TV Could Experience Car Trouble
Stalling sales may mean less ad spending next year, but so far, so good
By Steve McClellan -- Broadcasting & Cable, 12/8/2002 7:00:00 PM
This year, the auto industry will have its fourth-best year ever in terms of total sales. After a gangbuster summer, though, car sales have fallen sharply through the fall, prompting questions about the sustainability of strong auto ad spending into next year.
|* From 2001
Source: Nielsen Media Research Monitor-Plus.
So far, TV doesn't seem to be feeling the pinch. After weakness in the first half of the year, the broadcast networks and major groups have reported an upsurge in auto spending in the third and fourth quarters, as carmakers continue to offer consumers 0%-financing deals to spur sales.
General Motors, for instance, just extended its 0%-financing campaign into January. And one source at a top-20 broadcast-TV group says auto sales continue low-double-digit growth vs. 2001. That pacing should continue into first quarter 2003, the source says.
Nevertheless, there's concern. For all media, car-ad spending is down $1 billion for the first 10 months of the year, according to Nielsen Media Research's ad-tracking service, Monitor-Plus. And two of the Big Three domestic car companies—Ford and DaimlerChrysler AG—are spending less this year than they did in 2001. The ad tracker shows that, through September, Ford's spending was down 2%, DaimlerChrysler's almost 8%.
A spokeswoman for General Motors, the biggest ad spender through the first three quarters, says the company's ad budget for 2003 will be the same as it was in 2001 and 2002.
For TV, the news is mixed. Through October, the broadcast networks garnered about $350 million more in car ads than last year. But Monitor-Plus shows that spot TV spending is actually down vs. a year ago, by about $150 million. That's in contrast to reports from many broadcasters that third-quarter sales gains were spurred by auto spending.
Some on the buy side of the business say the outlook for car-ad spending into first quarter 2003 is uncertain. "There really is no firm direction," says the head buyer for one of the major auto companies. "The hope in the industry is that spending remains flat—and that's probably a best-case scenario—to continue to try to drive sales."
One of the unknowns, of course, is whether car sales will fall off sharply next year, as some believe, after several years of record or near-record sales. But National Automobile Dealers Association Chief Economist Paul Taylor argues against a sharp fall-off: "History tells us these things don't fall off a cliff the next year unless the economy does after a strong year." And he notes that Gross Domestic Product is projected to grow 3% or so next year.
NADA projects full-year car sales for 2002 will total 16.7 million units, the fourth-best year on record, behind 2000 (17.35 million), 2001 (17.12 million) and 1999 (16.9 million).
J.P. Morgan, the Wall Street firm that recently issued a detailed study on car-advertising trends, projects auto advertising will climb by about 4.9% in 2003. The report states that auto ads account for 16% of all TV advertising and about 12% of radio advertising. For local TV stations, the percentage is higher, often reaching 25%-30%.
The Wall Street consensus is that about 16.5 million cars will be sold in 2003. For now, NADA's Taylor says that figure is about where he sees car sales ending up for next year. We think the interest rates will be there next year with a stronger economy."
The JP Morgan report states that other pressures may keep the carmakers' ad budgets up. Those pressures include increasing foreign competition, bids for higher market shares, and, possibly, the fact that it is more cost-effective to keep production levels high.
The financing incentives are good for consumers and car dealers but no so hot for the carmakers. They make much of their profit from interest-bearing loans to car buyers. "Zero-percent financing has never been the most profitable promotion out there," says Vinton Vickers, JP Morgan's broadcasting analyst and co-author of the auto study.
According to Vickers, there's anecdotal evidence that spending per car brand is down. And the brand competition will intensify next year, when manufacturers are expected to launch 59 new models into the marketplace—50% more than the 39 new models launched in 2002. The amount of new product suggests that spending will continue to rise, says Vickers. "Even if auto sales are off over this year, which it will likely be, there's just a lot more noise out there."
And thus, the media world hopes, the need for car companies to shout a little louder.
No related content found.
No Top Articles
Digital Rapids provides market-leading software and hardware solutions, technology and expertise for transforming live and on-demand video to reach wider audiences on the latest viewing platforms more efficiently, more effectively and more profitably. Empowering applications from..more