Of course, we must take every precaution to minimize the spread of COVID-19; we also must do everything we can to minimize the economic impact. That does not mean life is going to be normal; it does mean that we will have to adapt to a new normal.
A March 4 update from the Consumer Tech Association cited various electronics industry trades, indicating that most factories that are online are operating at under 70 percent utilization, with facilities in Hubei and Hunan reporting utilization between 25–60 percent. Many are saying that they will not be at full capacity until late March or early April. Foxconn, the main assembler of Apple products such as iPads and iPhones, was projecting 80 percent utilization by March. Point is, even as we take all necessary precautions, the economy must go on.
Over the past two weeks, I've had numerous conversations with advertising and media leaders about their thoughts on the disease's impact on our industry. Here is a sampling of what they had to say about the impact:
- When the news of the virus first came out, many of the buyers were taking a wait-and-see approach, and I had the sense that many thought I was being an alarmist by even calling. None of them feel that way anymore.
- Travel accounts, understandably, are the first to be hit. Most of the schedules are on pause, including performance-based programmatic deals.
- With the markets in free-fall, banks will also be holding back budgets and adjusting plans.
- Global accounts are shifting budgets to less impacted countries.
- With each passing day, there's a growing fear that the Olympics could be canceled or postponed, either of which has enormous implications.
- If canceled, no one has any clue where they can make up that large amount of GRPs. While advertisers are not concerned about losing their money — all the major TV sponsors have clauses in their contracts that protect them — they are concerned about the domino effect that this could have on their entire marketing efforts. The games are scheduled to begin July 24, but organizers have started the discussion to potentially move them to October, if necessary.
- If the games are postponed, it would require many sponsors' product launches to either delay or switch the messaging.
- Several key industry conferences, including Mobile World Congress, SXSW, and E3, have been canceled. SXSW is a showcase for some of the most ground-breaking experiential marketing programs in the U.S. The cancellation is proving costly to some top experiential agencies in both real dollars and potential bragging rights, which, in our industry, turns into real dollars.
- Closing offices and moving to a "virtual" office space (whether mandatory or optional) is quickly becoming the norm for ad agencies. I have known many a chief financial officer that will look at this experiment to see how it impacts productivity and, if successful, they will salivate over the cost-per-square-foot savings. If this lasts for more than a few months, it will become the norm.
- The NewFronts and Upfronts that do take place, will be virtual. My colleague Ed Martin has written extensively on the ramifications and I agree that this could be a catalyst that ends the traditional, lavish parties for good. MediaVillage has established a hub for the VirtualUpfronts, and we look forward to telling you more about it in the upcoming days.
- It is likely to be a very soft Upfront season. There still is time for everything to stabilize, but very few companies are in a position, or have a desire, to commit to anything long-term right now. 2020-21 was already going to be a tougher Upfront without elections, Olympics, or World Cup to create must-own events.
- The advertiser "pitch" process will grind to a halt for at least the next month or two.
- Advertising for movies will take a hit. Fearing lower box office numbers, MGM and Universal moved the release date of the new James Bond film, No Time to Die, from April to November. The Hollywood Reporter/Morning Consult survey found that 38 percent of U.S. adults support shuttering theaters, while 44 percent oppose. There are more than 41,000 movie screens in the U.S. Should "social distancing" continue for many months, I believe that the long fought against taboo of releasing home distribution at the same time as in-theater showings may be, at last, broken. Additionally, in-cinema networks such as NCM and Screenvision will be hit in the short term.
- Creative agencies are worried about shoot schedules, talent availability, and protecting talent. They also seem to have greater concern over creatives' productivity while working remote, as the creative process often benefits from in-person group dynamics.
- Out-of-home companies, especially those with a significant presence in the cross-roads of the world, such as Times Square, Piccadilly Circus, and Shibuya Crossing, will need to recalculate estimated traffic and provide credits/make-goods with customers.
- With the NCAA Tournament cancelled, as well as every other sports league suspended for now, including NBA and MLB; and PGA Tour and NASCAR playing without fans, contracts will need to be made-good or renegotiated.
- While Cannes Lions is still on as of now, backup plans have been made to hold it October 26-30 if need be. Many advertising consultants and trade organizations are very concerned over the revenue loss from events and multi-day conferences. The margins on these events are high, and if this drags out, it would pose a huge fiscal challenge.
For the foreseeable future, many aspects of our lives will be different — how different depends on whether we allow fear to overtake us, and how quickly we can adapt to this new reality. While we all hope that this ends soon, the likelihood is that we are in this for a protracted period of time, and that it's likely going to be a catalyst for change that will long outlast the era of coronavirus.
But Wait, That's Not All…
Please stay healthy, wash your hands, and don't take this lightly. We will get through this. I read a blog saying that the "Keep Calm and Carry On" mantra, while well-meaning, is not helpful. Definitely don't panic, but don't stay so calm that you don't take the proper precautions that the CDC and WHO are recommending.
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The opinions expressed here are the author's views and do not necessarily represent the views of MediaVillage.com/MyersBizNet.