[opendtv] News: Ad Boom Now Officially a Bust

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
  • Date: Thu, 31 Jul 2008 08:25:46 -0400

While cable nets are up, the challenge lies ahead for TV broadcasting...

Gotta feel a little sorry for David Smith, CEO of Sinclair - major investments in auto dealerships and TV stations...




2008 Ad Boom Now Officially a Bust
By Price Colman

TVNEWSDAY, Jul 30 2008, 7:55 AM ET

A year ago, projections were that 2008 would be a banner year for advertising.
Story continues after the ad

And so it is-if your banner is the skull and crossbones.

The Television Bureau of Advertising at its annual forecast conference last September projected national spot would rise 14-16 percent in 2008, driven largely by political and Olympics advertising.

But, in the wake of a couple miserable quarters, rep firms and others are ratcheting down projections by roughly 30 percent.

"It will be a blessing if we approach 10 percent," says Val Napolitano, president and CEO of Petry Media Corp.

That the percentage is positive is due almost entirely to political.

"[Political] spending is hot and heavy," says Leo MacCourtney, executive vice president of Katz Television Group. "It's what we thought, maybe stronger. Without political, [national spot] is going to be down 8-10 percent."

The problem is with the core or non-political spending, particularly by automakers and dealers, which is falling precipitously.

Already weak in the first half, auto will fall 25 percent or more in the third quarter, maybe more in the fourth, according to Katz. Any rebound in auto, which accounts for about a quarter of total national spot, is a ways off.

"It's probably not going to be until the second half of '09 when we will see a resurgence," says Napolitano. "It's not doom and gloom forever, but we're probably setting our sights on a year from now before we see a turn."

"GM is leading the pack at minus 20 percent or more," says MacCourtney. "There are lots of cancels from Chrysler-Dodge and Ford is reorganizing its spending plan.

"It's a bit of a perfect storm," he says. "Ford is retooling its product list and the agencies themselves are retooling their buying responsibilities. ... It may not be a harbinger of the whole year, but auto is getting worse."

And it's not just cars.

While Katz sees travel up slightly for the rest of the year, Petry forecasts continued weakness in that category. Both firms see other key categories - retail, corporate, telecom, entertainment - flat at best, more likely down.

And the hoped-for Olympics boost in the third quarter appears sketchy.

"One would hope you would see some improvement in pacing, and we're not seeing it," Napolitano says. "Pacing has been in double-digit negative. What's a little alarming about that is we're behind the curve in a quarter that has an Olympics in it, so we should see some tightening of inventory. We're not."

You can mark, almost to the day, when the rollercoaster started down: Late July-early August 2007, when LIN and Nexstar shelved proposed sales as the subprime credit crisis dug its claws into financial markets.

Things just kept getting worse, although you'd hardly have known it listening to politicians, financial managers and industry executives.

As recently as January of this year, projections offered a rosy view of 2008. But as station groups ground through the first quarter, the recalculating began.

TNS Media Intelligence, which tracks dollars spent on national and local spot, shows total spot falling 3.3 percent from January through May.

Auto advertising, the single biggest chunk of total spot, was down 13.3 percent through May, according to TNS. Retail - about 13 percent of total spot - was down 7.6 percent. Telecom, which represents about 4 percent of total spot spending, was down 25.6 percent.

The TNS numbers are being confirmed in the second-quarter financial reports of the publicly traded companies with TV stations.

Gannett Broadcasting (BIAfn rank No. 9, 21 stations) revenues were down 5.9 percent, Journal Communications TV station revenues fell 4.3 percent, E.W. Scripps (BIAfn rank No. 17, 10 stations) station group revenues fell 4.7 percent and pure-play Belo revenues (BIAfn rank No. 11, 21 stations) were down 6.3 percent.

Buried in all those percentages is the fact that the local spot business is also struggling, although not as badly as national.

TVB last year projected that local spot, which accounts for roughly 70 percent of station ad revenues, would be up 5-6 percent compared to 2007. Instead, it's down across the board. And now that station groups have digested the second quarter's harsh realities, any remaining optimism for the year has evaporated.

"Local and national [in the third quarter] looks a lot like the second quarter so far," said Dunia Shive, Belo president-CEO during last week's earnings call. "Political is very hard to predict." The same message was heard on other calls. "It's a very, very difficult environment right now as far as the core categories are concerned," said Craig Dubow, president-CEO of Gannett.

Political has been slow coming, but the experts say it will arrive to save the industry from a negative year.

Both Katz and Petry see a big surge in the third quarter, with stations in so-called swing states benefiting most.

Swing states include Nevada, Colorado, New Mexico, Michigan, Ohio, Iowa, Missouri, Wisconsin, Indiana, Pennsylvania, New Hampshire, Florida, Virginia and Minnesota. "If you happen to be in the haves of those particular states, you're going to get a windfall, but only in that particular geography," says Napolitano.

"We're only talking about 25 percent of spot markets. The rest of the states are looking at a double negative space. And conventions are so late, that's driven down the window even further." One station group, Scripps, projects 15-17 percent revenue increases at its stations in Florida, Ohio and Michigan.

"Obama is already in more states than we thought and McCain will have to respond," MacCourtney says. "Then there's support money from the party side. Both the Republican National Committee and the Democratic National Committee will support their candidates and their positions. It's as robust a political market as we anticipated."

And, MacCourtney points out, 50 percent of all political spending will come in the five-week period from Oct. 1 through the Nov. 4 election, which bodes well for the fourth quarter. But after election day, it all goes away. "It will be like dropping a safe off the Empire State Building," says Napolitano.

Don't expect a rebound in 2009, a year without major political campaigning or Olympics.

TVB's two-year projections last September showed total spot in 2009 down 2-4 percent, led by national spot down 8-10 percent. The bureau projected local spot would rise 1-3 percent. Those projections face further revision in light of the surprising weakness of auto this year. Plus, the full impact of the financial, housing and energy issues is still working its way through the economy.

"Once we see an improvement in oil, we'll be out of the downward spiral," Napolitano predicts. "Psychologically, I think the election will go a long way toward determining whether consumers spend."

Still, he says, "One can only conclude it's going to be a very, very challenging '09."

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