War Fears Prompt Advertiser Caution

The Bush Administration's war drums are having an evident effect, but maybe more on American advertisers than on Iraqi generals. As they reported strong gains for the fourth quarter ended December, radio stations noted that they are seeing signs of a slowdown.

Clear Channel, Cox Radio and Cumulus Media all said they were having a hard time predicting how March ad sales will run, because some buyers were starting to hesitate amidst all the war warnings.

Reporting a "blowout" fourth quarter, Clear Channel President Mark Mays said first-quarter sales at the nation's largest owner of radio stations (around 1,200) "started very, very strong" but, "as the war rhetoric started to increase over the last two or three weeks, we have simultaneously seen advertisers starting to sit on their hands and being very cautious about when the war will start. Therefore, they have slowed down placing business for late February and early March."

He added, however, that second-quarter sales seem to be on track.

Said Cumulus CEO Lewis Dickey, "There is a lot of apprehension out there on the part of the buyer. We just have very little visibility into March right now, which is why we're being very cautious. If war does strike and it's much worse than any of us think and it has adverse consequences, all bets are off. And there's no way to forecast that."

That's a more negative vibe than TV-station groups have been sending out. TV executives acknowledge that buyers are nervous, but they haven't seen a pullback.

"I don't think people are canceling in March," said Young Broadcasting CEO Vince Young. "I think people are just sitting back right now, sort of waiting to see what happens. So probably what you are seeing is some people that just aren't placing business yet. ? If war broke out, somebody might cancel, but it's just too early to know that." Just a couple of accounts, he said, have asked his stations to drop their ads should the stations and their networks go with wall-to-wall war coverage if the Bush Administration actually starts dropping bombs.

The caution follows fairly uniformly strong results among all ad-supported media, which compare the fourth quarter of 2002—an election year—with the three months immediately following the 9/11 attacks. So TV and radio earnings reports benefit from easy comps.

Fourth-quarter radio revenues increased 9% to $979 million, but cash flow zoomed 42% to $428.2 million, fueled by savings from the layoffs of hundreds of employees last year.