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Writers' Strike Hitting Networks And Advertisers Where It Hurts

Writers Guild of America
CNBC.com
Writers Guild of America

While the WGA and Producers Association continues to negotiate, the TV networks are thinking about all the reasons they'd like this strike to wrap up. For one, if the strike drags into next year, advertisers may demand some of their money back.

Here's how it usually works: TV networks guarantee advertisers a certain number of eyeballs. If they don't deliver the ratings they expected they "make good" by providing extra ad spots for free.

What's the obvious problem now? The strike has shut down TV shows, bringing down ratings. The networks can't just hand out ads on low-rated shows because the inventory is measured by ratings. There may not be enough time on the networks for all the promised advertisers to reach their promised number of eyeballs. Making matters worse, ad time is particularly tight this year because the networks have sold such a high percentage of the remaining TV spots for the year and early next year.

So what will the media companies do? Well, they might put more ads into their higher rated shows, the "American Idols." They also might offer up ad time on their cable networks. What will advertisers do? Some ad buyers are telling me that their clients would rather pull out of the TV ad time and invest that money into national print publications, or Internet ads, where they can closely track who's getting their marketing message.

It would be a huge deal--and a complicated hassle--should the networks have to literally pay up to their advertisers. If advertisers demand money back it'll be a true sign of the falling value of network TV ads. Bottom line: advertisers have more choices than ever, and if a strike has kept them from reaching those eyeballs, they have little reason to put up with it.

So how much will it all cost? It depends on how long the strike lasts. If we get into early next year it could be a couple hundred million dollars. If the strike goes through the whole first quarter of the year it could be nearly a billion dollars. Ouch.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.