Month: September 2020

How has the pandemic affected the agency? 

A bunch of companies just stopped paying us even though we had done all the work. That happened to everybody; every agency I’ve talked to has been dealing with this. Early on, brands realized that cash was crucial to their business and that they might have to layoff employees, which is sad and terrible. But the ripple effect is that if we don’t get paid then we have to layoff our employees. That’s why you saw cuts or furloughs at brands first and then agencies after that. 

What do you do when a client stops paying their bills?

Our accounts receivables person will email and say, “Hey, you owe us. Your invoice is late.” The brands don’t respond. They do it again and [the brands] don’t respond. Then what happens is that I get a message about a brand not paying their bills. I have to get on the phone multiple times to be like, “Hey, you owe us money.” They’re usually like, “Yeah, times are tough.” Of course, we know that. Times are tough for us, too. Everyone will say that we’re partners in this and that they want to be partners when this is over, that our team is part of their team. But if that’s true, I’m going to not be able to pay my team — which is your team — and I’m going to have to fire them, which means you’re firing them. So either you’re full of shit or you’ll pay us. 

Do you end up at an impasse? 

We’ve basically said, “Pay us what you can.” We put together a payment plan and in some cases we took a percentage off and allowed people to pay in installments. Some still haven’t paid us and we’ll have to write it off as bad debt. 

What happens if they don’t pay you?

You have to do what you can control. We can control our costs, which means we have to delay raises, bonuses, 401(k) matching, which sucks. I have a bunch of people due for raises, but I can’t approve them. The bottomline is that it impacts the people. 

Then you have logistical issues. If they still don’t pay you [after a few months] you have to weigh the cost of sending them to collections. You don’t want to have to do it. But we’ve done it. And we’ve had to do it a lot more because of Covid. You’re sitting there going, ‘well, if it goes to collections I won’t get all of it, but I’ll get some of it and at this point based on how they’ve treated us they’re not worth the long-term investment.’ That’s really the discussion, How much do we want to get screwed? It’s a toxic relationship that’s super unhealthy. 

We definitely care more about our employees than the relationship. That said, we can control the employee situation. We can’t control not getting paid. At some point we can’t afford some of our employees because we don’t have money coming in from our clients. 

Are you looking to change payment terms because of this?

Absolutely. I think you’ll see an adjustment in contracts with auto-payment where you can do it. The reality is that as you work with bigger businesses they have more leverage to pay you [on] net-30, net-60, net-90 day payment terms. This has always been an issue. Agencies aren’t banks, but they’re treated like banks. We might get to a place where clients have to pay a portion upfront to hedge [the financial risk]. There are a few different ways to hedge it. But overall making contract adjustments will be more of a thing.

You always do what you can to make sure you get paid, but now everyone is reminded why it matters now.

Live sports on TV remains the best option for advertisers to reach a large number of people at the same time, but viewership has fallen short of advertisers’ expectations, according to agency executives.

Ratings for the NFL’s opening week Sunday slate of games fell 3% short of the 2019 mark. Ratings for the first three rounds of the NHL Stanley Cup Playoffs dropped 28% compared with the prior season. Meanwhile, the NBA has seen viewership for day games suffer but prime-time matchups pick up.

“They probably haven’t lived up, in terms of ratings, to what clients were hoping for, but I think there’s just so much going on in the landscape,” said Cara Lewis, evp and managing director of video investment at Dentsu Aegis Network’s Amplifi.

For example, NFL games are going head-to-head with NBA playoff games for the first time seemingly ever. The NHL’s Stanley Cup Finals are taking place a month before the regular season would usually start. The MLB has had to postpone games because of players testing positive for coronavirus. And college football conferences delayed or canceled then uncanceled the starts of their seasons. 

In light of these abnormalities, agency executives are hesitant to read too much into how viewership has fared compared to prior years. “It’s tough to come up with a true analysis by comparing to past years,” said Tom McGovern, president of Optimum Sports, Omnicom Media Group’s sports marketing agency. “How do you compare the NHL or NBA playing in August in daytime during the week to any other time period?”

Nonetheless, advertisers had high viewership expectations for the return of live sports to TV. Fueling those expectations were the high viewership figures for the sports programming that filled the gap in April and May, like ESPN’s “The Last Dance” documentary series and Turner Sports’ celebrity golf match featuring Tiger Woods and Tom Brady. “The assumption was that everyone would tune back in because of what we saw back in the spring,” said one agency executive.

Many advertisers had opted to wait for the major sports leagues’ return to spend the ad dollars they had earmarked for reaching people earlier in the year. Some advertisers had even put their entire linear TV budgets on hold until major sports returned to TV, according to agency executives.

“The second live sports came back, clients were really quick to invest that money as quickly as possible because they had huge commitments slated for Q2 and Q3 that went away [when leagues like the NBA, NHL and MLB went on hiatus],” said Ashley Sobel, group director at The Media Kitchen.

This pent-up demand made it even more important that viewership live up to expectations so that networks would have enough inventory available to meet advertisers’ reach demands.

Compounding matters, the TV networks seem to have had similarly high expectations and didn’t lower the audience guarantees offered to advertisers. “For the most part, partners kept their [viewership] estimates as they were,” said Tim Hill, evp of integrated investment at UM Worldwide. As a result, many advertisers that had been guaranteed to reach the usual number of people will likely be owed so-called “make-goods,” in which the networks run an advertiser’s ads to make up for the delivery shortcoming. 

