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Local Broadcast Ads Off Pace From 2002

Oct 20, 2003  •  Post A Comment

Local broadcast advertising will probably be in for a tough stretch this fall, since advertising dollars aren’t estimated to improve over last year’s totals in the fourth quarter.
At the same time, local cable advertising sales will see gains over a year ago.
The $24 billion local broadcast advertising market of a year ago could be flat to slightly down by year-end, said Chris Rohrs, president of the Television Bureau of Advertising. The local market for this purpose includes local spots sold by individual television stations and national spots, which are sold by national spot sales companies.
The problem, Mr. Rohrs said, stemmed from nervous television advertisers’ cutting their TV spending earlier this spring due to the war in Iraq. The TVB had anticipated advertising revenues would climb 5 percent for the first half of 2003. Instead, local broadcast advertising is now just even with last year’s pace.
All this will make it harder for 2003 to see a higher revenue increase over 2002. The fourth quarter 2002 witnessed soaring increases-which will be difficult to match in the fourth quarter 2003. For instance, advertising revenue for September 2002 was up 41 percent over the year before, October was 31 percent higher. November and December each witnessed increases of 12 percent. Overall local broadcast was up 11 percent in 2002 over 2001. “It’s going to be a challenge,” Mr. Rohrs said. “Clearly we need a strong retail holiday season.”
The Two-Year Rule
Mr. Rohrs said it is better to look at broadcast advertising revenue over a two-year period. In even-numbered years Olympics and major political advertising campaigns spike advertising revenue growth. What happens in odd-numbered years is there is no Olympics or political advertising and there is less growth.
Still, comparing ad sales from two years ago, in 2001, Mr. Rohrs said: “I fully expect our industry to match the growth rate of cable.” He said the local cable ad sales industry should grow at 6 percent to 7 percent this year over 2002, while local broadcast will be flat. But when taking into account the two-year rule, Mr. Rohrs said both local broadcast and cable will have climbed 12 percent to 14 percent from 2001 to 2003.
At least one cable sales executive expects more growth than Mr. Rohrs estimated-at least for part of the local cable ad sales business this year. Andrew Ward, executive VP, sales of National Cable Communications, the major national cable sales representative, said, National advertisers who buy cable on a market-by-market basis this year are expecting growth in the high teens percentage over last year.
Total local cable advertising sales grew 7.5 percent year to year to $4.2 billion in 2002, according to the New York-based media agency Universal McCann. Mr. Ward said local cable advertising is looking to grow further by expanding the business it does with certain advertising categories. He said cable currently does more business with automotive clients than with any other category and would like to ramp up the deals in other advertising categories.
“Our biggest clients after automotive are retail and restaurant,” he said. Spot cable books business with 90 of the top 100 TV spot advertisers who traditionally buy broadcast.
“A lot of our retail clients use local cable,” said Zachary Rosenberg, executive VP, Western division, Horizon Media, Los Angeles. “[Cable interconnects] like Adlink have a good story to tell. You can target creative ads by ZIP code and demo.”
Mr. Rohrs hopes that for the rest of the year, broadcast may benefit from early 2004 year political spending.
In other categories, he said, look for car manufacturers to spend heavily for the fourth quarter because dealers still have plenty of car inventory on their lots. Movie companies, will show media spending increases through the rest of the year, all from increased spending for DVD sales. He said retailers such as Wal-Mart, Kohls, Lowe’s and Home Depot are very TV-oriented and should continue to spend.
On the softer side, McDonald’s Corp. has led the restaurant category, which continues to spend less. TV stations are also working on convincing pharmaceuticals, which spend heavily on national TV networks, to spend locally. Mr. Rohrs said only 2 percent of pharmaceutical companies spend their media on local broadcast-far below the average of other industry categories.