If you think there are too many ads on TV now, just wait.
Cramming even more commercial time into shows is just one option networks are eyeing to counter a widespread ratings shortfall sparked by a dramatic drop in viewership this season, according to media and ad executives.
Giving money back — a once-unheard-of proposition — is also being bandied about as TV ad sales departments scramble to figure out how to bridge the growing gap between the ratings they guaranteed advertisers and the actual numbers, media buyers said.
With the new fall TV season approaching in a matter of weeks, buyers calculate that top cable and broadcast networks owe hundreds of millions of dollars in airtime that wasn’t delivered this season.
“There is a huge liability on the books,” one senior network executive confirmed. “It’s the first time you saw the top five to 10 networks on the decline. It hasn’t recovered and it’s going down more.”
Added one media buyer: “Across every network, including broadcast networks, it isn’t hard to get to hundreds of millions of dollars [in lost ad revenue]. That wouldn’t be far-fetched.”
In the past, networks could draw on their remaining ad inventory and give back free commercial time, known as “make-goods,” to compensate advertisers when shows underperformed.
But this season, the ratings slide is so severe — double-digit declines across the TV dial — that buyers doubt networks have enough leftover ad time to make good on their “make-goods.” Some networks are already sold out of ad time, leaving their sales folks with little to do but listen to the phone ring.
With inventory running low, those networks that have ad time are jacking up prices on spots sold closer to the actual air date on the so-called scatter market, making it even tougher for marketers to get on air.
Ultimately, TV ad sales departments will likely have to resort to one or more alternatives for making advertisers whole, including:
- Jam more ad spots into shows.
- Roll over make-goods into the next quarter (and risk losing business down the line).
- Give cash back.
Among the networks hardest hit are those facing the biggest year-on-year declines, according to ad executives. Those include NBCUniversal-owned MSNBC, Turner’s TNT/TBS, youth-centric Viacom channels like Nickelodeon and MTV, and A&E TV Networks.
“Make-goods are something that’s being discussed right now,” said one ad exec.
Nielsen’s so-called C3 ratings — which measure commercials watched live plus three days of DVR playback — are the industry’s currency for buying and selling ads.
Commercial ratings across cable channels have been down every month since May 2014, according to Nielsen numbers crunched by research shop MoffettNathanson. Even worse, the ratings declines show no signs of leveling off.
Still, the networks are in denial about the extent of the ratings shortfall.
“They’re still negotiating on numbers which are unattainable,” said one ad exec. “It’s visions as opposed to reality and we can’t continue to work off mirage concepts.”