Some networks are trying to settle these debts now. They are taking advantage of higher viewership for playoff games or the start of the NFL and college football seasons. They are also withholding inventory from the so-called “scatter” market, in which advertisers buy networks’ inventory closer to when the ads will air and for higher prices than in the annual upfront market. 

However, unless there is a dramatic increase in sports viewership, “there is going to be some significant under-delivery,” said Jimmy Spano, svp and group director of national video activation at Dentsu’s Carat. 

Some, such as CBS Sports, featured a banner with odds provided by the sports book William Hill. Others, such as NBC Sports, had team- and sport-specific ads from PointsBet layered into content for readers located in states including Illinois, New Jersey and Virginia; a person in Illinois reading an article about the Chicago White Sox might see an ad offering 100-to-1 odds with PointsBet that the team will win the World Series.

The shifts are not accidental. Over the past 12 months, several large sports media brands, including NBC Sports, CBS Sports, ESPN and Bleacher Report have signed partnership deals with sports books including DraftKings, MGM and PointsBet.

While not every deal is structured the same, the largest arrangements are potentially worth hundreds of millions of dollars: PointsBet is committed to spending almost $400 million with NBC Sports over the next five years, plus commissions for driving customers. NBC Sports also gets a 5% stake in PointsBet, whose shares mature in five years.

In some cases, the deals are rooted mostly in media and data, with the publishers figuring out the optimal places to put ads and offers that will drive readers to sign up for accounts with its respective sportsbook partner; many sports publishers began honing their expertisein that department by selling subscription products aimed at hardcore fantasy sports players.

In others, such as Vox Media’s tie-up with DraftKings, or Bleacher Report’s partnership with Caesar’s, the publishers have hired whole teams of people to produce content specifically around betting.

Sports media’s embrace of gambling was expected from the minute the ban on sports betting was overturned in 2018, and most of these deals were in the works well before the coronavirus hit.

Indeed, many of the sportsbooks that have entered these kinds of partnerships have scaled back their ad spending this year, largely because the coronavirus paused the sports leagues that people gamble on.

These partnerships come in a year when many of the sportsbooks’ ad spending was either down or flat, thanks to most sports leagues being suspended and many casinos unable to welcome in-person customers due to local coronavirus restrictions. FanDuel’s ad spending through the first half of 2020 was basically flat, at $11.6 million, while William Hill’s fell from $1.8 million to just $134,000, per Kantar.

The biggest exception to this rule was DraftKings, whose ad spending through the first half of 2020 was nearly triple what it spent during the same period last year, according to Kantar data; DraftKings spent $19 million on advertising through the first six months of 2020, compared to $7 million last year.

Sports and gambling figure to get closer as gambling get bigger in the coming years: Sports betting is currently legal in only 18 states, and industry observers expect it will eventually be legal in most of the country – as many as 40 states could offer it by 2024.

But how much those publishers’ audiences will embrace that content is an open question. While most had an inkling that some of their audience already gambles on sports — and more are betting-curious — the publishers are all in a race to try and figure out how to entertain, serve and grow that audience.

“It’s going to be walk before you run,” said Johnny Aitken, the CMO of PointsBet. “We don’t want to just be PointsBet-branded ads everywhere, and that’s it…we wanted to do it in a meaningful way.”

Some publishers have focused on keeping their betting coverage light. In B/R Betting’s case, that means focusing on the social and cultural aspects of sports betting, such as Instagram pictures of people cashing in big-paying betting tickets, or gifs of fans collapsing in agony when a team covers a spread with a last-second score. During the spring, when the coronavirus pandemic halted professional sports, the B/R Betting staff was forced to do things like run simulated games using Madden NFL and offer odds, or post pictures of jars filled with jelly beans.

That contrasts somewhat with content Bleacher tested out last year. A number of video series that Bleacher Report launched last year, such as “The B/R Betting Show,” were not renewed.

“I think the way we looked at it was where the white space in the market was,” said Joe Yanarella, Bleacher Report’s svp and gm of sports betting. “We’ve tried to think non-traditionally.”

Other publishers are taking a more cautious approach, integrating partner sports books’ data into content they were creating already, either via banners or by offering it to editors and staffers for use in their regular work.

“For us, it hasn’t changed [our approach] significantly because we were kind of already there,” said Jeff Gerttula, evp and gm of CBS Sports Digital.

Over time, Gerttula said, the plan is to hire more writers later this year who can dig more deeply into betting topics as it understands what CBS Sports’s betting audience has the most appetite for — a small audience that reliably signs up for accounts or places bets through William Hill might become more valuable than a larger audience that doesn’t.

“It could shift how we invest in sports,” Gerttula said. “We’re looking at those pockets where maybe we’d been under-invested, where the economics didn’t support it when it was purely display-oriented.”

The big challenge, as these media companies figure out how many bettors they have in their audiences, will be to avoid annoying the people who aren’t interested. For now, much of those audiences get a reprieve, with most of the publishers’ ad placements for these deals only appearing in front of users located in states where betting is legal; a person in Utah reading a story about the Chicago Bears’ fantasy matchups on CBS Sports’s website will not see the William Hill ads that a person reading that same story in Illinois is likely to see, Gerttula said.