By Tim Calkins and Derek D. Rucker
January 17, 2017

This year, Super Bowl ads have been a tougher sell for Fox, the TV network airing the big game next month. In early December, the network said ad spots for the event were 90% sold out. Although that sounds like a lot, this is a rather slow pace, given that in prior years, 90% of Super Bowl spots were taken by September or October. To have more than a dozen spots available in December suggests that companies are not rushing to advertise.

One culprit may be slumping NFL ratings. If fewer people are watching NFL games, then it would make sense the trend would spill over to the Super Bowl, as advertisers may view the costs as overpriced relative to past years.

After all, it’s hard to ask for the same premium price if you cannot deliver on the audience: a company needs to develop a new and compelling ad, assemble a program for customers and the sales force, and prepare for a social media push. All of this typically requires tremendous planning and deciding to run a Super Bowl ad isn’t an overnight decision.

Beyond NFL ratings, however, we believe at least three other factors are driving down Super Bowl television ad sales.

It’s getting too expensive

Perhaps the simplest explanation for the modest demand this year is that it’s too expensive and may not be worth it for companies. In 2010, Super Bowl ads were selling for about $2.5 million for a 30-second spot. This year, Fox is reportedly asking for $5 million to $5.5 million. That is at least double the cost in just a few years.

The media cost is only part of the total expense, however. A Super Bowl campaign often requires a new and dynamic piece of advertising. Creating and producing a spot can easily cost $1 million or more. For most brands, a Super Bowl push now also includes significant digital support. Large media buys on Facebook and You Tube aren’t cheap. Add in a public relations push and a sales program, and a company can easily spend $10 million or $12 million —or much more.

Ultimately, companies make financial decisions. It only makes sense to advertise on the Super Bowl if the payoff outweighs the cost. As the price goes up, the financials become tougher.

It’s too risky

A Super Bowl ad can boost a brand, create excitement, spawn conversations and drive sales. These potential benefits are part of the reason companies can justify the cost. But a Super Bowl spot can also create problems; the event receives so much attention and scrutiny that a Super Bowl advertiser can find itself at the heart of a negative PR nightmare.

This downside risk has become very apparent in recent years, and general uncertainty may only enhance brand sensitivity to risk, and why people are more sensitive to them.

Recall Nationwide, which in 2015 received plenty of criticisms for airing a spot featuring a dead child. Instead of enhancing its brand among consumers, the Super Bowl ad damaged it among many. In 2011, HomeAway was forced to apologize for its Super Bowl ad that included a baby being smushed against a glass wall. That same year, Groupon was embarrassed by its ad that made light of oppression in Tibet.

In this way, Super Bowl advertising is exceptional. People don’t usually get too upset about a single commercial running on Survivor or CSI. Careers don’t end due to a mediocre execution, but agencies and clients have parted ways, and even been sued, over a single disappointing Super Bowl spot.

The growth of social media has increased the risk. People are very quick to voice opinions on-line. A Super Bowl spot that offends is an easy target. Even a perfectly adequate Super Bowl ad might cause a backlash, as people express disappointment. Expectations are high.

It’s getting competitive

Digital media continues to grow. The election of Donald Trump as America’s next president highlighted how a brand can spend very little on traditional media outlets and still make a major splash through creative use of social networks. For instance last April, Twitter announced it would start broadcasting NFL’s Thursday night football games online, potentially giving around 800 million registered and non-registered users a chance to watch the NFL online. Many of the new media outlets are supremely targeted. This increases efficiency and reduces overall risk.

It’s an uncertain world

What will the new Trump administration do? How will the change in the presidency and the party impact the economy? While the stock market has certainly rallied since the election and continued to climb, brands may be hesitating to commit marketing funds until there is more certainty and the outlook has cleared somewhat. Uncertainty can be a strong psychological motivator, and it may impact how marketers view the Super Bowl.

The Super Bowl remains a compelling marketing platform. We anticipate the Super Bowl will sell out once again but marketing executives are hesitating this year. Whether the slow pace is simply a blip due to general uncertainty coupled with the costs and downside risk remains to be seen. If the pattern of stagnation continues, networks may need to reconsider the value of a Super Bowl spot.

Tim Calkins is a clinical professor of marketing at Kellogg School of Management at Northwestern University. Derek D. Rucker is the Sandy and Morton Goldman Professor of Entrepreneurial Studies in Marketing at Kellogg School of Management. They co-lead the Kellogg School Super Bowl Ad Review.

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