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National brands seek to cut back on fall TV advertising deals by up to 50 percent

National brands seek to cut back on fall TV advertising deals by up to 50 percent
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Large national advertisers such as Pepsi Co., General Motors and General Mills are scaling back deals they made with cable TV networks by up to 50 percent in the third quarter, according to the Wall Street Journal.

TV ad spending fell earlier this year as the country initially responded to the coronavirus pandemic but was shielded from a drop comparable to other industries because the majority of TV advertising is bound by contracts that are made in advance of the new TV season, which starts each September. 

Under those deals companies have the opportunity to refinance their contracts, giving them the option to cut up to 50 percent of their spending, which several companies are considering, according to the Journal. Those options have existed in the contracts for years but the pandemic has presented the first situation where ad buyers have considered using it to its full extent. 

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Ad buyers estimate that roughly $1 billion to $1.5 billion in commitments for third-quarter ad spending could be canceled, according to the Journal. 

“The cuts are going to be pretty deep,” Dave Campanelli, chief investment officer at media buyer Horizon Media, told the newspaper. 

Companies sought to break from their ad agreements in March and April but networks were under no obligation to allow a break from the contract then. 

“There were dozens and dozens of calls saying, ‘we need to get out of this now,’” a network executive told the Journal. “It was very hard to be on the phone and not be human.”

However, some media executives remain optimistic that ad revenue will come back as they approach September, so long as the National Football League starts the season Sept. 10 as planned.