Does A Rate Card Mean Anything These Days?

Philip Stone February 19, 2009

With the huge advertising downturn does a rate card in a competitive environment mean anything these days? Indications are the discounts are now huge and increasing.

None other than Rupert Murdoch is complaining that the New York Times is discounting its rate card while his Wall Street Journal is toeing the line. Murdoch said recently, “We have the New York Times cutting rates against us. We will not cut our rates. We are down at the moment about 20% in advertising.”

Now that may or may not be for  back in November  it was the New York Times complaining that the WSJ was really going after The Times’ luxury advertising customers and that Journal sales people were flogging ad space at deep discounts to The Times’ traditional luxury advertisers.

The one bad thing about advertising inventory is that once the newspaper is published that inventory has disappeared forever unsold, so there undoubtedly comes a time in the sales cycle when some money may be considered better than no money. It’s a dicey game to play because once advertisers are used to getting those discounts then they will wait and insist upon them. 

And two of the larger US advertisers are showing exactly that savvy in their 2009 advertising. Kellogg says that this year it is going to be a lot smarter in buying television ad time, looking for good scatter opportunities and the like. And Procter & Gamble, the world’s largest advertiser, is said to be canceling all of its Q2 options and media consultants believe the company has decided it can do better in the scatter market than by up-front buying. 

That seems to be a trend that others are following with some cable and broadcast networks complaining that no sooner do advertisers cancel than they are back at the door seeking better deals, perhaps going all scatter. Fox, for instance, says its cancellations are around 8% but expects that figure to increase to around 11%. Some of it may well be retrenching, but with others it certainly is a case of looking for better deals.

In magazines, the discounts appear to be significant. MediaPost did the math and says that comparing official rate card figures from the Publishers Information Bureau with year-end results from publicly traded magazine companies indicates that Time Inc titles, for instance, had been selling at 44% discounts from the official rate card. At Meredith, according to MediaPost, the discounts look like they were in the area of 75%.

And the statistics show that the discounting got larger as the year went on so at the end of 2008 there were discounts apparently in the 80% range – in other words fill the space for anything rather than let it go for nothing. It’s easy to see why the panic set in – each quarter grew worse in 2008 with ads down in Q1 by 6.4%, growing to 8.2% in Q2, getting alarming at 12.9% in Q3 and just plain horrible in Q4, down 17% from the same quarter a year before.

That’s a sign of the panic out there and it’s going to take a long time to convince advertisers that times have improved and that they should no longer be looking for big discounts. One of the big problems, of course, is the drying up in particular of auto advertising – down 20.5% in 2008, a drop of some $400 million.

The problem for newspapers in particular is that retailers are just plain disappearing — going out of business. The discount clothing firm Mervyns went in December and huge electronics outlet Circuit City is in liquidation; most major retailers are reporting lower January sales and with auto dealers hitting the dirt in record numbers it’s going to be real tough to hold to any semblance of the rate card.

And it really is a live and die situation out there. There weren’t many new titles last year but 525 magazines went out of business according to MediaFinder.com database.  The only possible consolation is that in 2007 some 591 magazines disappeared.

Already this year 40 titles have folded, including Conde Nast’s Domino, Disney Publishing’s Wondertime, and six magazines from Doubledown Media, which itself is gone. And another 13 titles have switched to online publishing only.

And it only needs a look at some powerhouses to see what it all means. Readers Digest, for instance, has announced an 8% cull of its global workforce citing lower consumer spending and magazine advertising. Those who survive can look forward to five unpaid days off this year and next and a suspension of company contributions to the pension plan.  Reader’s Digest itself has suffered particularly from a downturn in pharmaceutical advertising for its older readers and total ad pages through February’s edition are down 12.8%, according to MediaWeek Monitor.

At Disney’s media networks operating income fell 29% with sales down 5%, because, the company said, of lower advertising revenue at the ABC television network and at the owned stations. And over at News Corporation Rupert Murdoch laments that his TV stations saw a 30% drop in auto advertising that is "really killing us". 

Which brings us back to where we started. In this type of environment can the media afford to adhere to the rate card, or put another way, can it afford not to?