It could yield the most convincing evidence yet of receding and shifting revenues that threaten the existence of some TV networks and stations even in better economic times -- if they don't stop clinging to their old ways. Unlike the major banks, there is no federal bailout for media.
Instead, the rescue of television media must come from new digital revenues slowed by the recession and diffused across the online and mobile spectrum.
Some analysts warn that $9 billion of annual upfront commitments could shrink by as much as 20%, mostly as a result of cautious, financially devastated advertisers. Television industry spending could plummet to $17 billion, severely impacting local TV stations. Broadcasters' salvation is using interactivity to cultivate their hyper-local connections to grassroots consumer and merchants, not riding the increasingly weak biennial roller coaster of election and Olympic spending. More than $1 billion in ad revenues will flow to TV stations from mobile interactive applications, but not before TV station revenues drop more than 15% in 2009.
Recent recovery chatter fails to recognize the permanent loss of some national and local ad spending by automotive, financial services, retail and real estate businesses, due to systemic economic change. The slow, difficult road back will be complicated by the continuing migration of TV ad dollars to other media platforms, and cable finally winning its long struggle for broadcast parity.
Advertisers may opt to hold back more of their upfront spending for last-minute scatter buys closer to airtime as they wait for consumer sentiment and their own balance sheets to improve. Broadcast and cable TV barons are under mounting pressure to change the ritual's fundamental premise. Advertisers bet millions on the outside chance networks will create content that engages and connects with the desired target demographic, despite a reliable 90%-plus new season show fail rate and a pricing mechanism based on audience guess work, at best.
Interactive digital media is forging the standard of more qualified and quantified connections to either side of the ad buy. Advertisers and agencies that don't insist on better ways to price and place their messages have only themselves to blame for lost value. (Can Google's proposed quality score for TV ads be far behind?)
As to the prevailing stress test questions: To what extent will declining upfront commitments and overall ad spending financially cripple television networks and stations? How will they meet their capital needs while a prolonged recession and high unemployment continue to impede advertiser and consumer spending through 2010? What's to become of the television economy and its players when digital media and other new revenues sources fail to collectively offset traditional core income?
That painful juxtaposition could drag on for years if the television industry defaults to its dysfunctional metrics and models rather than search for sustainable growth -- starting with a complete change in how ad time is continuously priced and sold. Within a year, logic could prevail and cable's Canoe Ventures addressable ads could decide the matter.
An uncomfortable hint of longing for "normalization" came in television-related media conglomerate earnings calls last week. CBS CEO Les Moonves, News Corp. CEO Rupert Murdoch and Disney CEO Bob Iger wasted no time declaring "the worst is over" and pining over heavy net losses artificially bolstered by aggressive cost-cuts, one-time items and hugely lowered expectations. The double-digit declines in quarterly ad-dependent television revenues and operating income, nearly halved in most cases, constitute too deep a wound to heal anytime soon. "Green shoots don't yet mean a big bang...we don't see bottom up drivers of significant improvement" in the back half of the year, warned Goldman Sachs analyst Mark Wienkes.
Even when spending resumes by consumers and advertiser anchored by debt, it will revive more slowly and take new twists. Economic weakness will drive a disconnect between television ratings and revenue performance. The recovery wild card is prevailing high uncertainty and pitifully low returns. The question remains: can ad-dependent media, especially television, embrace dramatic change and new business models fast enough to save the industry?
Early into the more subdued upfront programming announcements, there already are missteps. CBS' upfront defense is assuming that advertisers and consumers buy the brand first, and content second, as if social networking, individual consumer relevance and search didn't exist. It smacks of the old big brand media approach. Disney is one of the few content companies that can play the brand card because its unique children and family core thrives on viral networks.
But these are confusing times. Twitter, a rapidly growing microblog without advertising, is poised to overtake the financially struggling New York Times.com in unique visitors. Hulu steadily gains in streaming video audience, while it boasts of its commercial-free prime time comprised of content from struggling ad-supported broadcast TV networks. Current TV, Al Gore's user-generated cable network, distributed its RFP to ad agencies over Twitter. The intertwining of Google and Twitter features can only further minimize television as one of many content sources and distribution platforms.
Against the backdrop of such dramatic change, even the "improved" outlook for television is grim. For instance, CBS' new guidance suggests its core television revenues and operating income will virtually stagnate until inching up to 2008 levels in about three years. That's not exactly top line growth.
The television industry should take solace in having reached a point when boldly riding the sea change can't be any worse than the marginal outcomes of their deteriorating fundamentals. Television executives who think their companies have thwarted disaster in the latest advertising mine field, take heart. To quote Adrianna Huffington, "the stress test is not passing the smell test."