Coronavirus Spurs Dire Outlook for Advertising and Media Companies, Plus Landlords Push back
The Wall Street Journal had two stories of note today that we thought are worth sharing.
Crisis for Advertising and Marketing
The first story is about the severe decline in advertising spending due to the coronavirus and the gloomy predictions about what that means for ad agencies, marketing and public relations firms, and others in the media space.
“This crisis is going to be unprecedented by its magnitude, complexity and length,” Arthur Sadoun, chief executive officer of Publicis Groupe SA told the WSJ. He said he expects a far steeper ad pullback this year than the 10% plunge in 2009, at the height of the financial crisis.
“Everyone was comparing this crisis to 2009 but this is not the right reference,” he said. “There is no comparison. It’s going to be steeper.”
“In March, the rate of decline has been more dramatic than anything we have seen in the past,” Mr. Sadoun said of ad spending overall. “The quarters to come are going to be very tough,” he said.
Landlords Fight Back
The second story has to do with large landlords pushing back against big retailers not paying rent during the crisis.
According to the WSJ, mall and shopping-center owners are compiling a blacklist of large, financially stable tenants that haven’t paid their April rent.
Many landlords are willing to work with smaller companies who are experiencing a big drop in revenue, however.
But some property owners are taking a more confrontational approach with larger delinquent tenants that landlords believe have cash or access to capital but have failed to pay their rent anyway.
According to estimates from Marcus & Millichap, a commercial real-estate services and consulting firm cited in the story, mall landlords with a higher concentration of nonessential tenants have collected around 10% to 25% of rents, while centers with more essential tenants such as grocers and pharmacies have collected 50% to 60% of rent.
Many nonpaying tenants also say the pandemic is a force majeure, or an event outside their control that prevents them from meeting contractual obligations, something landlords are trying to push back on.