Writers’ Strike May Bolster Alternative Digital Advertising

November 8th, 2007 Nurlan Urazbaev

The writers’ strike may undermine the already weakened network TV and will benefit alternative digital media platforms, predicts Diane Mermigas in today’s MediaPost article.

Mermigas says TV stations will have to offer sizable makegoods to advertisers for the audience numbers lost during the strike, which, in her opinion, will cripple the networks. At the same time, “The Internet search and social networking kings are giving advertisers new options to connect with engaged target consumers, establish ongoing relationships, push cost-effective pitches and make certain transactions. They provide click-accountable direct consumer connections and immediate, personalized communications,” she writes. While Mrs. Mermigas does not mention digital signage (or its synonyms) directly, it is fair to assume that this type of new media falls into the category of “alternative platforms” she refers to.

Here are the exerpts from this Media Post article that I thought were relevant to digital signage professionals with regard to the situation around the writer’s strike:

“The traditional and newer gatekeepers take completely different approaches to the way they pursue, price, place, define and mine advertising dollars. The broadcast television networks and local television stations face stagnating advertising growth; save for the cyclical political election ad spending that is slowly oozing onto the Internet. Advertising-related revenues on the Internet and other digital interactive platforms are growing unabated at double digits.”

“…Suffice it to say that the Internet, mobile phones and other digital interactive platforms will only appreciate in value and importance, and will continue to suction dollars from static old media. It’s probably more worthwhile pondering just how fast and far old media revenues will fall off their historical highs.”

“…The TV networks will have to offer advertisers some form of makegoods for the ratings and demographic shortfalls in their handicapped program schedules and streaming video Web sites. Their best-guess connections to viewers are dependent upon the performance of high-priced, low-return content, the only sure financial offset to which is advertising sales. The collective jolts to the stability of television advertising have never been greater.

What a prolonged strike and absence of new scripted prime-time and daytime dramas and comedies–as well as late-night talk shows–may demonstrate is the willingness of viewers and advertisers to permanently move outside the realm of television networks to competing digital interactive advertising-supported outlets for entertainment and information. These options include professional and user-generated video on Web sites like YouTube, playing video games, locating vintage TV shows of choice of choice on non-sanctioned Web outlets, watching more pirated films online, Internet socializing, shopping and surfing. With 80% of all U.S. adults online, according to a new Harris Poll, the time and money historically spent by consumers and advertisers on television will be seriously challenged.

In the context of these confluent factors, bigger shifts in the flow of advertising dollars will come as a result of increasing destabilization of traditional static media such as television and print, and the increasing value proposition of interactive media such as the Internet. Even television’s 2009 mandated digital conversion will not reconcile the fundamental technical differences with so-called new media. However, the certain makegoods that will be made to advertisers this season based on falling ratings exacerbated by the writers’ strike bring insult to injury for Madison Avenue players struggling with metrics, return on investment, and new forms of creativity.”

“…The millions of dollars in advertising makegoods that could be at stake in a protracted strike will not only cripple television networks’ thin profit margins, but permanently damage the business link between television companies and advertisers. On the film side, piracy continues to sap hundreds of millions of dollars in annual revenues, and the maturing of DVDs (which have extended the profit life of films) is beginning to taper off and decline.

In other words, the writers’ strike is not helping an already tenuous media and entertainment situation.

The ultimate irony is that the studios, networks and other traditional media companies are arguing they can’t assign a portion of the revenues from so-called new digital media because they don’t know what it will be worth. Suffice it to say that the Internet, mobile phones and other digital interactive platforms will only appreciate in value and importance, and will continue to suction dollars from static old media. It’s probably more worthwhile pondering just how fast and far old media revenues will fall off their historical highs.”

“…On the advertising front, television networks have only a dwindling mass audience to offer, which they cannot muster during a strike.

Google’s meteoric growth into an advertising-supported search powerhouse using fundamental practices, metrics and pricing that are radically different from traditional media is a testament to just how fast consumer and advertiser sentiments can change. The new advertising game plans from Facebook and MySpace that feed on immediate, direct connections between engaged consumers and advertisers with mutual interests are attracting support from television’s blue-chip advertisers including P&G, Ford, Toyota , Microsoft, Chase and Coca-Cola.

Their self-service advertising interface services are making it easier for small to medium businesses to participate in an online advertising market that siphons ad dollars away from local television stations. As the marketing game churns, the television networks are confronted not only with keeping pace with the change, but salvaging their existing ad revenue base.

Analysts are mulling the adverse impact that general and strike-related ratings shortfalls (even using the new C3 metrics), and advertising makegoods, will have on overall TV network revenues in the fourth quarter and first half of 2008. Although companies such as CBS–which derives 70% of its revenues from advertising–are especially vulnerable, no media company with television and film ties is safe from a negative financial backlash from a prolonged strike. Even the most diehard TV viewers will be able to stomach only so much reality and rerun programming, making advertiser makegoods essential. The broadcast networks’ aggressive sale of scatter inventory at as much as 40% premiums to upfront prices has created an artificially tight market that pushes the inevitable reconciliation of advertiser makegoods into early 2008.”

“…The group of key target consumers that are mainstays of both television and the Internet will provide the most intriguing insight to how old and new media will fare during these times of high drama. “With TV already less important to the all-important 12- to-34-year-old demographic, a prolonged strike, particularly for television, risks further eroding consumers’ interest in the medium,” observes Pali Capital analyst Richard Greenfield. Unlike the 1988 writers’ strike, television can expect to reclaim even fewer of its loyal viewers and advertisers when the dust finally settles on the current conflict, since the media world is now dominated by many more viable competing options for their time and money.”

Another article, on ADOTAS, predicts thet the writers’ strike may give rise to web TV, the very subject addressed by the strikers:

“…The big question being asked at this time is if this strike could inadvertently give a leg up to the web.

As many shows are going to reruns, users are generating more content and online content is being produced in abundance. The Associated Press quoted Duncan Riley on the Techcrunch blog to say “The trends in viewer numbers have all been headed online to this point; this strike could well accelerate this trend, particularly if it lasts over the long term. It will be a chance for millions online to bloom.”

The strike is addressing this exact thing. The Writers Guild of America is asking for a percentage of the revenue generated online from their work, however the Alliance of Motion Picture and Television Producers say that it is still too early to understand if and how the traditional media will capitalize from online exposure.”

Entry Filed under: The Big Picture, Uncategorized