Search »

GM Bankruptcy Causes Media Stir, Prompts Debate between Agencies, TV Partners on Payment Schedule

General Motors’ bankruptcy filing is likely to cause yet more challenges for the struggling media industry.

General Motors is one of the U.S.‘s largest advertisers, and media, including newspapers, magazines, TV, radio and online, stands to lose hundreds of millions in GM advertising dollars, writes The Deal.

GM’s sixth-largest unsecured creditor is Starcom MediaVest Group, with a claim of $121.5 million. Other unsecured creditors include Publicis (owed $25.2 million), Interpublic (owed $15.9 million) and McCann Erickson of Calgary, Alberta (owed $4.6 million).

General Motors’ woes have already affected media. The company trimmed its advertising 15% in 2008. GM yanked its advertising from the Academy Awards in the first quarter of 2009, after having spent more than $110 million on Academy Award advertising between 1997 and 2008 and $13.5 million in 2008 alone.

GM officials say the bankruptcy should be a short-lived one, with the company emerging from bankruptcy protection as a new, leaner company within two to three months, according to ABC News.

Broadcast nets, cable channels, syndicators and TV station groups waiting on payment from GM won’t see the money until their agency partners get paid. One broadcast network told Broadcasting & Cable that the bankruptcy is a “big issue.” The filing has prompted a debate between agencies and their TV partners over liability and who gets paid when.

Chrysler, which filed for bankruptcy a month ago, listed Omnicom’s BBDO Detroit as its second-largest unsecured creditor.

Chrysler, which posted a 29% decline in total ad spend in 2008 from the previous year, owes BBDO Detroit $58.1 million, though it is believed that the majority of that money is owed not to the agency itself but to the media for purchases made on Chrysler’s behalf. Most of the money is believed to be owed to local TV stations.