GM asks major networks for major rollbacks

After months of very public changes to its media spending, General Motors and Carat, its media agency, are asking U.S. television networks for price rollbacks. According to those familiar with the negotiations, the networks have so far refused the request. The proposal from the automaker, which has recently stopped advertising on Facebook and in the […]

After months of very public changes to its media spending, General Motors and Carat, its media agency, are asking U.S. television networks for price rollbacks. According to those familiar with the negotiations, the networks have so far refused the request.

The proposal from the automaker, which has recently stopped advertising on Facebook and in the next Super Bowl, appears to be onerous for the TV networks. One ad-buying executive said the automaker could be seeking cuts as large as 20% in the cost of reaching 1,000 people, a metric known as a CPM that is common in upfront discussions. The TV networks try to sell the bulk of their ad inventory for the coming fall season each year in this annual bargaining session.

GM’s request “has not been well received” by the TV outlets, said one ad buyer. Spokesmen for General Motors did not immediately respond to queries.

Advertisers have typically asked TV networks for rollbacks during a major economic downturn, like the beginning of the recent recession, or when there has been a ratings shortfall. This year, both sides of the table agree pricing is on the rise. Instead of arguing over whether a price increase is warranted, most of the haggling is centered on the size of the increase.

GM’s ask has the potential to cause ripples. General Motors is one of the biggest spenders on TV advertising, spending about $1.1 billion on TV ads in 2011, making it the third-largest U.S. TV advertiser last year after Procter & Gamble and AT&T.

Its demand for pricing cuts would likely cause significant recalculations in the amount of ad time the networks choose to sell this year. All the TV networks have refused to negotiate with GM so far, ad buyers said. A fear is now blossoming among media outlets that if one TV network deals with GM, the others will have to capitulate, one ad-buying executive said.

Some networks have begun to ponder what to do if there is no GM money in the upfront, several executives said. In that event, networks would probably sell less inventory than usual in the upfront and hold back more for the so-called “scatter” market, where ad time is purchased much closer to air date and typically costs more.

General Motors already enjoys significantly lower-than-market pricing, a benefit accorded to advertisers who have spent on networks for decades. Procter & Gamble is another marketer whose relatively low ad rates are more or less “grandfathered” in to negotiations. For GM to win rollbacks on rates that are already below market would mean the networks would see less volume in this market.

“They have a pretty low base to begin with,” the ad-buying executive said. “They have been an advertiser since the dawn of time and they are a founding or incumbent sponsor on a lot of network, so they get a very low base.”

To get a price cut on top of that “is just very, very detrimental,” this executive added.

There’s more! To read the full story in Advertising Age, click here.

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