Wolzien sees economic woes persisting

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Las Vegas - For those of you thinking that maybe recent interest rate cuts by the Fed will kick start the stalled advertising market forget about it. A look at past downturns in the economy shows that interest rate cuts don't effect ad expenditures one way or the other, says Tom Wolzien, media analyst with Sanford Bernstein.

And you can pretty much forget about an economic recovery in the second half of 2001, as well, Wolzien told an audience of Television Bureau of Advertising Conference (TVB) attendees in Las Vegas on Monday (April 23). The chances of that happening are looking less likely with each passing day, says Wolzien.

The good news is there will be a recovery, Wolzien said. The fact of the matter is nobody knows when it will occur. His best guess, and it's just that, an educated guess, is that overall advertising might see a slight gain next year of maybe 2%. That will be after a flat 2000, with a decline in national broadcast, but maybe a 4% for cable. The economy, he believes, will grow at a sluggish 1.5% this year.

And while big media companies like AOL Time Warner and Viacom kept insisting last fall that there we no problems and that advertisers were living up to their upfront contracts, "they were technically correct but disingenuous," Wolzien asserted. Advertisers were living up to their contracts, but they were exercising options to get out of portions of those spending commitments in huge numbers. When the economy does resume an upward turn, said Wolzien, "it will be heralded by a rebirth of auto advertising.

Wolzien's advice to stations until the next upturn: "hunker down and conserve cash until the patient stabilizes."
When the recovery does arrive, Wolzien further predicts it will spark a new round of industry consolidation. He bases that prediction, essentially on the market capitalization for both AOL Time Warner and Viacom, which are exponentially bigger than the market caps for all the other players in the industry. - Steve McClellan