General Motors, Broadcasters in Upfront Standoff

[JamesMcQuaid]

This story in Ad Age is a very big deal that has been unreported by consumer media outlets. The cuts only seem fitting, given the degree to which Fox and the other networks have sponsored and/or catered to the brutish, hateful, and outlandish abuse of General Motors and the Volt.

The good news is that Global Chief Marketing Officer Joel Ewanick is making good on his commitment to cut $2 billion in marketing costs over five years. This is vital to General Motors' return to sustained financial health, and this good news is the real takeaway.

http://adage.com/article/special-rep...andoff/235132/

General Motors, Broadcasters in Upfront Standoff

General Motors and its media agency, Carat, have created a standoff in upfront negotiations by asking TV networks for significant pricing rollbacks, which the major broadcast networks have refused, according to media buyers and other executives familiar with the pace of talks.

...

GM's request "has not been well received" by the TV outlets, said one ad buyer. Spokesmen for General Motors did not immediately respond to queries.

Advertisers have typically asked TV networks for rollbacks during a major economic downturn, like the beginning of the recent recession, or when there has been a ratings shortfall. This year, both sides of the table agree pricing is on the rise. Instead of arguing over whether a price increase is warranted, most of the haggling is centered on the size of the increase.

GM's ask has the potential to cause ripples. General Motors is one of the biggest spenders on TV advertising, spending about $1.1 billion on TV ads in 2011, making it the third-largest U.S. TV advertiser last year after Procter & Gamble and AT&T.

Its demand for pricing cuts would likely cause significant recalculations in the amount of ad time the networks choose to sell this year. All the TV networks have refused to negotiate with GM so far, ad buyers said. A fear is now blossoming among media outlets that if one TV network deals with GM, the others will have to capitulate, one ad-buying executive said.

...

General Motors already enjoys significantly lower-than-market pricing, a benefit accorded to advertisers who have spent on networks for decades. Procter & Gamble is another marketer whose relatively low ad rates are more or less "grandfathered" in to negotiations. For GM to win rollbacks on rates that are already below market would mean the networks would see less volume in this market.

"They have a pretty low base to begin with," the ad-buying executive said. "They have been an advertiser since the dawn of time and they are a founding or incumbent sponsor on a lot of network, so they get a very low base."

To get a price cut on top of that "is just very, very detrimental," this executive added.

[bonaire]

I've never bought a car - due to seeing any ads.
I don't know anyone who has, but I'm sure some have been swayed.

If GM pulled all advertisements, I believe I would still remember that Chevrolet still existed, made good vehicles and if I knew they weren't blowing money on constant ads and put the money instead into engineering, quality control, employee pay and benefits, I think I'd respect them as much or more.

Advertising is like makeup on people. It's what's under the makeup that really counts.

When I bought my Mazda6 back in Jan 05, I did it from research and review rather than their silly "zoom zoom" ads. I wanted a wagon at a good price, with good features and reliability. So far, after 145K miles, it's running like new (with one nagging wiring problem for the left rear TCS sensor).

[Steverino]

A buyer's request for a price cut is usually not well received, no surprise there. So it's a standoff, a game of chicken. Who will blink first?

It sounds like GM is belt tightening to reduce expenses, increase profits. I hope some of the savings goes to more Volt ads.

[DonC]

This can't be unexpected. The reach of TV networks just isn't what it used to be. http://mediadecoder.blogs.nytimes.co...each-new-lows/ Until now advertisers have still been willing to pay top dollar because, while shrinking, TV is still the best game in town for reach. But you knew that this couldn't last forever.

I don't think this has anything whatsoever to do with the Volt.

[Neromanceres]

I've never bought a car - due to seeing any ads.
I don't know anyone who has, but I'm sure some have been swayed.

If GM pulled all advertisements, I believe I would still remember that Chevrolet still existed, made good vehicles and if I knew they weren't blowing money on constant ads and put the money instead into engineering, quality control, employee pay and benefits, I think I'd respect them as much or more.

Advertising is like makeup on people. It's what's under the makeup that really counts.

I agree with you in that the vast majority of people don't buy a car based on advertisements.

But I would say the purpose of a car ad is to get someone to at least look into the car or raise awareness of the car. Without car advertising some people might not know that certain cars even exist to look into.

A car add can also be used to counter misconceptions. Example "I won't buy a Buick because it's an old persons car" But a good advertisement for a Buick Regal GS could counter that misconception and cause the viewer to at least look deeper into that car.

[cnicholson]

I disagree with the OP that this is linked to editorial coverage. This is normal rational negotiation to get maximum ROI for corporate dollars. Common sense, but a refreshing change for U.S. auto industry. The challenge for media companies is that GM is such a large buyer that any concessions to them will threaten to lower baseline pricing across the board. I predict a complex deal that pairs a moderate reduction in "cover price" but a series of incentives that more significantly reduces GM's effective pricing.

At DonC alluded to, TV is still essential, but increasing has competition. Worse yet for broadcast media is that the "new media" effectiveness can often BE MEASURED DIRECTLY, whereas TV relies on hand waving and imprecise proxy metrics. I think advertisers are increasingly demanding to get PROVABLE ROI for their money.....

[marlow]

While it is not possible for a add alone to sell a car (unless it is intreractive with transaction capability), they do spark interest and inform to some extent.

[voltbeaupre]

Commercials for the chevy volt are terrible Gm will do fine with just internet advertising or1volt race track commercial lapping all econobox's on the road today

[JamesMcQuaid]

I disagree with the OP that this is linked to editorial coverage.

Well, actually I did not say that; I provided attribution as:

"Global Chief Marketing Officer Joel Ewanick is making good on his commitment to cut $2 billion in marketing costs over five years. This is vital to General Motors' return to sustained financial health, and this good news is the real takeaway."

I did say that "the cuts only seem fitting", and IMHO they certainly do.

The other point worth noting is that the negotiations do not necessarily mean that there will be fewer General Motors advertisements, only that G.M. will be paying less for them.

[MrEnergyCzar]

They should get a 50% discount to advertise on Fox since they bash the car regularly... and the company.

MrEnergyCzar