As the government starts to crack down on social distancing and more Australians begin working from home, data is already showing free-to-air networks and SVOD numbers are on the rise.
Yet while viewership may be increasing, the commercial networks remain under financial pressure due to a cutback in advertising spend, an issue plaguing the industry long before coronavirus came to town.
As audience habits change with increased time spent at home, there’s no denying the current state of the TV industry looks nothing like it did two weeks ago. Further still, it could be (rightly) argued that in two weeks’ time, it will look different yet again.
As it stands today, what does TV advertising in Australia look like amid the novel coronavirus pandemic? What are brands asking for? Are they spending more or pulling their campaigns and investments? B&T had a chat with buyers from OMD, Vizeum and Nunn Media, as well as network 10’s head of sales and a Morningstar equity analyst to get the lowdown on the good, bad and uncertainty of commercial television during COVID-19.
Dentsu Aegis Network’s Vizeum Australia CEO Ashley Earnshaw told B&T there’s a lot to learn from looking to overseas markets, where they are a few weeks ahead in this “difficult environment we are in”.
He added the data coming in is already showing a change in consumption, and that TV audiences and other video platforms are increasing as people are increasingly housebound and social distancing becomes the norm.
When asked if clients are panicking, he said he doesn’t see any present panic.
“I don’t think anyone’s panicking. At the moment, it depends on the client vertical. I think some verticals have been more impacted than others. For some clients in the market, their businesses remain robust and the requirements for marketing stay the same. I think there are other categories that have been far more impacted by coronavirus and the changes in consumers.
“They’ve been really impacted and some of those clients are reducing or removing their advertising spend and have had to have a real hard look at cost, effectiveness and relevancy of their advertising at this time.”
Earnshaw said, however, that clients who are reducing or removing their ad spend need to consider the balance between short-termism and long-termism.
“The market is shifting on a daily basis. Two weeks ago, the world was very different than it is now. The conversations we’re having are [around the notion] that things are pressured and things are changing for many businesses.
“But it’s now about impact analysis. It’s getting clients to understand if budgets do change now, if they do move advertising spend now, what’s the impact on their brand in the medium to long term?”
Earnshaw said for all agencies now, when clients are coming and asking to change their investment profile or take money out of the market, it’s important to ask why, and give some advice before clients do.
“Our view is cutting budget in an economic downturn will only help our clients defend profits in the very short term. Brands and customers will emerge from this downturn in a very different shape than they are now. Yes, profitability will be an issue for some of them. But it’s better to maintain a share of voice at or above the share of market during a downturn. The longer-term improvement in profitability is likely to more greatly outweigh the short term reduction.
“I think for any good agency where there is pressure for clients to cut costs or make changes, I think we have to be responsible as a service-led business and give clients advice before we do that, because the reality is, whilst there may be pressure now on clients to cut costs, that may harm their brand in the medium to long term. The reality is we will come out of this event.”
Earnshaw said it’s not just about budgets, planning and strategy, but that creative also plays a vital role.
“What we’re advising is really great, creative which has relevancy right now. If done empathetically and in the right way, it can compensate for some of that reduced spend clients may be under pressure to activate.”
OMD head of trading Jane Combes told B&T there hadn’t been a major audience shift up until last week.
“Viewing this week to date on total people is up 10 per cent on live data. Sydney is up 14 per cent,” she said.
“We haven’t seen that sort of growth outside of a special event in a very long time”
As the economy stalls, Combes said OMD’s clients are working hard to adjust to a new reality with a focus around being sensitive to their consumers.
She said: “With any event of this scale, there will be opportunities for certain clients to provide utility and support. In those cases, where clients can add some meaningful value to consumers, we may see an increase in activity in market.
“On the flip side, we will have clients that see a downturn and in the middle, others are looking to just shift their creative so that it remains relevant and considerate of the current issues we are facing.”
“I don’t think anyone can deny that we will see a slowing of the market over the next 6 months, but for us it’s about helping our clients navigate through that and come out the other side.”
Nunn Media managing director Chris Walton told B&T it’s hard to know to what extent viewership will increase, but that news will get a boost, as will sports.
On how clients are reacting, Walton said, “there is certainly a bit less buying going on”.
