Advertising Slowdown Spreads to TV Networks, Publishers

U.S. television networks and news publishers are feeling the effects of a slowdown in the advertising market, the latest indication that an ad-spending retrenchment previously flagged by giant technology companies is spreading, according to The Wall Street Journal.

Warner Bros. Discovery Inc., home of cable channels including CNN, TNT and the Food Network, on Thursday cut its outlook for this year and next in part because of a slowdown in advertising. In recent days, the owners of outlets including the CBS television network, the New York Times and USA Today all said their ad revenue was under pressure during the latest quarter.

“Given the less-favorable macro environment, we are seeing softer demand in the scatter market,” said Gunnar Wiedenfels, chief financial officer of Warner Bros. Discovery, referring to the period when TV ads are sold closer to air date.

The ad outlook has become increasingly dim in recent weeks in the midst of signs that rising inflation is beginning to affect consumer spending.

Irwin Gotlieb, the former chief executive officer of GroupM, the ad-buying company owned by WPP PLC, said he expects more marketers to cut back on ad spending in the wake of Walmart’s announcement. “When they hear a decline across the board at Walmart, it confirms their worst fears,” he said.

WSJ Graphic

Despite the slowdown, some still expect overall ad spending this year to be strong. GroupM said in June that it expects global ad sending to grow 8.4% to $837.5 billion, excluding U.S. political spending. In December, it forecast a 9.7% increase for the year.

Advertising generated $7.1 trillion in sales activity in the U.S. in 2020, according to a 2021 study conducted by IHS Markit for the Advertising Coalition, a group composed of media companies and national trade associations. The study, which takes into account the direct and indirect effects of advertising, found that every dollar spent on advertising in the U.S. in 2020 drove nearly $21 in sales activity.

Advertising is often among the first expenses cut by companies looking to trim spending in times of economic uncertainty, according to industry observers. When that happens, digital companies are often the first to be hit since marketers can turn off spending in real time.

Last week, Gannett Inc., the publisher of USA Today and a raft of local newspapers, posted a 8.7% drop in revenue from advertising and marketing services and cut its profit outlook for the year in part because of industrywide headwinds in digital advertising, as well as rising costs.

New York Times Co. on Wednesday posted its first decline in digital advertising revenue since 2020, due in part to the macroeconomic environment.

“We see both headwinds and tailwinds in advertising,” Paramount Chief Executive Bob Bakish said during a call with analysts after the results. He said the digital-advertising market and the scatter market are facing challenges, primarily because of supply-chain constraints affecting advertisers including car makers. “But these aren’t long-term issues,” he said.