4Q Was Rough for Advertising

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Analyst Michael Nathanson of Nomura Securities took a closer look at the fourth quarter in which several major media companies reported lower than expected advertising revenue.

His conclusion is that U.S. advertising grew only 1.5% in the quarter, the slowest growth since the fourth quarter of 2009. Among the traditional media, only broadcast networks, up 6%; cable networks, up 2.3%; and outdoor showed gains. The Internet clicked, however, posting a 12% increase. TV stations were down 15.2% and cable MSO were down 9.1%, leaving total TV off 1.2%.

Some of 2011’s problems stemmed from tough comparisons from political advertising. There was also the NBA lockout to contend with.

Nathanson also notes that total ad levels are still down 9% from pre-recession 2007 levels. The only categories spending more now than they did back then are food, restaurants, toiletries and other.

For 2012, Nathanson says he’s boosting his advertising forecast to 5.5% from 4.5% growth. That follows Nomura raising its estimate of online advertising to 16% from 8%.

“While we believe there is an improvement in tone since the end of 4Q11, when companies were cutting back on ad dollars to make their full year numbers, we continue to hear about pressure on pricing in the marketplace,” he says.

For TV, Nathanson is forecasting a 6.6% increase in 2012, down from the 7.1% gain previously predicted. He sees ad revenue at the Big 4 networks up 3.9% in 2012, unchanged from his earlier estimate. He’s lowered his forecast for national cable to 6% growth from 6.6% growth, and sees syndication rising 4%, down from 6% earlier. Local stations are expected to post a 9.3% gain, compared to an earlier forecast of 10.1% and local cable is expected to pick up by 9.4%, more than the 7.8% in the prior forecast.

Nathanson says he’s expecting a slowdown for 2013, given tough comparisons from the Olympics and political advertising 2012 will enjoy.

In 2013, he sees the Big Four flat, national cable up 6%, syndication up 4%, local stations down 5% and local cable flat.

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