He added: “Clients fall into different categories – those that have been working to minimise any advertising they are doing due to an immediate and significant reduction in demand, those that see the opportunity and have begun to invest more, and those that haven’t made major changes but are keeping a close eye on developments.”
“For categories like travel, it is of no surprise advertisers are pulling back. In contrast to this, some clients in the FMCG and e-commerce categories have either begun investing more or are currently working with us to evaluate the value in doing so.”
He said, however, the questions being asked of media now should be no different from usual.
“If it is felt there is a positive return to be had then by all means do more,” Walton said.
“There is endless documented evidence of how brands remaining active during downtimes come out the other end stronger and with a larger share of market as a result.
“However, each brand needs to analyse their own situation. For example, I wouldn’t be advising travel brands to advertise at the moment unless they want to communicate about such things as their cancellation policy and so on,” he added.”
Over at the commercial networks, early data is looking promising. Network 10 for example is up 30 per cent compared to the same week in 2019, while channel 10 is up 33 per cent.
ViacomCBS and Network 10 chief sales officer Rod Prosser told B&T now is a “very important time to be a free-to-air broadcaster.”
He said: “Our role at this time includes giving advertisers a platform to effectively communicate important brand messages.
“We are seeing that TV audiences have grown in the double digital percentage over the last week, with 10 up 10 per cent. Similarly, we’re seeing increases across our digital platforms as more people come to news and information sites for the latest information, and to streaming sites for more entertainment.
“This situation is affecting brands globally and at 10, we are in regular communication with our advertisers and continue to monitor the situation closely.
Last weekend following the cancellation of the 2020 Formula 1 Grand Prix, 10 had to manage the aftermath.
“There was immediate impact in terms of advertiser behaviour and revenue and we worked through that with our partners,” said Prosser.
“We are assessing campaigns on a case-by-base basis and and are being flexible, adapting to clients’ needs as much as possible.
“Brands are being affected by the situation differently. For some, it doesn’t make sense to advertise during this time. For others, it’s a critical time to be communicating important brand messages to audiences. Some are simply affected by the supply chain while others are able to be flexible with their spend and timing.”
Over at Nine, there has been significant uplift across TV viewing, particularly with news programs. Week-on-week the broadcaster has seen an 18.5 per cent uplift in its weekday 9News 6pm bulletins.
Last Monday night, Nine News had its highest rating weekday bulletin of the year with a national average audience of 1.378m. On its BVOD platform 9Now, minutes consumed increased 10 per cent week on week.
At the end of the day, however, is this uplift in audience numbers translating into advertising dollars and cents?
Brian Han from financial services firm Morningstar said that while TV viewership may be up “for obvious reasons”, he doesn’t expect an increase in advertising spend.
Han told B&T: “While advertisers may still be advertising – because I haven’t had a situation where between the programmes there’s a big blank screen – it’s more about how much money [the FTA networks] are actually making from those advertisements. And how much of those advertisements are actually fresh campaigns?
“I would have thought that [not many ads] are fresh campaigns because we’re in a situation where companies are fighting for survival, and people may lose their jobs.”
Han said the “last thing on companies’ minds” right now should be marketing and brand building.
“There is a time and place for those things and right now, I would have thought that’s a second priority. Looking out for its employees and making sure the company stays afloat would be [a main priority].”
He added: “Advertising ultimately hinges on corporate confidence and consumer sentiment, and if those two things are down in the dumps, then I think advertising would be the first thing people look at to perhaps cut, before they start cutting into their employees.”
Around a week ago, Han predicted the state of the FTA TV ad market, suggesting it could be down about eight and a half per cent to June 2020. Speaking to B&T on Monday, however, “that seems like forever ago in the current situation”.
“Right now, at this stage, it’s anybody’s guess as to what it will be. What’s more important is that TV companies can see through this, because a couple of them do have pretty high debt.”
Companies with high debt include Seven West Media, which has been banking on advertising revenue from the 2020 Tokyo Olympics to get it over the line. However, while no official call has been made yet, all signs point to a postponement of the Games, which will be quite the headache for Seven who are betting big on ad revenue from the event.
In such an instance, not only will Seven’s revenue take a hit, but so will its audience numbers, with the broadcaster needing to fill its content slate with something of equal value and interest to advertisers and ultimately, consumers.
On Tuesday morning, Seven withdrew its FY20 financial guide amid COVID-19 uncertainty.
