Media companies, including Viacom, are predicting lower income after last week’s terrorist attacks.
While the terrible events of last week did much to boost media ratings, they have not been good for many of the major American media companies. Viacom has announced that earnings for the year will be lower than expected because of reduced advertising revenues since the attacks.
Viacom’s CBS network showed no advertisements during the initial period of news coverage. Many other TV stations did likewise. Combined together, the major networks lost around $320 million last week from lost advertising revenues. At the same time, providing non-stop coverage instead of the scheduled programs drove costs up.
But that is by no means the biggest money problem – a change in consumer sentiment has lead many businesses to postpone or rethink planned advertising expenditure. After such a shock to the system, the last thing on Americans’ minds is to go shopping. Major spenders including Coca-Cola, Nestle, Procter & Gamble and Unilever have indefinitely postponed new advertising campaigns. While they expect to resume normal spending eventually, there is considerable uncertainty over when this might happen.
At a time when media companies were already praying for the decline in advertising revenues to turn around, this is the last thing they want to hear. Viacom still expects earnings to grow slightly, but the predictions are now in single rather than double digits.
The industry’s income will also be hit by the need to cater to a more sensitive audience. There has been a massive withdrawal of films, songs and television programs that might be deemed inappropriate. Most major film and television companies have had to delay or re-edit some of their products, in particular removing references to terrorism.
The ramifications of last week’s tragedy come as very bad news for an industry that is already suffering. If a recovery driven by consumer spending was on the way, it will certainly be delayed further by recent events. This is bad news for companies that are so heavily reliant on advertising.
