Analyst: Writers' Strike Could Send Ad Dollars to Digital

Prices for commercials in sports and news programming might rise
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A potential strike by the Writers Guild of America against the Alliance of Motion Picture and Television Producers in May could send viewers and advertisers to digital platforms, analyst Kannan Venkateshwar of Barclays said in a note Wednesday.

Venkateshwar notes that the WGA strike in 2007 lasted about 14 weeks and a 1988 strike went for 21 weeks. This year’s timing could also be a key because it could come when shows for the new season would be produced and the upfront ad sales are being negotiated.

During the last strike, Netflix had just started streaming and the iPhone was new.

“Today, of course, the environment is quite different. If networks are unable to air new seasons due to the strike, this could result in a much greater shift towards OTT platforms than would be the case otherwise,” he said. “While Netflix and Amazon’s pipelines are also likely to be affected by the writers’ strike, their library of original content could realize much wider viewership in the absence of competition from legacy TV. These companies also have the ability to source content globally, as evidenced by the number of British shows on Netflix.”

The TV ad business would not be helped by the uncertainty caused by a possible strike.

“Given the anemic growth rates for television advertising already, any uncertainty over the fall season is likely to force more advertisers to expand their allocations towards digital platforms,” Venkateshwar said.

“Another implication for advertising could be the potential increase in CPMs for sports and other live events,” he added. “Based on our conversations with major advertisers, television CPMs are already at levels which force them to look for better alternatives in order to generate adequate returns. This could also drive more dollars towards digital platforms.”

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