TV, Auto Biz Reaffirm Bond

Apr 21, 2003  •  Post A Comment

What’s good for General Motors is good for the local broadcast television industry. And what’s good for Ford, Toyota and the rest of the critically important automotive advertising category also benefits local TV.
Exhibit A: In 2002 automotive was the largest advertising category for local broadcast television, bringing in $3.7 billion in local and national spot combined, according to the Television Bureau of Advertising. By comparison, the second-largest ad category-restaurants-accounted for only $1.4 billion in 2002 local broadcast dollars.
Exhibit B: The approximately 1,100 station and advertising executives and others packed into a meeting hall in Manhattan’s Javits Convention Center last week for the TVB’s annual marketing conference, its second held in conjunction with the prestigious New York Auto Show. That attendance level is up 44 percent over last year, according to the TVB.
Despite weakness in the new-car market at the start of 2003, the auto-industry “patient is healthy and recovering from the mild cold it had during the early months of the year,” said Jim Press, chief operating officer of Toyota Motor Sales USA. Mr. Press, who keynoted the conference, also noted to appreciative applause that Toyota itself has spent $6.5 billion on TV advertising in the past decade.
Despite war, economic difficulties and the high cost of gasoline, “At Toyota, we’re still projecting annual solid sales of 16.5 million vehicles” for the industry as a whole, Mr. Press said. “That’s a bit off from the record pace of the past few years, but it’s still the industry’s fifth-best sales year.”
However, on the same day Mr. Press was making that upbeat prediction to the TVB, General Motors warned that it might be unable to reach its earnings goals for the year because of the costs associated with offering discounts and the uncertainties associated with the struggling economy.
Mr. Press’s longer-term forecast for the automotive industry was rosy as well, based primarily on the 63 million young people who will reach driving age during the next 10 years. With “marketing and selling costs … approaching 50 percent of the cost of each vehicle,” Mr. Press said, how to reach that upcoming generation has become Topic A in the auto industry, with automakers creating entire new lines and new commercial campaigns to entice Generation Y and beyond.
TV is central to the Gen Y advertising equation, but ads that direct the younger viewer to a Web site are becoming ever more important. In fact, fully 50 percent of the Saturn automobile buyers last month at the Long Island Automotive Group “touched” the Internet as part of their buying process, said Michael Lazarus, executive VP, group operations, LIAG. “When [car commercials] are on national television we have floor traffic and the opportunity to sell,” he said, and when the spots aren’t on the air, car sales drop. Television “can put our brands on the [customer’s] shopping list,” he added.
The battle for new drivers and for the upcoming generation even has ads for luxury cars turning up on networks that cater to the young, who presumably can’t afford them. For example, Mercedes advertises on MTV-something that would have been unheard of five years ago, said Douglas Callahan, president of Carriage House Mercedes-Benz in New London, Conn.
Not everyone was as sanquine. As the boomer generation fades from the scene, it will be approximately five years until the next big generational “bubble” is ready to replace it with its dollars as an economic stimulus, according to Donny Deutsch, chairman and CEO of Deutsch Inc., which represents Mitsubishi, among others. Expect four more years of downturn and doldrums, he told the conference, and expect to encounter consumers who are in a postwar “kind of malaise” and are “frightened to death” by terrorism and other uncertainties.
Reach them with messages of comfort, he said, with a little bit of escapism and with “dumb fun.”
“Our clients … are retreating to TV,” said David Verklin, CEO, Carat North America. Mr. Deutsch said TV advertising is in vogue now.
But both television and the automotive industry face the same longer-term problem, according to Jim Schroer, executive VP, global sales and marketing, DaimlerChrysler. And that problem is falling prices.
In the automotive world, prices are falling by approximately 1 percent per year, Mr. Schroer said. “How do you make money when prices go down?” he asked. That is the question that both industries will need to face.
“The boom in television does not extend to all television,” said Erwin Ephron, a partner in Papazian & Ephron, who singled out lower-tier cable networks as among those not being lifted by the rising tide of ad dollars.
As for the effects of the war in Iraq on TV advertising, coverage of the war on the broadcast network side caused “no reversal of business,” said Tony Vinciquerra, president and CEO, Fox Networks Group, adding that the losses during sustaining coverage at the war’s beginning were made up “pretty quickly.”
Some early upfront predictions from industry leaders have forecast CPM increases in the 15 percent to 20 percent range, but Mr. Vinciquerra noted that while he foresees “good, healthy” upfront increases, he does not think they will be that high.
On the local side, advertisers are “cautiously optimistic,” said David Barrett, president and CEO, Hearst-Argyle Television, which owns 24 stations. “They’re starting to plan more business, [but] they’re tentative in terms of when they book that business. … There’s a fair bit of business pending in most of our markets, both local and national.”
Steve Herson, president and general manager of the well-known station rep firm Telerep, added, “I have 85 percent of my money booked for May. … We’re at 65 percent for June, and I think we’re going to come out OK. I think the advertisers speak with the money they spend.”