Fiscal Cliff May Start Spooking Marketers
There will likely be more reports about Superstorm Sandy’s negative impact on the U.S. ad industry. But a flurry of them could also emerge soon about how the impending fiscal cliff could affect TV spending and other media.
The story hasn’t yet gotten the coverage it may deserve because of the election, but “fiscal cliff” will very quickly be an unavoidable term on cable news after the votes are counted. Congress and the White House (presumably President Obama even if he is not reelected) will have to hammer out a wide-ranging agreement to prevent spending cuts and increased tax burdens – on both individuals and corporations – going into effect as 2013 dawns.
Even a rabid Tea Party caucus couldn’t let the country slide off the cliff into unknown financial distress, could it? Well, if its members get elected by huge margins, who knows? A fiercely divided Congress can’t be trusted anymore. Last year, the country’s credit rating was dangerously downgraded thanks in part to that group.
TV remains an extremely strong medium, even with ratings declines and competition from other media. Nonetheless, the networks have to be heartened that the cliff looms in the fourth quarter after much of their inventory was sold in the upfront at sturdy prices. If the deadline for a Washington deal were in, say, April, it’s very possible marketers might retrench, holding back money in the scatter market and perhaps exercising some options on upfront commitments.
STRATA, which offers a TV buying and selling platform, released some data Wednesday showing only 35% of agencies believe their business will wind up improved for the second half of this year, while 19% believe results will be worse.
More than half of agencies polled anticipate budgets remaining flat. That might not be too alarming, except it marks a notable reversal from optimism earlier this year. Now, about a third of agencies don’t anticipate business becoming robust again until post-2013, STRATA reported.
Of course, STRATA points out that agencies may have lost out if they had to pull back on TV buying because so much inventory was filled with political ads, effectively pricing them out. But that could have a snowball effect, keeping them off the air during the holiday season as wealthy advertisers return. (Which of course would be a boon for stations and networks.)
Agency executives may not be pondering the fiscal cliff yet, but they might find the term occupying conversations with clients as the potential for gloom to become doom approaches.