Autos driving scatter market

The gains enjoyed in the upfront market continue

Back in June, when the upfront network-TV ad market busted through the roof, some ad-agency executives said they thought the $8.3 billion payday would come at the expense of this season's scatter market. Even network executives didn't think all the money would stick.

Wrong. The scatter market is now going through the roof as advertisers can't seem to get enough network time and also seem to have rediscovered local TV as well.

A handful of public companies, including Tribune, Hearst-Argyle, Acme and Granite Broadcasting, have upwardly revised their earnings and revenue guidance for the third quarter. Station operators also say the fourth quarter is on track to generate double-digit ad revenues.

For example, Hearst-Argyle recently indicated sales will be up 18%-20%, vs. earlier guidance in the 11%-13% range. "Business is very strong" and likely will be through the end of the year, says Hearst-Argyle President David Barrett.

Fox TV stations President Mitch Stern agrees. "A lot of advertisers are competing aggressively with each other, and they can't ignore the power of television." National spot business, he said, "is the best it's ever been."

Likewise, Dennis FitzSimons, president and chief operating officer at Tribune Co., told investors last week at a Goldman, Sachs conference in New York that, although the past three years have been an economic roller coaster, sales were up significantly in the third quarter. The fourth quarter, he said, is encouraging, with sales "way up" over last year's miserable post- 9/11 trough.

The automobile makers are now in the middle of another 0%-financing campaign and are buying a ton of ads to get the word out. Rich Hamilton, CEO of Zenith Media, points out that the auto category is so big that, when it's hot, it can tighten up the market almost by itself.

Unlike in much of last season, ABC is participating in the scatter market and is commanding prime time price increases that are 25%-30% higher than its upfront rates, says Mike Shaw, president of sales for the network. The news category is also strong, he adds. And, in daytime, ABC is commanding rates that are up 60% or more from the upfront. There's no reason this shouldn't continue," says Shaw of the strong scatter market. "There are no storm clouds that we can see."

Joe Abruzzese, president of sales for CBS, says his network is commanding scatter-price increases between 25% and 40% across every daypart. "Advertisers seem to have a lot more faith in what's going to happen in the future than Wall Street does," he says, referring to the recent sell-off in the financial markets. "Clients are betting they're going to sell their products, and they're launching new products and putting marketing and advertising behind them."

Says Zenith's Hamilton, "The marketplace has been quite a bit healthier than most people predicted six months ago." And the more time passes from last year's 9/11 attacks, the more normalized the market will become.

"Most of the health we're seeing is essentially the replacement of some money that was held back last year," he explains. "Travel and airlines are coming back, and, as we get further away from that event, we're gradually getting back to an ad economy where people realize that, if they want to move products, they have to advertise them."

Tom Decabia, executive vice president of the media-buying firm PHD USA, says a lot of retailers got hammered last year with the one-two punch of the recession and terrorist attacks. This year, they are spending heavily on ads leading into the holiday season. "Right now," he explains, "they're saying, if we're going to have a decent year, we need to step up now."

Meanwhile, at the local level, comparisons with year-ago spending levels (which were dismal) and this year's political spending are helping to make sales look better at TV stations. But station executives also say the market is in pretty good shape even if you put those two factors aside.