape continues to fragment, especially with three new streaming providers to be launched in the months ahead. The COVID-19 virus pandemic can potentially impact how television ads are negotiated and how viewers watch their home entertainment. In any event, 2020 is looking to be a lean year for advertisers. MAGNA Global recently revised their ad spend forecasts for the year and now projects U.S. ad revenue for national TV to decline by 13%.