Ad Spending on the Rise
Veronis sees TV business growing 7% a year as the economy mends
By John M. Higgins -- Broadcasting & Cable, 8/2/2004
After years of getting slammed by the economy, the TV business is expected to enjoy several years of strong growth. That's the prediction of the annual Communications Industry Forecast from investment-banking firm Veronis Suhler Stevenson. The survey predicts total TV ad spending will grow an average of 7.3% annually from 2004 to 2008.
| 2004 | 2008 |
| $64.2B | $82.9B |
| Year | Network | National Spot | Local | Syndication | National | Local | |
| BROADCAST | CABLE | TOTAL TV | |||||
| 2004 | $17,076 | $11,552 | $14,510 | $2,538 | $13,818 | $4,685 | $64,179 |
| 2005 | $17,450 | $11,922 | $14,713 | $2,604 | $15,133 | $5,180 | $67,001 |
| 2006 | $18,708 | $12,744 | $15,581 | $2,755 | $16,661 | $5,763 | $72,212 |
| 2007 | $19,045 | $13,088 | $16,360 | $2,854 | $18,144 | $6,347 | $75,838 |
| 2008 | $20,721 | $14,186 | $17,424 | $3,088 | $20,212 | $7,309 | $82,940 |
| Source: Veronis Suhler Stevenson |
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| YEAR | BASIC NET LICENSE FEES | BASIC NET ADS | BASIC TOTAL | PAY NET LICENSE FEES | TOTAL* |
| 2004 | $13,061 | $13,818 | $26,880 | $4,769 | $31,649 |
| 2005 | $14,642 | $15,133 | $29,774 | $5,017 | $34,791 |
| 2006 | $16,351 | $16,661 | $33,012 | $5,268 | $38,280 |
| 2007 | $17,825 | $18,144 | $35,969 | $5,521 | $41,490 |
| 2008 | $19,290 | $20,212 | $39,502 | $5,734 | $45,236 |
| *Includes advertising and license fees from cable and DBS operators Source: Veronis Suhler Stevenson |
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| YEAR | broadcast NETWORK | NATIONAL SPOT | LOCAL | BARTER SYNDICATION | NATIONAL CABLE | LOCAL CABLE | TOTAL NATIONAL | TOTAL LOCAL | TOTAL TV |
| 2004 | 10.0% | 8.5% | 6.8% | 7.6% | 14.0% | 12.0% | 10.7% | 8.0% | 9.9% |
| 2005 | 2.2% | 3.2% | 1.4% | 2.6% | 9.5% | 10.6% | 4.7% | 3.6% | 4.4% |
| 2006 | 7.2% | 6.9% | 5.9% | 5.8% | 10.1% | 11.3% | 8.0% | 7.3% | 7.8% |
| 2007 | 1.8% | 2.7% | 5.0% | 3.6% | 8.9% | 10.1% | 4.4% | 6.4% | 5.0% |
| 2008 | 8.8% | 8.4% | 6.5% | 8.2% | 11.4% | 15.2% | 9.6% | 8.9% | 9.4% |
| Compound Annual Growth | |||||||||
| 1998-2003 | 1.9% | 0.0% | 2.2% | 1.5% | 11.9% | 10.5% | 3.7% | 3.9% | 3.7% |
| 2003-2008 | 5.9% | 5.9% | 5.1% | 5.5% | 10.8% | 11.8% | 7.4% | 6.8% | 7.3% |
| Source: Veronis Suhler Stevenson |
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That's nearly double the rate that broadcast and cable companies generated during the previous, rocky five years.
According to P.B. Weymouth, head of mergers and acquisitions for Veronis Suhler, the firm doesn't see anything magical driving the TV business in the next few years. It believes that a simple snapback in the broader economy disproportionately benefits ad sales. The end of lavish ad spending by fading dotcoms, 9/11 and the Iraqi War hammered ad growth at TV stations and networks down to 3.7% during the past five years.
"We see TV getting back to levels that are commensurate with its historical relationship with GDP," he says, referring to gross domestic product. "TV has suffered a series of corrections over the previous five years."
Total TV ad revenues are expected to reach $82.9 billion in 2008, up from $64.2 billion this year. By the end of the five-year period, cable and broadcast networks should each generate around $20 billion in advertising.
In local markets, TV stations are expected to hit $31.6 billion, and ads sold by cable systems will come close to matching that volume, generating $27 billion in sales. Barter syndication programming should account for the remaining $3 billion.
Cable networks will increasingly steal money from broadcasters. Veronis Suhler sees their revenues growing an average of 11% through 2008, about the same rate as in the past five years. But it's almost double the 5.9% rate seen for broadcast programmers.
In the local market, cable systems are expected to grow 11% annually through 2008. Broadcast stations will set a slower pace, around 5%.
The best news for stations is that Veronis Suhler forecasts a rebound in the national spot market. The volume of big national advertisers buying commercial in local markets has dropped 13% since 2000 but is expected to resume increasing an average 5.9% annually over the next five years. Such an increase is key because national spot accounts for almost half of TV stations' sales.
