Industry pundits have saturated the press with predictions about what the industry will look like after things return to normal. What will happen to media spend? To media mix? How will creative needs change? Will holding companies return to growth? These are legitimate questions. What needs to be acknowledged is that 1) the industry was in a terrible state before COVID-19; 2) executives are now taking steps that will further weaken it; and 3)the industry is certain to be in a worse situation afterwards unless agency CEOs and advertiser CMOs redefine their priorities and directions. I will be joining Jack Myers for a Zoom Collective Leadership for Renewal and Growth conversation on Tuesday May 19 at 1pm ET. Register now at https://zoom.us/webinar/register/WN_0iYCTActS9CcL9Qg5xXX3g
This is a dire view of the industry situation, but it is founded on hard data and facts. Consider the following:
The chronic cost reduction measures taken by the industry have solved short-term financial challenges, but they have done nothing to strengthen industry capabilities. It is distressing to see the magnitude of cost reductions today – designed to shore up share prices – but having the effect of digging very deep holes for the future.
Agency CEOs and advertiser CMOs need to invest, instead, in learning how to master the fragmented media mix and restore brand growth after the COVID-19 crisis passes. Success in achieving brand growth will take the pressure off of costs and fees; brand success will be converted into Wall Street success.
Agencies who invest in capabilities and succeed in helping their clients grow should be able to charge higher prices, thus putting a floor under industry prices and restoring financial health to their operations. Success in this dimension will help them pay for better talent and staff up appropriately to handle their extensive workloads.
What is needed to prepare for post-COVID-19 is investment, not desperate cost-reduction efforts that will only make things worse.
Holding companies should consider taking billions of dollars in hits to the income statement and balance sheets to create investment reserves for the next few years. Forget about defending share prices for 2020 – that is a lost cause. Take the "big bath" and use the reserves to invest for the future.
Privatization of the industry though the efforts of private equity players may be required to wean industry executives from focusing so intently on quarterly financial performance – giving them respite to invest rather than further enfeeble their operations.
This would be a better outcome if it were planned today – instead of seeing it emerge as the outcome of an industry failure after the passing of the COVID-19 crisis.
Photo Credit: Roz Chast, The New Yorker, The Cartoon Bank. With permission.
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The opinions expressed here are the author's views and do not necessarily represent the views of MediaVillage.com/MyersBizNet.