Ad Revenue To Rise 7%
Universal McCann forecaster expects network TV to climb 12%
By Steve McClellan -- Broadcasting & Cable, 12/14/2003 7:00:00 PM
After the 1991 recession, it took two years before the economy fully recovered and headed into the next boom cycle. According to Robert Coen, it looks like 2004 will be the first full year of recovery from the 2001 recession.
|The Good News for '04|
Source: Universal McCann
Universal McCann's chief forecaster predicts that total U.S. ad spending will grow 6.9% to $266.4 billion next year. "The key indicators are starting to move back up again," he told attendees at last week's UBS media conference in New York. "The economic outlook is much stronger than it has been for some time."
That news ought to be especially welcome to broadcasters, who should be able to turn those positive signs, along with the "quadrennial effect" of an Olympics and a presidential election year, into double-digit gains in ad revenue next year, says Coen.
He predicts that network-TV revenue will climb 12% to $17.4 billion.
David Poltrack, executive vice president, research and planning, CBS, is only slightly less bullish. Speaking at the UBS conference, he predicted network growth of 10% next year.
If Coen's and Poltrack's projections prove accurate, 2004 would be the first year of double-digit growth for network TV since 2000, the last quadrennial year, when network ad dollars rose 14%. By comparison, both executives say network advertising should post a modest, 3% gain to $15.5 billion this year.
Other agency executives said last week that it's too early to say what shape the ad spending will take for TV in 2004.
Jon Mandel, co-chief executive of ad buyer MediaCom, told attendees at the Credit Suisse First Boston media conference in New York that near-term improvement in the scatter market is far from a sure thing. Scatter was weak in the fourth quarter, and, if it doesn't improve in the next two quarters, the odds of another strong upfront market in spring 2004 would be unlikely, he said.
CBS's Poltrack said that, even without the Olympics gain, next year's network growth will be a fairly strong 7%. But, to get there, he said, several things have to happen, including the continuation of the economic recovery. He assumes that a sustained recovery would revive the scatter market.
But 7% growth (sans Olympics) is also contingent on the networks' collective ability to "manage their audience deficiencies," says Poltrack. In other words, all bets are off if network ratings fall far enough below guaranteed levels that the networks use all of their scatter time making good to advertisers.
Poltrack also said his forecast assumes a strong 2004-05 upfront market. And those two conditions—manageable audience declines and a strong upfront—are interrelated to some degree. If, for example, ratings remain below guarantees to advertisers for the rest of the season, that could take some, though not all, available ad time out of the scatter market. If that happens, pricing for the time that's left could soar with just a modest amount of demand. And, he contends, "if scatter prices for the first and second quarters are substantially higher than the upfront prices, then I do not believe that we will see many upfront-market defectors next year."
John Perriss, CEO of ad agency ZenithOptimedia, said at the UBS conference that he expects total ad growth next year of about 4.7%, about two percentage points below what Coen is predicting. "There are still some doubts about the sustainability of consumer spending."
"Corporate confidence," he said, will spur ad spending to sell products and drive earnings. This year, he said, it has been the biggest advertisers who have kept the ad economy afloat in the U.S.
Citing data from Competitive Media Reporting, Perriss noted that, in the first half of the year, the top 10 advertisers boosted ad budgets by 16%. Across all companies, the average increase was less than half that amount. "Spending is driven by the profitability of individual companies," he said, "and not necessarily certain sectors."
Coen predicted that national spot TV will increase 9% to $11.6 billion next year, bolstered by political advertising, which, according to a recent report by Sanford C. Bernstein & Co., could reach $1.6 billion. Local TV will grow 7% to $14.5 billion, said Coen. Cable should post a 12% gain next year to $15.8 billion, while syndication may climb 9% to $3.8 billion. Local radio could be up 6% to $16 billion while national radio may climb 7% to $4.7 billion.
Among the major network ad categories, Coen reported that, for the first nine months of 2003, the toiletries/cosmetics category showed the most growth, climbing 25% over the same period a year ago. TV's biggest category, automotive, posted solid gains: Network auto advertising was up 8%; car spending on local stations (national spot), 2%.
The biggest growth category for national spot in the first nine months of the year was the drug category, which was up 18%. Drug companies spent liberally on network as well; their budgets were up 12% for the first nine months.
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