TV advertisers, like many others in Hollywood, are holding their collective breaths.
They're anxiously waiting to see how audiences respond Sunday to ABC's broadcast of the 88th Academy Awards. The controversy over the lack of people of color among the 20 actors nominated for an Oscar — and calls for a TV boycott of the program — have put additional pressure on the show's host, comedian Chris Rock, the television network owned by the Walt Disney Co. and the Academy of Motion Picture Arts and Sciences.
Advertisers, who are paying record prices for air time, find themselves in an awkward position.
They want to attach themselves to the glamour of Hollywood without having their brands tarnished by the controversy over the all-white slate of acting nominees. Most advertisers finalized their ad buys last fall, long before the furor. Advertisers agreed to shell out about $2 million for each 30-second spot in the TV program, a new record.
"This is such a big investment for advertisers," said Lisa Herdman, director of national programming for RPA, a Santa Monica ad agency. "And advertisers are having to deal with forces that they cannot control."
ABC is expected to rake in at least $120 million in advertising revenue from the telecast — its biggest haul ever. And much of that money will go to pay the TV license fee to the Beverly Hills-based academy, which depends heavily on revenue from the annual telecast to finance its operations throughout the year.
Industry experts say the debate over diversity in the entertainment industry might boost ratings by increasing interest in the show. Some people might tune in just to see whether Rock skewers the industry in his opening monologue and in his quips throughout the ceremony.
But there also is a concern that audience levels could be depressed, particularly if casual viewers become turned off during the show should the acceptance speeches take on an overtly political tone. In addition, ratings have been down slightly for this year's other big live TV events, including the Grammy Awards and the Super Bowl.
"The audience ratings this year are much more difficult to predict," said Jon Swallen, chief research officer with Kantar Media, which tracks advertising spending. "I don't think the controversy is going to help the ratings — this year it's a real wild card."
One of leaders of the threatened TV boycott, Najee Ali, director of Project Islamic Hope, would like advertisers to be stung by the controversy. "We think the nationwide tune-out of the Oscars will be successful because this conversation about racism and the lack of diversity in Hollywood has been going on for several weeks," he said.
That adds more tension to the telecast, and gives advertisers heartburn.
"It's really difficult for advertisers to take a stand on social issues," said Herdman. "The lack of diversity is a very sad situation, but advertisers are not spending money to support causes. We're spending money to support our products."
Last year, 37.3 million people watched the program, making it one of the lowest rated Oscar telecasts in years, according to Nielsen. Audience levels were down 14% from the 43.7 million viewers in 2014, when the show was hosted by Ellen DeGeneres. The talk show host is particularly popular among young women viewers desired by advertisers. And to the delight of audiences, she sprinkled into the program comedic bits, including ordering pizza and a cellphone selfie picture with Jennifer Lawrence, Bradley Cooper and Angelina Jolie. Social media conversations soared, making the Oscars even more valuable to marketers.
Despite the controversy, none of the advertisers who committed to buying time in the Oscars have withdrawn from the show, according to ABC.
The prestigious nature of the Academy Awards, and the huge TV audience, has enabled ABC to charge a significantly higher ad rates compared to what other networks charge for ad time
in the Grammy Awards or the Golden Globes. Last year's Oscar broadcast generated $110 million in ad revenue, according to Kantar Media. Meanwhile, the Grammy Awards in 2015 brought in $75 million and the Golden Globes generated $42 million in advertising revenue.
The big-ticket nature of the Oscar broadcast ups the ante with advertisers. The show has traditionally attracted advertisers because the TV audience has a higher concentration of high-income viewers. But the overall size of the TV audience continues to be the main draw.
"We think the Oscars are an important space to be in," said Barbara Shipley, senior vice president for brand integration at AARP. "We are supporting the academy's efforts to increase diversity," she said, referring to recently enacted rule changes by the academy. "We certainly need to be sensitive to the issue and we are because we are a multi-faceted and diverse organization ourselves."
This will be the second year that King's Hawaiian will be featured in the broadcast — an enormous bet for the Torrance-based bread maker.
"We made our decision prior to the controversy," said Erick Dickens, vice president for marketing. "We are staying the course; we still have confidence in the platform. We think a lot of people will tune in to see Chris Rock, who should be a phenomenal host."
King's Hawaiian saw an uptick in bread sales last year — its first appearance in the Academy Awards — prompting the company to return this year.
Squeezing into the national broadcast has become increasingly difficult, in part, because the academy limits the commercial time. In addition, some advertisers, such as American Express and fast-food giant McDonald's, faithfully advertise each year and pay a premium to keep their main competitors out.
This year, General Motors will be the exclusive carmaker in the national broadcast.
Kohl's department store will be the retail advertiser, buying five spots in Sunday night's program, said Will Setliff, Kohl's executive vice president of marketing.
The company designed an entire a social media campaign, featuring comedian Vanessa Bayer, around its appearance in the program. The Wisconsin-based retailer is targeting millennial viewers, those under the age of 35, and Latinos.
A key selling point for the Oscar ad buy was that millions of viewers typically watch the ceremony on the big TV screen while holding the so-called second screen, a tablet, laptop or smartphone, to participate in the chatter on social media. That increases so-called viewer engagement.
"The big screen is where we elevate awareness in our brand and we use the second screen to engage with viewers on a more emotional level," Setliff said. "We believe the viewership of this event will be widely diverse — we are trying to find the best places to reach the modern family, and that, by its very nature is a diverse family."