The coronavirus pandemic is leading almost all advertisers to review their commitments for the quarter ahead, and in many cases for the rest of the year. In the past week alone, P&G has announced it plans to boost marketing investment in 2020, Unilever is to hold budgets constant but rethink priorities, while Coca-Cola is pausing all spend during COVID-19.
Some media channels have lost all their impact and reach overnight. Every cinema is closed, and out-of-home impacts have dropped by 89% since late February. Meantime, audiences for linear live TV and many websites – particularly news channels – have quickly enjoyed double-digit audience growth. E-sports are also experiencing a surge in popularity, regularly attracting audiences in the tens and hundreds of thousands. EA Sports’ FIFA-20 has just run a knock-out, invitational tournament featuring Premier League players and some other celebrities playing the game live online to fill the void of no live sport. The ePL has an official bank, beer, snack, soft drink, ball, timekeeper, and sundry other official licensees, as shown below.
The official partners of EA Sports’ ePremier League (ePL)
In this period of unprecedented change and uncertainty, some advertisers that want to sustain (or even grow) their share of voice are looking to change the channels where their ads are running – from out-of-home to radio, from cinema to e-sports. Whether they are able to act in a nimble and agile fashion as they’d like depends, of course, on their agency contracts. The ability to move committed ad spend from one media channel to another depends on the degree of flexibility and adaptability in these contracts.
Some contracts between advertisers and agencies have flexibility built-in. Brands are able to reallocate budgets without incurring penalties – typically a percentage of the budget. Some don’t have any formal clauses on brands’ ability to switch channels – it’s more a way of working. In the current climate, with so many brands keen to change or scale back investment, advertisers should expect agencies to enforce the terms of their contracts more rigorously than in more normal trading conditions. Previous “gentlemen’s agreements” are likely to be less relevant. And for many brands, the option to switch channels doesn’t feature in their contracts.
So, before they ask their agency partners for a new investment strategy, marketers should work with the legal and procurement teams to check their contracts and determine what their obligations in fact are. While switching channels may not be covered – or, indeed, may be precluded – in a contract, given a large number of brands who are looking to cut spending, those who want to continue investment but in other channels may well find themselves in a buyer’s market. They may well be able to achieve more with less in a quieter market, on greatly reduced investment. But advertisers should also be prepared to give as much notice as possible and not expect instant reallocation of spend from one channel to another.
For brands looking to invest in e-sports – a move which for many will be a first – contractual obligations aren’t the only consideration. Dealing with media owners you (and perhaps your agency) have never dealt with before can be a rude awakening. It’s quite possible they’ll have different trading patterns, environments, rebate, and/or free space deals from what you’re used to. New relationships take time to shape, so bear that in mind, too.
For brands with a track record of investing significant budgets in channels that are currently delivering zero or greatly reduced audiences – cinema and out-of-home – agencies and media owners could be prepared to be more flexible. We have heard cases recently of media owners willing to offer “sweetheart” deals for the future – brands can pull budgets for the next quarter, say, provided they’re prepared to commit to increased spend later in the year, once the media attract audiences again.
However brands are looking to change media strategy during this time, advertisers need to check their contracts to understand what they can and can’t do and – if necessary – review and revise some terms in their contracts. They should also check with their expert advisers that any new commitments they’re making are transparent and aren’t obligating them to commitments they cannot undo if the new normal doesn’t arrive as quickly as some may be hoping or predicting.