Television networks have not been very receptive of the request made by General Motors and Carat (its media agency) to roll back the prices of ads. The negotiations are now in a standoff, according to media buyers and other executives who are privy to the details of the talks. GM has recently announced that it will not pay for ads in Facebook any longer and it also won’t buy ads for the next Super Bowl.
According to a source, GM may be asking for reductions in the price of ads by up to 20% in the cost of getting to 1,000 people, a metric named CPM that is common in upfront talks.
The TV networks will attempt to sell a big part of their ad inventory for the approaching fall season in this annual bargaining session. GM has not commented on these reports. When there were problems with the economy in the past, TV networks have been asked by advertisers to roll back the prices of their ads. This happened during the recent recession and when there was a drop in the ratings.
In 2012, both parties agree that prices will go up but what they’re arguing about is how big of an increase it will be.
Last year, GM was the No. 3 largest U.S. TV advertiser, trailing Procter & Gamble and AT&T. In 2011, GM spent around $1.1 billion on TV ads. It is likely that GM’s demands to reduce prices of the ads will result to major recalculations in the amount of ad time the networks aim to sell for this year.
Ad buyers said that so far, all the TV networks have declined to negotiate with GM. One ad-buying executive said that the TV networks are worried that this may set a precedent and will result to more companies asking for price drops. [source: AdAge]