Recession In Q1 2023? What Happens To The National TV Ad Marketplace Then?

Upswings and downswings in the national and local TV advertising market have been semi-regular events -- just the broader economic recessions.

A softening TV ad market has run near to -- or in the midst of -- the last few economic downturns.

In February 2020-April 2020, a brief period of pandemic disruption, the late-moving upfront market August-September 2020 resulted in a 15% drop in volume.

In the midst of the 18-month (December 2007-June 2009) “Great Recession” -- the worst since the late 1930s -- the 2008 upfront market sank 7% in volume, and then another 14% in 2009. Before this, “The Dot.Com” internet-fueled downturn (March 2001-November 2001) witnessed a 15% dip in upfront TV volume.

But now we have this inflation thing -- which wasn’t around in any of those recent, very difficult economic periods. Figure that inflation -- in some form -- may be a challenge well into 2023.



Here’s one ominous projection for one legacy TV network group from Jeffrey Wlodarczak, principal/internet/media/communications analyst of Pivotal Research Group:

“We reduced our NBC expectations for the second quarter [2023] and beyond to better reflect weakness in scatter advertising that we expect to worsen materially in the second half and in ’23 (recession).”

That doesn’t sound good. Does all that put the kibosh on the U.S. TV economy?

Not exactly. Unemployment is still near all-time lows, with employment at all-time highs. Consumer spending is still -- perhaps somewhat weirdly -- modest to strong.

But if you are a TV marketer and just plunked down your million-dollar or multimillion-dollar upfront TV media investment -- you are locked in to that buy (traditionally speaking, anyway) for the entire fourth quarter of this year.

Your next move then comes during option season -- starting in the first quarter, where typically 25% of that upfront deal and 50% of subsequent quarters can be cut back.

All this comes as marketers continue to shift more of their national TV buys to all things streaming and digital --- up to 20% to 30% of their traditional national TV spend --- to either legacy TV-owned platforms or to independent-minded Roku, or Amazon Prime Video. Toss in Netflix down the road.

With all that going on, what happens to those traditional long-term upfront buys during a probable recession -- with high inflation?

TV sellers continually warn that pulling back too much TV marketing during a recession means a risk of losing a marketer’s brand awareness and share of voice among consumers.

But if consumers continue to spend big into the first-quarter 2023 period -- and perhaps just briefly halt spending thereafter (as they did during the pandemic) -- will marketers dare to make major adjustments to their media spending and messaging stories?

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