As the Hollywood writers strike enters a second week, advertisers are worrying it could seriously disrupt the TV schedule — and the number of eyeballs viewing their ads — in coming months.
So far, the strike has forced only late-night talk and comedy shows into reruns, since their material must be freshly scripted every day.
But when marquee shows like "The Office," "Desperate Housewives" and "24" halted production, the supply of ready-to-air prime-time hits came under threat — and that has been unsettling to advertisers.
For the moment, the bulk of the TV schedule is intact. And ad buyers aren't worried about losing money because their contracts guarantee total audience counts, which the networks will make up with more airtime if ratings drop.
The real worry is what effect a prolonged strike could have on future TV show development and on audience loyalty to big-name shows, particularly as viewers face more and more choices for watching video — streamed over the Internet, uploaded to a media player or on cable channels.
"This could become a watershed moment," said Brad Adgate, senior vice president of research at Horizon Media, a major advertising buying and planning agency. "There's a lot of opportunities that consumers have with digital media, and advertising dollars are going to follow the eyeballs."
In fact, consumers' opportunities are at the heart of the current labor dispute. Writers want a share of future revenue from new media video channels such as streaming over the Web, but networks are balking. They say it's too early to tell what that business looks like.
In 1988, the last time Hollywood and television writers went on strike, Adgate said, cable was a weaker force, with the average home having just 28 channels and just 55 percent of U.S. households subscribing. Today, about 85 percent of households have cable.
Heather Goodchild, media analyst at the Standard & Poor's credit rating agency, said in a report last week that the networks' prime programs "could lose momentum and, potentially, audience interest if they are replaced by ad hoc, filler programming."
And that could outweigh the benefit of the lower cost of producing the replacement programming, such as reality shows.
Chris Caldwell, a media buyer at the Houston-based agency Briggs & Caldwell, said if an extended strike does significantly affect network programming, his agency will look more closely at other choices for placing television advertising.
"If this thing continues, we're going to spend our TV money more wisely," says Caldwell, "and move the money to programs that aren't being affected by the writers strike, like news-based programs, reality-based programs and game shows."
For the time being, many advertisers are just watching and waiting. Mark Wright, who heads advertising buying for Anheuser-Busch Inc. in United States, said last week it was "too early" to say how, if at all, Budweiser's plans might change. But he noted that much of the company's ad spending was in sports programming, which wouldn't be affected.
"If there are no original scripted dramas on the air," Wright added, however, "we would have some decisions to make."
Ryndee Carney, manager of advertising and marketing communications for General Motors Corp., said it was status quo for the moment. If there are changes to the programming lineup, then GM would review its plans, she said, but she declined to elaborate.
Some networks will feel the strike's effects more than others. For Fox, which has relatively few scripted dramas — and a ratings juggernaut in "American Idol" — the strike could be positive, the chief operating officer for Fox parent company News Corp. said last week. Peter Chernin said on a conference call that the strike may cut the cost of making pilots and producing programming.
In the days leading up to the strike, several other broadcast executives also said they didn't expect to see an immediate financial impact and assured investors they had ample programming in their pipelines.
Rino Scanzoni, chairman of Mediaedge:cia, an advertising buying and planning agency, says the long-term concern about the strike "is a grave one," because development of new network shows gets under way in earnest in early winter.
Late-night talk shows are being forced into reruns at a crucial time for ratings. November is one of four periods in the year called "sweeps" in the television business, when ratings are used as a benchmark to set future ad rates. Lower viewership now will mean lower rates later.
Official viewership ratings for last week haven't come out yet so it's hard to pinpoint the impact even on the late-night shows. But Shari Anne Brill, director of programming at Carat, a major advertising-buying company, said her preliminary calculations based on local household ratings show declines of some 8 percent in late-night talk shows.
In addition to concerns about shows living up to agreements, advertisers are unhappy at the prospect of reality shows — or other substitute programming that doesn't rely on writers — taking the place of the high-profile scripted dramas and comedies they paid top dollar for.
"With the exception of 'American Idol,' it's really the scripted series that carry the networks, so their disappearance will really hurt," said Brill. "Now that the pipeline for some of the better shows has dried up, it's a problem."