In another sign of tough times for the television advertising business, new figures from research company Standard Media Index show that spending by big media agencies on TV declined in July.
The drop will make it very difficult for media companies, which posted weak ad revenue gains in the second quarter, to show the third-quarter improvement top executives promised during their earnings calls with analysts.
The July declines hit all segments of the television industry. Broadcast networks were down 7% in July, according to SMI. That’s not much of a surprise because broadcast ratings have been eroding for years. Unless one of the networks has a big event, such as the Olympics on NBC earlier this year, or a surprise hit along the order of last summer’s Under the Dome, broadcast networks will have not shown ad gains for several years.
More unusual is a 7% decline in cable network advertising. Cable advertising has been a big gainer, although it has slowed in the last few quarters. Sports are an important driver of cable ad revenue and the only major sporting event in July was the World Cup.
Syndication was down 4%, according to SMI. On the local media side, spot TV was down 9% and local spending on stations and cable systems was down 4%.
According to SMI’s figures, digital, on the other hand, was the big gainer, showing a 12% increase. The big question in the ad business is whether digital gains are coming from TV as online video grows, or from other marketing budgets.
In a recent research note, analyst Michael Nathanson of MoffetNathanson Research says that major advertisers’ TV budgets must be the source of at least some of the growing spending on online video and display. For 2014, Nathanson estimates that TV will be up 6.4%, a figure that includes political spending. But he lowered his outlook for broadcast network ad growth by 3 percentage points to 2%, and cable by 1 percentage point to 5%.
SMI figures also show newspapers, which have seen their ad revenues plunge over the last decade, were up 4% in July, but magazines, radio and out-of-home media all posted doubledigit losses.
Overall, SMI says ad spending was down 3% in July.
SMI gets its figures from the computer systems at the media buying agencies. Except for GroupM, which has the biggest share of media buying, all of the major agencies share their data with SMI, which has also been adding independent and smaller agencies to its roster, making its numbers more representative of the entire industry.