News Articles

Viacom Isn't Alone; Broadcast Execs Bemoan Local-Sales Lag

Broadcasters are looking forward to election dollars' rolling in next year 10/05/2003 08:00:00 PM Eastern

In December 2000, Mel Karmazin accused Wall Street of being "sort of screwed up" for punishing media stocks on the then unproven speculation that the economy was headed a toward a major slowdown. "I wish there was a recession so we could show how well we can perform in one," the Viacom president said.

Unfortunately for Karmazin—and for anyone else selling advertising or anything else—his wish came true, and it's still coming. Viacom has joined the throng of other TV and radio companies slammed by the rocky ad market.

Media executives pitching at Goldman Sachs' annual media investor conference last week reaffirmed their confidence in the network ad business but were gloomy about the state of local TV and radio sales. All came with pretty much the same message on local: Wait 'til next year.

That's partly because of hope for something better than the current "jobless recovery," in which growth in gross domestic product is still short of the 5%-6.5% annual gains generated through most of the 1990s. "We would certainly like to see how the advertising industry looks and how Viacom looks when the economy starts growing more than 3%," Karmazin groused.

Viacom's stock continued to get battered last week in the wake of the company's acknowledgement that problems with local TV and radio and billboard advertising would crimp earnings. Analysts now see a small sales increase, 1%-2%, for Viacom's TV stations and a small decline for the Infinity radio and outdoor advertising group this year.

But Viacom's far from alone in its local problems. Walt Disney Co. President and COO Bob Iger sounded the same note, saying that ABC properties "clearly could use a little help from the economy."

The "next year" message is also based on local TV numerology: 2004 is both Olympics and election year. The Olympics help station groups whose portfolios are heavy with NBC affiliates, like Hearst-Argyle, and, of course, NBC's O&O group. Political ads primarily boost TV stations with the strongest newscasts in the market.

TV and radio executives caution over and over that their results for the third and fourth quarters of 2003 will look low in comparison with last year—an election year. But even without that, stations' results will be terrible.

"I think it's a flat business," said Fox Entertainment Chairman Peter Chernin. "If you take out political, it's a point or so of growth. It's within our predictions." But he chided other broadcasters, saying that "I'm probably not spending too much time pretending that 2003 is over and we're already in 2004."

Tribune Co. Dennis FitzSimons said that, "while political certainly helps tighten up our markets, it's not as big an issue for us as some others."

That's primarily because Tribune stations rarely have top-rated newscasts, in large part because, in markets where they are the WB affiliate, their news runs an hour earlier than that of CBS, ABC and NBC affiliates, which usually get bigger audiences.

Karmazin believes that, nationwide, the local-ad market rose just 3% in July, went flat in August and rose 4% during September. "Within that, you're seeing extraordinary variations" among different markets, he said. Los Angeles, for example, is red hot, but other markets are way down.

Even once-surging cable-system ad sales are slumping. "Our local ad sales right now aren't so hot, 2%-3% growth," said Comcast CEO Brian Roberts. However, the company is making inroads persuading national spot advertisers to shift money to cable systems, something made easier by Comcast's takeover of AT&T Broadband, which gave the company 25% of U.S. cable subscribers. "Our national business is up 18%," he said.

The companies expressed confidence in the scatter market for their national networks. Karmazin said fourth-quarter scatter prices would achieve double-digit percentage rate hikes over upfront prices. Chernin said Fox is seeing "high-single-digit" percentage gains over upfront pricing. Both companies, however, had hoped for stronger scatter prices, particularly to feed their cable networks, which tend to withhold more inventory from the upfront in a bet on a scatter-price surge.

The executives weren't making too many predictions about the new TV season. Iger said he thought ABC was off to a good start, having "delivered stability in the ratings" last year after a big drop in the previous two years. He acknowledged that, last winter, the network had "too much reliance on reality," much of it weak product like Are You Hot? and The Family. "We won't make that mistake again."

None of the companies expressed much immediate interest in buying more TV stations. "We really haven't seen pricing that makes sense," Iger said. ABC hasn't pursued securing duopolies in the markets that way Fox and CBS have. Iger called duopolies "potentially interesting."

 

Alert to All Users of the Disqus commenting system:
Because of a recent global security issue, the Disqus website recommends that all users change their Disqus passwords. Here's a URL about the issue:
http://engineering.disqus.com/2014/04/10/heartbleed.html

 

April
May