Coronavirus shapes up as a double wallop for media businesses’ advertising and events

March 10, 2020
Category: Business & Work

The news industry hardly needs a new one-two revenue punch to the chops but may be getting one anyhow.

Events have become a major new revenue source for some organizations, a strong prospect for others. But getting a crowd together later this year, and earning the associated sponsor revenue, is beginning to look doubtful — particularly in the wake of last week’s cancellation of the mammoth South by Southwest events in Austin.

A much bigger and broader problem is that recessions tend to hit advertising schedules early and hard. And even should the worst fail to materialize, cancellations and postponements are likely in the pipeline.

Mark Thompson, CEO of The New York Times Company, took the extraordinary step last week of disclosing in a U.S. Securities and Exchange Commission filing that the Times now expects digital advertising to decline by 10% this quarter.

Subscription revenues are holding steady, he said, but in the last two weeks the Times has been “seeing a slowdown in international and domestic advertising bookings, which we associate with uncertainty and anxiety about the virus.”

An industry newsletter that crossed my desk today reported that a sharp drop in advertising, led by the tourism industry, is already in progress in Europe.

I spoke with Evan Smith, CEO of The Texas Tribune, where the annual Texas Tribune Festival generates seven-figure revenues. All systems are go for now, he said.

“September is literally six months away,” he said, “and as far as the news cycle goes, that’s a millennium.”

“So we have no plans now but to have the best festival,” he continued, but said “who knows” what may happen. Same with advertisers and sponsors — no impact yet, Smith said, but given Texas’ reliance on oil business, the expected downturn bears close watching.

I posed the same pair of questions to Steve Yaeger, senior vice president of circulation and chief marketing officer at The Minneapolis Star Tribune. An annual November travel show is their marquee revenue event.

“For those events with significant up-front costs, or that represent material revenue, we are looking at event insurance … ” Yaeger said in an email. “Another wrinkle for us is that we have sponsorship deals in place with all of the pro sports teams, arts organizations, local races and festivals. If events are canceled, or if games are played in empty stadiums, our sponsor assets would be affected.

“I don’t expect to cancel any of our events at this point. But it’s something we are looking at very closely, and trying to put ourselves in the best position to weather disruption.”

I was unable to reach Jason Taylor, a Gannett president whose portfolio includes events. But in talks with analysts and news staff lately, CEO Mike Reed invariably mentions the merged GateHouse/Gannett company’s hopes for growing that business. Events like high school sports banquets and road races, Reed argues, not only generate sponsorship revenue but reach out to groups in the community who may not be news subscribers.

It has been more than a decade since the last recession, so those newer to the business may not know the truism that newspaper advertising gets the worst of it when times are bad. That was as true in 2007-2009 as it had been in a milder recession earlier in the decade and in several in the ’80s and ’90s.

The pattern is that businesses pare back marketing budgets and ad schedules as their first moves. (They typically resume early, too, before the official end of a downturn.)

The deep 2007-2009 recession had the further bad effect of tempting industry optimists to go slow on digital transformation. They were looking for a full-blown print ad bounceback which, of course, did not materialize as disruption remained in full force in the years following (even before the advertising competition from Facebook and Google hit).

In 2020, The New York Times is far along and others are making progress in replacing advertising revenues with subscription dollars from readers. And it may be (though I can’t see why) that the digital ad mix including programmatic and sponsored content will be less sensitive to the economy than were old-timey bargain days promotions.

Looking for a bright spot? My colleague Kristen Hare suggested to me that more and more publications are dropping paywalls in light of the crisis. That may sound like foregoing income, but not really.

Providing the right kind of sample is one of the intricacies of building paid digital subscriptions. If potential subscribers like what they see, they may be more inclined to sign up when the wall returns.

Rick Edmonds is Poynter’s media business analyst. He can be reached at redmonds@poynter.org.