Coen Reduces Growth Estimates for '03

Just because the upfront market is roaring, don't expect the networks or many other advertising sectors to post exceptional gains for the year. That's the conclusion of Robert Coen, advertising forecaster for ad agency Universal McCann. In his midyear forecast for 2003 ad spending, he trimmed his estimates for 10 of the 16 categories he tracks.

Overall, Coen expects spending on national and local media to increase 4.6% to $247.7 billion. That's down $1 billion from the 5% increase he had predicted in December and down another $1 billion from the 5.5% he had forecast last July.

Still, 4.6% growth is better than the 2.6% increase seen in 2002 and, of course, the disastrous 6.5% drop that media outlets experienced in 2001.

Coen blames the revision on weakness in spending on local media, which he sees growing 3.6%, instead of the 4.6% forecast earlier. Spending on national media should rise 5.3%, about what he was predicting in December.

He sees good news in some sectors, revising upward estimates for cable networks (from 7.5% predicted earlier to 10%), syndication (from 4% to 8%) and Internet sites (from zero growth to 5%).

But the losers include spot TV (reduced from 2% growth to a 1% decline), local TV ads (from 3% to 2.5% growth), local radio (from 5.5% to 4%).

Individual media sectors (for example, cable or Internet advertising) may experience volatile sales shifts, but overall ad spending is fairly well anchored to the gross domestic product. Ad spending generally runs 2.1%-2.5% of overall economic activity. Of course, with GDP at $10 trillion or so annually, a shift of one-tenth of 1% means $10 billion more or less for media to fight over.

Coen's lessening confidence in the overall economy means that he expects slower ad growth. He expects GDP to grow 2.4% in 2003, about the same as last year but half the rate of 1997-99.

"Trends are not quite as robust looking as they had been," he observed, adding, "Advertising lags the economy, it doesn't lead it. Traditionally, advertising will grow more slowly than the economy."

Coen is encouraged by first-quarter spending. He cited data from Competitive Media Reports (CMR) showing growth of 11% in spending by car makers (up 6% in spending on broadcast and cable networks, up 8% on spot TV), 22% by toiletries and cosmetics manufacturers (up 26% on TV networks, up 11% on spot), and 17% by drug companies (up 10% on TV, up 31% on spot).

Those segments are among the largest buyers of TV time. Secondary categories were more of a problem. In the first quarter, telecom spending fell 11% from already reduced rates (down 16% on TV networks, up 6% on spot TV); airlines dropped 26% (down 51% on networks though just 3% on spot and, interestingly, up 30% in magazines).

There are some flaws in Coen's estimates. He has no way of tracking spending on product placement (like the Mountain Dew given as prizes on Survivor).

And he has difficulty getting detailed information about spending on local cable advertising. The Cabletelevision Advertising Bureau puts out very little data on ad sales by local cable systems, and it's not monitored at all by CMR. "We don't know how much money people are spending in spot cable advertising," Coen said.

That's not likely to change, partly because cable data is hard for outsiders to collect. For example, just a dozen or so broadcast stations would have to be monitored to get a good fix on the Los Angeles market. But local cable systems there sell ads in 75 local zones, inserting ads into 45 networks.

Although cable nets want the CAB to collect and promote national cable ad sales, cable operators have preferred to leave the talking to their systems, said CAB Vice President of Local Sales and Marketing Kevin Barry. The bulk of local cable ad revenue, he noted, is generated by the 10 largest MSOs, most of which are publicly traded. "Listen to the analyst calls," he suggested.