Mel's rose-colored outlook
Viacom chief predicts U.S. advertising will rise nearly 6% this year
By Steve McClellan -- Broadcasting & Cable, 2/11/2001 7:00:00 PM
Call him Mel Karmazin, optimist. Of course, that comes with the territory for any salesman. And one could argue that it's the required outlook for any chief operating officer whose company, like Karmazin's Viacom, derives more than half its revenue from advertising sales-particularly in the current ad environment, which is sluggish at best.
In a speech at the annual conference of the cable television Advertising Bureau last week, Karmazin was in full optimist mode. Despite those in the press "who write those obnoxious articles" reporting the current downturn in the advertising economy, the Viacom Inc. president and COO predicted that total U.S. advertising will climb 5.8% this year.
Overall TV advertising growth will be slower over the next four years than in the previous four, he said, but should still climb at an annual pace of more than 6%.
And he threw out a challenge to his audience, more than half of which, he noted, comprised people in ad-sales businesses. "If all of you sell 20% more advertising this year than last year, then guess what? The industry will be up 20%."
This year, he predicted, network cable advertising will grow 12.5%, to $10.1 billion. The cable industry currently gets about 5% of all U.S. advertising, compared with about 22% for newspapers. "We will not be satisfied getting such a small share of the pie" going forward, he said.
Even if there is a recession this year, as Morgan Stanley Dean Witter (for one) is now predicting, Karmazin claims that advertising "will not dip." Why? Because advertising has become too important to companies trying to build brands and retain their products' market share.
"Advertising is extremely good," he said. "It's a growth industry that's going to grow even more." Ad-sales people can thank the Internet for some of that growth, he added: Despite the problems of the dotcom industry, it is forcing "brick-and-mortar" retailers to advertise more than in the past to compete with the e-tailers.
Lots of new business opportunities are emerging daily, he observed. In 2000, some 31,000 products were introduced in the U.S., "all fighting for recognition and opportunities to brand themselves."
Separately, Karmazin confirmed that CBS sold its Super Bowl spots for an average $2.3 million per unit, up from the $2.1 million that ABC averaged in 2000. And CBS did it with just three dotcom spots vs. the 17 that aired in the ABC telecast and drove up the price considerably.
Sales types should not expect the kind of windfall from dotcoms that occurred in 1999-2000 to happen again anytime soon, he warned: Those dotcom businesses were spending "with no relevance to return on investment."
He also confirmed that Viacom has changed its mind about spinning off its Internet assets into a separate publicly traded company. Internet valuations aren't as inflated as they once were, and the investment community is no longer valuing those assets at a higher level than Viacom itself. "We've come to a normalization" in that regard, he said. "We no longer feel like we have to spin them off."
The company would like to buy more cable networks, which he said is "one of the businesses we like the most." And, he added, it has its eye out for more TV stations in the top-20 markets and more radio stations and outdoor-advertising companies in the top 50 markets.
Separately at the CAB conference, New York-based media consultant Jack Myers threw out some projections on ad spending that should give broadcasters something to ponder. Over the next five years, he predicted, ad revenues for the seven over-the-air networks (the Big Four, The WB, UPN and Pax TV) will climb from roughly $17 billion to about $19 billion.
Meanwhile, cable advertising will climb from about $9.8 billion to $24 billion.
Online advertising, though, will see even larger growth, climbing from $4.8 billion in 2000 to more than $32 billion in 2005-06, Myers said. Veronis, Suhler & Associates (B&C, Aug. 14) last summer predicted similar growth patterns for the three media.
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