WGA Strike: Marketers Will Change Ad Strategies Regardless of Duration and Outcome
Yesterday, members of the two Writers’ Guilds of America, which collectively represent essentially all writers who work with major film and television producers, voted to strike against the Alliance of Motion Picture and Television Producers, which collectively represent the studios. There has been much press about the possibility of a long strike ahead.
As I thought through what the near-term impact on the business might be, I first wanted to look at historical data related to TV viewing and spending around the time of and following the last strike which ran from November 2007 to February 2008.
Reviewing historical viewing data from Nielsen for TV consumption which I used to track when I was an equity research analyst, whether broken down by total TV viewing, or only looking at cable or broadcast, or prime time only viewing it appears that at a macro-level there wasn’t a noticeable change in viewing trends around the time of the strike. Looking at the average growth monthly growth rates in viewing during the year following the strike, total TV continued to grow consumption levels and cable grew faster than broadcast much as it did in the prior year. While there was undoubtedly some impact to live late night productions and a shift to reality or unscripted content, programming changes that were made evidently mitigated any observable impact at an industry level.
Looking at the business side, national TV advertising grew in 2008 much as it did in 2007 – up just under 3% each year according to GroupM data – although local TV advertising was down primarily because of the recession that hit automakers and thus local TV hard around this time. From a consumer spending perspective, spending on video services was growing as well, with data compiled by the FCC estimating pay TV video spending rose around 4% in 2008, vs around 5% in 2007, although spending on cinema box office and home entertainment video spending for purchases and rentals were down slightly (according to data from Box Office Mojo and DEG, respectively).
With the current dispute, I don’t see any reason to assume there will be meaningful changes in overall viewing trends, which have seen an ongoing shift towards streaming services and concurrent declines of traditional linear TV. In the near-term, there will probably be some modest incremental (if mostly unobservable) benefit to viewing of streaming services because they don’t have much live or near-live scripted programming.
As time progresses, production of all US-based scripted comedies and dramas would be shut down, which would impact every network and streamer. However, globally-oriented streaming services will have more ready access to a wider range of original content (or content that is at least original in the eyes of viewers), and over the past decade viewers have demonstrated greater openness to viewing non-English-language programming. Netflix and Amazon in particular commission billions of dollars of original programming each year outside of the US, and on a relative basis they should gain share, delivering most of that content ad-free.
Looking at the business side, regardless of the progression of the strike I expect consumers will continue to pay for video-based services much as they have in the past – increasing total spending by low single digit percentages each year – because home-based video consumption continues to offer better value relative to alternative forms of entertainment.
With respect to advertising, viewing shifts between ad-free streaming, ad-supported streaming and linear TV will probably be negligible in the near-term. Spending by advertisers will effectively shift to wherever there is available inventory.
At the same time, if services with more original (i.e. global) content turn out to be the beneficiaries in terms of viewing share gains and those services continue to be primarily ad-free, pre-existing trends around diminishing reach potential of traditional ad-supported TV could accelerate. Those trends were already leading to a world where the large marketers who depend on TV will need to either a) stop using reach as a key metric b) try to optimize audience reach across multiple media or c) redefine reach of video to include YouTube or YouTube, TikTok and other social video as part of their overall “television” budgets.
Does this mean that one side or the other should hurry up and come to an agreement? Probably not. An immediate settlement wouldn’t stop these trends.
But however they approach a resolution, both will need to recognize that while consumers will continue to demonstrate their willingness to pay more for high quality content, advertisers are increasingly focused on audiences and consumers regardless of whether or not they are paying and regardless of whether or not a professional was involved in writing or producing. That means less advertising money for professionally-produced video productions, regardless of the outcome of the strike.