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MarketScreener Homepage  >  Equities  >  Nyse  >  Chipotle Mexican Grill Inc.    CMG

CHIPOTLE MEXICAN GRILL INC.

(CMG)
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Advertisers Seek Right to Cancel TV Spending as Pandemic Roils Fall Season

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09/02/2020 | 03:57pm EDT

By Alexandra Bruell

Advertisers are pressing for unprecedented flexibility to back out of monthslong spending commitments with TV networks, concerned that the coronavirus pandemic is sapping the fall schedule of new programming and threatening the National Football League's season.

By this time of year, advertisers usually have struck broad deals governing the TV season that starts each September. This year, the pandemic scrambled the equation, delaying those deals and introducing new risks for marketers -- most notably, whether the content on which they want to advertise will even get aired.

After several college-football conferences decided not to play in the fall, Chipotle Mexican Grill Inc. shifted some of its ad spending from college football to NFL games, said Chris Brandt, the company's chief marketing officer. He now is asking networks for the ability to back out of those spending commitments if professional football games get canceled.

"How's the NFL going to work if you're not in a bubble?" Mr. Brandt said, referring to the National Basketball Association's effort to keep its players and games confined to the Orlando, Fla. area. "The number one thing I'm asking for is flexibility."

Advertisers spent close to $5 billion on the NFL last season, according to ad-tracking firm Kantar. The NFL plans to launch its season on Sept. 10, and has expressed confidence it will be completed.

"We really hope the NFL season goes on as currently planned," said Rachel Ferdinando, chief marketing officer for PepsiCo Inc.'s Frito-Lay North America. She said the snack-food maker expects to spend as much on the NFL as it did in previous years, but is working with broadcasters to ensure there are contingencies for any scheduling changes.

Verizon Communications Inc. is asking networks for the ability to walk back commitments if football games get canceled and to pull the plug on some ads closer to their air date than in previous agreements, according to John Nitti, Verizon's chief media officer. The telecommunications giant is also looking for the flexibility to move its ad dollars to digital content if the media companies can show that they would offer the same if not more value, he said.

The NFL's fate is likely to have a major impact on the ad world, not only because of the partial postponement of college football but also because little new entertainment programming is being made due to pandemic-caused production shutdowns.

With production on scripted programs just starting to resume in dribs and drabs, all the networks are assembling fall schedules that are a potpourri of unscripted fare, acquisitions from abroad and shows from either their bench or sister platforms.

ViacomCBS Inc.'s CBS, for example, has said it doesn't expect any of the new and returning scripted shows it announced in May to be ready for airing until November at the earliest. Instead, it will fill the first few months of the fall with episodes of "Star Trek: Discovery," which traditionally runs on the streaming platform CBS All Access. The network will also air episodes of the reboot of "One Day at a Time," a sitcom that initially ran on Netflix and is now on the ViacomCBS-owned cable channel Pop, as well as news and reality programming.

"You have a shortage of original content, you have a lot of news eyeballs that are not easily monetizable and you have two of the major five conferences in college football being canceled," said Michael Nathanson, media analyst and founding partner at MoffettNathanson. "It comes down to the NFL. Can it come back and for how long?"

Advertisers that pulled out of previous commitments still have the option to buy time for commercials outside of the broadly negotiated contracts, but such last-minute ad buys are more expensive. Many brands are currently choosing to do so, a sign that some advertisers are spending again, according to both ad buyers and media executives.

When the pandemic hit earlier this year, the last round of big TV deals were already in place. Under those deals, marketers couldn't immediately cancel any spending -- though networks allowed that to happen in some instances, in a show of good faith. Buyers typically had the ability to retrieve a portion, around 30%, of their commitments two to three months before programming was set to air. That was a provision standard for ad deals.

During this round of ad negotiations, some brands are asking to be able to withdraw a larger portion -- at least 50% -- of their commitments much closer to TV air dates, according to ad buyers. And if the programming doesn't air at all, they often want 100% of their commitment canceled.

In March, when it was announced that the Tokyo Olympics would be postponed to 2021, Comcast Corp.'s NBCUniversal asked advertisers to let it know by July whether they wanted to keep their ad commitments for the rescheduled event. NBCU also told advertisers that if they agreed to commit by May, it would guarantee a 4% increase in views for the same amount of money, according to people close to the negotiations.

While some ad buyers agreed, others scoffed. The 4% bump was small given the relatively short time frame to get approval for such a large media investment during uncertain times, the people said.

Mike Law, president at Dentsu ad-buying group Amplifi, said networks went above and beyond to keep advertisers happy, even though they contractually didn't always have to. "Now, brands are going to finance and saying, we need approval to make a commitment into next year. Their finance person is saying, what's the option to get out?"

TV networks traditionally give advertisers one window every three months during which they can renege on some of their ad commitments. This time around, one TV network is giving them two such windows in the same time frame.

"Some clients were asking for 10 windows," said an executive at the TV network. "Hey, I get it. We're in uncharted waters here. But we also have a business to run."

--Joe Flint contributed to this article.

Write to Alexandra Bruell at alexandra.bruell@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
CHIPOTLE MEXICAN GRILL INC. 2.98% 1339.08 Delayed Quote.59.96%
COMCAST CORPORATION -0.11% 45.06 Delayed Quote.0.20%
DENTSU GROUP INC. 2.75% 3180 End-of-day quote.-15.76%
NETFLIX, INC. 0.63% 488.28 Delayed Quote.50.90%
PEPSICO, INC. -0.04% 139.56 Delayed Quote.2.11%
VERIZON COMMUNICATIONS INC. 1.10% 57.96 Delayed Quote.-5.60%
VIACOMCBS INC. 0.62% 29.28 Delayed Quote.-30.24%
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Financials (USD)
Sales 2020 5 979 M - -
Net income 2020 273 M - -
Net cash 2020 695 M - -
P/E ratio 2020 137x
Yield 2020 -
Capitalization 37 466 M 37 466 M -
EV / Sales 2020 6,15x
EV / Sales 2021 5,34x
Nbr of Employees 94 000
Free-Float 75,1%
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Chipotle Mexican Grill Inc. Technical Analysis Chart | MarketScreener
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Technical analysis trends CHIPOTLE MEXICAN GRILL INC.
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 35
Average target price 1 363,93 $
Last Close Price 1 339,08 $
Spread / Highest target 19,5%
Spread / Average Target 1,86%
Spread / Lowest Target -32,8%
EPS Revisions
Managers
NameTitle
Brian R. Niccol Chairman & Chief Executive Officer
John R. Hartung Chief Financial Officer
Curtis Evander Garner Chief Technology Officer
Albert S. Baldocchi Independent Director
Neil William Flanzraich Lead Independent Director
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