TVB conference: Through a crystal ball darkly

No consensus on when the ad sales will resume growth

Here's how it was at last week's TVB forecasting conference in New York: Sanford Bernstein media analyst Tom Wolzien got a big laugh when he told attendees that Scotch and Valium would be available on the way out.

Overall, the forecasts coming out of the session were, in a word, depressing. One unanswered question: Will the recovery come in late 2002. Or perhaps not till sometime in 2003?

Forecasting ad projections has always been a tricky business, and there were some widely different projections made for next year. For example, the predictions for cable advertising ranged from Merrill Lynch's 10% decline to Veronis Suhler's 14% increase.

And many firms constantly revise their ad predictions. Just last week, both Merrill Lynch and Zenith Media offered new and lower projections on ad spending for 2001.

As TVB head Chris Rohrs candidly noted, volatile market conditions can mean blown projections. Take TVB's initial 2001 projection for local- and national-spot TV a year ago. Last September, the organization was projecting an increase of 3%-5% for local-spot TV sales and a gain of 1%-3% for national-spot sales.

Not even close. The TVB revised those projections just last month based on ad-sales results for the first five months of this year.

Read it and weep: The TVB's new forecast for national spot this year is down a whopping 16%-18%, while local spot is expected to be down a somewhat less depressing 3%-5%.

And the TVB was far from the only one that blew its initial 2001 projection. Last year, a dozen Wall Street firms contributed forecasts to the TVB's forecasting conference. None of them predicted a down year for local spot in 2001. About half thought national spot might be down 1% or 2% but nowhere near the 16%-18% currently being predicted for this year.

And the news from the auto sector—TV's biggest advertiser— isn't very rosy, either.

Robert J. Maguire, chairman of the National Automobile Dealers Association, said the industry is currently on track to sell 16.5 million vehicles this year, almost 1 million fewer than last year and 400,000 fewer than 1999.

Domestic automakers have cut their ad budgets by close to 20% this year. Foreign carmakers have increased their budgets, but they account for only about 15% of the overall market.

Yes, Maguire said, dealers believe television to be a "valuable bridge to our customers." At the same time, he said, "we have more options for spending our ad dollars than ever before." And increasingly, dealers are using such alternative media as the Internet and direct mail. The share of auto dealers' ad budgets going to television dropped from 16.6% in 1999 to 15.5% in 2000, he said.

TV stations, Maguire said, "need to show dealers the value you bring to the table." And television, he suggested, was not helping its quest for auto ad dollars with unflattering portrayals of the dealers in news reports and entertainment shows.

"You see the same old and invalid stereotypes on the tube," he said, of "motor-mouthed dealers in plaid suits and loud ties."

Maguire stopped short of asking TV stations to do glowing features of the auto industry in its newscasts. But he did say there is "built-in media bias against car dealers." The public has a rosier perception. Maguire said a recent Gallup poll indicated about 75% of those surveyed reported being very satisfied or extremely satisfied with their car-buying experience.

But when journalists were asked in the same survey what percentage of consumers they believed would have such a satisfying experience they said about 5%.

"If only we could see that true image reflected more often in TV coverage," said Maguire.

In what may be a positive development for the TV industry, Maguire reported that General Motors is reverting to an ad-buying procedure that gives dealers far greater input into the way dealer ads are planned and purchased. GM assumed almost total control of that process a couple of years back, and "it didn't work," he said.

Meanwhile, Wall Street analysts now say they don't expect the ad market to fully recover until the second half of 2002 at the earliest. "It's about as bad as we've ever seen it," said Merrill Lynch's Jessica Reif Cohen.

CS First Boston entertainment analyst Dennis Leibowitz said this year will be the first time a long time that advertising growth will be slower than the growth of gross domestic product. "The question is, is it cyclical" or a sign of an emerging new pattern? The answer is probably years away, he noted.

Paul Sweeney, TV and radio analyst at CS First Boston, doesn't see a recovery happening until the second quarter of next year at the earliest. "But there are real concerns about to what degree it will even be
a 2002 event."



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Merrill Lynch






Bear Stearns

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Prudential Securities






Vogel Capital






UBS Warburg






Sanford C. Bernstein






Universal McCann






Veronis Suhler