The TV Commercial, Once Advertising’s Main Event, Suffers in the Pandemic

Before the coronavirus pandemic, the TV networks were expecting a strong 2020. The presidential election and Tokyo Olympics would keep people watching, and companies would spend more than usual on commercial time.

But with the Summer Games postponed and campaign rallies on lockdown, television advertising revenue is likely to drop 12 percent this year, according to a projection by the research firm MoffettNathanson. Networks will lose out on $25.5 billion in spending, according to a report released on Thursday by the WARC research group.

This could be the future of television advertising: fast, cheap, minimalist.

“TV was already in the middle of a huge revolution, and it’s only going to intensify, because now advertisers’ money is tight,” said Jane Clarke, the chief executive of the Coalition for Innovative Media Measurement, a trade group.

Before the pandemic, 30 percent of ad spending in the United States went toward TV commercials, while 56 percent went to purely digital platforms. By the end of the year, “this gap is really going to blow out,” with TV “falling more dramatically,” said Michael Nathanson, a founding partner of the MoffettNathanson research firm, in a recent conference call with clients.

The upfronts usually end with companies agreeing to buy up to 80 percent of the ad space available for the approaching TV season. This year, the networks are being flexible, allowing advertisers to wait and see how the season goes before asking them to sign on the dotted line. So far, the number of deals is “probably not coming close to the usual volumes,” said Tim Nollen, an analyst with Macquarie Capital, in a note to investors this month.

“Advertisers have a lot more questions about actual metrics, and they’re putting fewer dollars in less accountable environments where it’s harder to measure results,” said Tal Chalozin, the co-founder of Innovid, an ad-tech company.

The pandemic has forced many companies to be more efficient with their advertising because they have less money to spend, said Ms. Clarke of the Coalition for Innovative Media Measurement. The crisis may encourage more ads made for owners of internet-connected TVs, using data to deliver customized messages to specific groups of viewers.

“You might see ads that feel more like they’re talking to you, and you won’t see as many of them — not those big, expensive ads over and over again,” she said.

In the new mediascape, big-statement, big-budget TV commercials could become something of a rarity, said Edward E. Timke, an advertising expert at Duke University.

“This is going to be a watershed moment in history, where ad agencies or their clients are going to be forced to rethink how they produce and how they create,” he said. “Maybe ads with big productions will become the exception, rather than the norm.”

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