Our Take: One concern that networks and advertisers certainly don’t have to worry about is whether or not sports fans will return once the games resume. The head of sales at one RSN said that he/she “hasn’t found [a single] buyer who doesn’t think ratings will be through the roof. [Viewership] is not going to be the problem [in terms of re-capturing ad spend]” (see: a record 55 million football fans tuned for the NFL draft).
Our national source said that his/her company has already begun to see “a lot of interest from advertisers in coming back.” In fact, he/she said there has already been “a big uptick in scatter business over the last several weeks [as sports leagues have slowly but surely begun to play again]” – to the point where he/she wasn’t sure the company would be doing as well had the various pro sports leagues not experienced a disruption in the schedule.
The national executive we spoke to said that if there was to be a significant decline in sports ad spend it would likely occur at the local level. He/she suggested that because RSN businesses were exposed to smaller advertisers (which are more likely to be in financial trouble post-COVID), that they were at a greater risk of suffering losses. But our RSN contact said that the mom and pop shops hurt by the lockdown (think: local restaurants) have never really been the business’ target audience (rates are too expensive and the geographic reach is too wide for small businesses) and thus the financial impact from COVID would minimal once play resumes. He/she said his network’s “[brand partners are] closer to whom the national networks target than who the local cable providers sell time to inside of our games.”
It shouldn’t be a surprise to hear that the advertising business is picking up. Historic trends indicate that TV advertisers tend to be active in the wake of a recession. Back in 2008, television ad spend declined just -5% (online was the only medium with less of a drop-off). The unpredictability of the Coronavirus outbreak does present some additional challenges for the networks this time around, but our national source said that his/her company has managed to overcome those concerns by offering advertisers “the flexibility to react if there is any sort of disruption in this linear trajectory of recuperation” (i.e. the agreements allow brands to cut back on spend if a second lockdown were to occur).
One could certainly argue that sports broadcasters are in an even better position to bounce back than they were a dozen years ago. The onset of COVID has expedited direct to consumer (and AVOD) trends (which means fewer people than ever are watching network television in primetime) and with Hollywood still at a standstill (and thus there likely to be shortage of desirable entertainment content to advertise on in H2 ’20), it’s reasonable to expect “more and more [brands] to look at sports [to spend their advertising dollars].” Our national network contact explained that “if [a company] wants big reach or scale messaging sports is really the only option at this point.” It should be noted that there was also $1.35 billion committed to the 2020 Summer Olympics (which have since been postponed until 2021). At least a portion of those dollars should find their way back into the market over the next several months.
Sir Martin Sorrell (executive chairman, S4 Capital) recently suggested in an interview with CNBC that post-lockdown is “the time [for cash-rich businesses] to be aggressive [with their marketing campaigns].” The national executive we spoke to agreed saying there’s an opportunity for brands to grow market share and “emerge from [lockdown] in an even stronger [competitive] position” as competitors pull back. Look no further than Lowes (same store sales +11%), who significantly outperformed Home Depot (+5%) during the “pandemic quarter.” The company made the decision to press on with big promotional events (think: NFL draft) while the larger of the two home improvement companies slashed ad spending in an attempt to curb visits to retail locations.
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