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Digital Media Advertising NewFronts

Dodged a Bullet: WGA Strike Avoided But Advertising Still Headed to Digital

Phew! That could have gone badly. The same day the NewFronts commenced in New York, negotiators for the Writers Guild of America and networks and studios went past a midnight deadline before agreeing on a new contract. Those two events are more closely tied than they might initially appear.

A decade ago, the WGA authored a disastrous strike that shut down Hollywood for eight months. The extended stoppage, quickly followed by the Great Recession, chased many out of secure jobs for years to come.

Hollywood denizens feared that a rerun of that bad old show would be even worse this time around, possibly hastening the shift of viewer attention and ad dollars to digital outlets.

There certainly were reasons for some digital denizens to root for a least a short stoppage, hoping it might attract more ad support for their programming over that of the linear TV networks. Relatively few of the digital companies making NewFronts presentations have WGA representation, for instance, and could have used such an interruption as another selling point because they would continue producing new shows.

One puckish piece even suggested the biggest cheerleader in favor of a strike might be former reality-TV star Donald Trump, because a strike’s first victims  would have been the nightly talk shows that routinely savage his administration’s many missteps.

More significantly, however, a shutdown risked undermining the networks’ imminent Upfronts, where they showcase new and returning shows and try to lock down billions of dollars in spending commitments from ad buyers. The major networks begin their Upfronts May 15 (some smaller networks have already held theirs).

The NewFronts, the digital networks’ equivalent of the Upfronts, kicked off with the New York Times trying to shake its Gray Lady image with several kinds of new programming it hopes will attract subscribers and advertisers both.

The bigger NewFronts news, however, was Sir Martin Sorrell, head of WPP, one of the world’s biggest ad buyers. WPP, Sorrell said, plans to more than double its spending this year on Snapchat to $200 million this year.

In part, he acknowledged, WPP hopes to create a “third force” in digital media to compete with the Facebook/Google duopoly that has vacuumed up most new digital-media ad spending.

WPP is betting Snapchat parent Snap will figure out how to use a nine-figure investment as it adds, finally, a new dashboard and other promising tools for advertisers.

Meanwhile, digital ad spending in general continues to leap upward by 20 percent a year, according to the Internet Advertising Bureau (even if gains have been concentrated with Facebook and Google).

The growth has been sustained and substantial enough that 2017 is likely the year digital passes TV in terms of total ad spend, according to eMarketer. That rapid growth isn’t likely to flag, even without a strike to cripple traditional Hollywood for weeks or months.

Yes, the WGA deal includes higher residual fees and other provisions that affect digital media outlets. In particular, several provisions affect the two biggest digital contenders, Netflix and Amazon, and their big-budget productions in several sectors, including overseas and theatrical exhibitions.

Neither of those subscription-driven outlets worries about advertising or the NewFronts, but other WGA contract provisions affect at least some digital services. Moving forward, those services are still in better position for possible growth than the entire bottom half of the Pay-TV channel grid.

And don’t forget that Hollywood isn’t completely past this cycle of contract negotiations.

The WGA boasted, without providing backup detail, that its deal was worth $130 million more than if negotiators had just taken provisions similar to the Directors Guild of America’s contract signed earlier a few months ago.

That may prompt the DGA to push for follow-on additions to its contract, or to add those provisions to its shopping list in the next contract.

And still looming are negotiations over the expiring contract for SAG-AFTRA, the actors union. The actors are a notoriously fractious lot, though mostly with each other. That said, SAG-AFTRA almost certainly will seek “me-too” provisions that mirror the WGA deal points when negotiations begin in mid-May.

And even in TV’s Platinum Age, big companies are getting whacked by the competition from new kinds of entertainment.

I’ve written about the looming die-off of lesser cable channels, many created years ago by big-media companies that sought more slots on the cable box and the resulting higher carriage fees and ad dollars. Many of those lesser channels are now zombies, with few viewers, no compelling programming and little obvious future in an era of skinny bundles and more discriminating and price-conscious viewers.

And last week saw ESPN, Pay TV’s crown jewel, lay off 100 employees, including a number of prominent on-air personalities.

ESPN’s problems may be unusual, if not unique, among linear TV channels. Its cost structures are steep and substantially locked in, thanks to billions of dollars in long-term deals for broadcast rights with the NFL, NBA and Major League Baseball. Meanwhile, as more cable cords get cut, the ESPN subscriber base continues to wither, down 12 million in just a few years.

Further, the immediacy that a channel such as ESPN has been able to provide viewers is no longer unique to traditional TV. Amazon will stream 10 NFL games this year. Twitter, which had the NFL games last year, will now show Bloomberg TV 24 hours a day. And live programming on digital outlets from Facebook to Live.Me to Brandlive is taking off.

So Hollywood (probably) avoided a debacle early Tuesday morning. But as advertiser enthusiasm for the NewFronts participants likely will show these next two weeks, a debacle avoided does not mean a revolution ended.