War coverage may cost nets dearly
Disney, Fox, AOL TW could lose up to $200 mil
Assuming the first two to three days of the war will see 100% of programming preempted by coverage with the subsequent four days ceding around 50% of airtime to commercial-free programming, Disney, Fox and AOL Time Warner could lose up to $200 million in total revenues from reduced advertising and travel-related businesses, investment bank Goldman Sachs estimates.
Using the cost of Gulf War and post-9/11 coverage as a comparison, calculations by Goldman Sachs analyst Anthony Noto put the all-in cost impact of continuous network TV war coverage at anywhere from $5 million-$20 million per day, depending on the company.
ABC is set to take a big hit in terms of revenue exposure, says Noto. Assuming total preemption in the first three days of war, ABC Network could forfeit $24 million-$30 million in that period, while its TV stations and cable net may sacrifice another $9 million-$15 million if advertisers opt out. This estimate however, may be only a worst-case scenario.
Huge demand
John Rash, senior VP and director of broadcast negotiations for the media buyer Campbell Mithum Esty, says that the demand for 30-second spots on the Oscar telecast is so huge that ABC can get away with including a clause that prevents the advertiser from pulling out at the last minute, no matter what the cause.
The enormous demand also protects ABC, which has not had to give ratings guarantees to advertisers. So advertisers will pay the full cost -- which averages out to $1.35 million per 30-second spot -- even if ABC is forced to delay the telecast for a day or two. Such a delay would almost certainly cause the ratings of the Oscarcast to plummet, but ABC wouldn't have to return a penny to advertisers in the form of makegoods.
There have still been no confirmed pullouts or ad replacements for the Oscar broadcasts.
Disney acknowledged the difficult climate for its entertainment and parks business.
AOL TW least affected
AOL Time Warner should be the least affected in terms of lost revenue. CNN has already set aside $30 million-$35 million to cover the war, and the newsie is expected to forfeit only $5 million-$10 million in the first week.
NBC could not comment on its dealing with advertisers, while a Fox source said the network will be working closely with its advertisers as programming plans and the duration of war become clearer.
Ad agencies are being equally cautious about which of their clients will be pulling out ads during war time, whether or not the nets resume a normal program schedule quickly.
MasterCard has said it will pull its commercials for a week after hostilities begin, while other big brands say they will likely lie low for several weeks.
Others, including Budweiser, may refocus their ads away from direct promotion to image building with more patriotic messages, as they did after 9/11.
So far only Disney and radio broadcasters Westwood One and Clear Channel have acknowledged first quarter profit reductions, but analysts are already assuming Fox and Viacom may have to make similar adjustments.
(John Dempsey in New York contributed to this story.)
