With May’s arrival, Americans are entering their third calendar month under quarantine. But with some states lifting shelter-in-place orders, and others starting the process of determining how they may reopen, it is tempting to hope that the worst of the Covid-19 pandemic may finally be behind us.
Yet several TV ad sales execs—who have already weathered billions in lost ad revenue since March as live sports and Hollywood productions remain on lockdown—tell Adweek they are concerned that the biggest ad sales revenue hits are actually yet to come. That’s because no one knows when regular business operations will be able to resume, and more importantly, whether consumers will return to their pre-pandemic spending habits—particularly the 30 million people who have filed for unemployment since the coronavirus began to shut down the country.
That is a daunting prospect, given the massive ad revenue hit that media companies are already seeing from Covid-19. According to eMarketer, U.S. TV ad spending will decline by between 22.3% and 29.3% in the first half of 2020 compared to previous forecasts, a loss of between $10 billion and $12 billion in revenue.
“The business is going to come back. We just don’t know what the next six months is going to look like,” said one TV ad sales exec. And depending on when companies have their fiscal year, “potentially, next year could be tougher than this year.”
After all, consumers will be going from one “unprecedented” situation—sheltering in place for months due to a pandemic—to another: uneasily returning to public life with the lingering threat of the coronavirus’ resurgence.
As that occurs, “there are all these sociological and psychological things we’ve never really dug deep on [before],” said one TV ad sales exec. “What will the consumers’ attitudes be about creative, or about going out to a restaurant? If [movie] theaters open, will people want to fill the seats? Will there be social distancing? … There’s so much that goes into this that is different than how we [usually] look at it.”
Added another TV ad sales exec, “Do they have less to spend because they’re not having the foot traffic in stores they thought they would? What about the purchase power of the  million people that don’t have jobs right now?”
One ad sales exec recently talked to a wireless company that before the pandemic hit had planned to shift its business away from prepaid wireless plans. But now, that company has decided to double down on its prepaid plans, given that a large portion of its subscriber base is among the 30 million unemployed and might not be able to afford a monthly phone plan until they can work again.
“It was a big reality check. It was eye-opening to me,” said the exec of that conversation. “You have to reprioritize their product stack in order to service these people. How long is it going to take before people have their core customer base the same way they did before? We don’t know.”
It’s an uncertainty that will apply to several advertiser categories, including automotive, financial services and retail. Even for those companies that think they will be on solid footing, “there’s a lot of unknowns,” and plans could change once new data comes in about consumer sentiment and spending.
Already, media companies are telling investors to brace for ad revenue losses resulting from the pandemic fallout. In Comcast’s earnings call on Thursday, CFO Mike Cavanagh said that going forward, “we anticipate advertising revenue will materially weaken from the first quarter” due to the continued absence of live sports and economic recovery as the country reopens.
Preparing for a staggered upfront
All this uncertainty is why this year’s upfront marketplace will operate on a staggered timetable, with buyers entering negotiations whenever their clients are ready to think about their long-term spend. For some categories that are thriving now, such as consumer packed goods, that will be in the next month or two, but for several others—including those hit hardest by the pandemic, including travel, dine-in restaurants and automotive—it is more likely that they’ll negotiate later in the year, and shift to a calendar upfront.