A year ago, the writing was already on the on the wall that the next 12 months were going to be ugly for TV advertising sales. Then, there was September 11. As Sanford Bernstein analyst Tom Wolzien put it, "we had no idea what a charmed life we'd been living" until that tragic day.
Indeed, with 9/11, the bottom fell out of the ad market. The industry is still recovering, and there's a wide range of opinion—as evidenced by the differing views expressed at last week's Television Bureau of Advertising Forecast Conference—about how long it will take to get there.
The TVB released its ad-growth projections for 2003 and 2004, as well as 2003 projections the organization collected from a dozen or so Wall Street firms, investment bankers, analysts and consultants.
What they have in common is that, for the most part, the projections are up over last year across all sectors of the TV business—local and national spot, network, syndication and cable (see table).
The sector likely to show the least volume of growth next year is national spot, due to the tough comparison it will have to this year when perhaps $1 billion dollars will be spent in political advertising.
Wall Street and TV firms foresee maybe a half-percentage-point growth for the sector next year, while the TVB says the sector could be anywhere from flat to up 2%. In 2004, TVB predicts, national spot will rebound with 10% growth, thanks to expected heavy political spending.
Some analysts don't believe even the low end of the 2003 projection is achievable given all the political and Olympic money that would have to be replaced.
"My official projection for national spot next year is negative 2%, and I think that is very aggressive," said one analyst. "When you think that 12% of spot dollars this year are political, you have to believe there is going to be a really huge spurt in the underlying business to get to the same level in '03. We're just not there yet."
That's a statement that really goes to the point that the TVB has been making for a while now: The national spot business ought to be looked at in two-year cycles, given the alternating-year infusion of political and Olympic ad dollars into the marketplace.
TVB President Chris Rohrs notes that, over the past decade, in odd years national spot has had low-single-digit growth even in the best of times and in even years has seen a high-single or double-digit spurt.
Over 2003 and 2004, if national spot meets projections, the sector would "exceed the 1999-2000 plateau," said Rohrs.
Campaign-finance reform kicks in after the election this year, but it remains to be seen how big a dent it will make in broadcasters' political-money trough.
The bill limits so-called soft money that can be spent on campaigns by the national parties. One expert on the subject, Jan Baran, a senior partner in the law firm Wiley, Rein & Fielding, thinks the impact will be minimal. He told TVB attendees that there is wiggle room in the reform bill that allows the national parties to "spin off" their soft-money operations to affiliated groups at the state level, where in many cases there are no limits on spending.
Wolzien, who moderated the media analysts panel at the conference, summed up the issue for ad sellers in a nutshell. "The business is truly reliant on the economy," he said, noting that, over a 40-year period, annual advertising growth was just a fraction of a percentage behind the growth of the Gross Domestic Product (GDP).
There were some strong and differing opinions expressed at the conference as to just how real the economic recovery is.
David Wyss, chief economist at Standard & Poor's, told conference attendees that the recession is over and the question now is how fast the recovery will happen, with the possibility that a second downturn might occur (with the right mix of war and inflation) before a full recovery. As recessions go, he said, this one ended "very quickly.
"The Federal Reserve Board helped," he added, "by cutting interest rates four times, to a level not seen since the Eisenhower administration." As a result, it's cheaper than ever to buy a house or a car, and consumer spending in both of those areas is extremely strong right now.
But that has some who follow the business more than a little concerned. "The economy is still in trouble, and interest rates are propping it up," said Tony Hoffman, partner at Hoffman Shutz Media Capital. "If the consumer stops spending, the whole house of cards will come tumbling down."
Wolzien also made the point that cable is finally beginning to get its act together on local sales after 30 years of "being incompetent." Top-rated stations probably don't have much to fear, he said. But weaker stations should be concerned about losing market share to cable.