Ad forecasters, looking ahead to one of those odd-numbered years bereft of Olympic and election-year spending, are predicting 2005 will be relatively strong.
Speaking at the annual UBS Media Week Conference last week in New York, Robert Coen, senior VP and forecasting director at ad-buying agency Universal McCann, forecast a 6.4 percent increase in U.S. advertising to $280.6 billion for 2005. He also said advertising will show a 7.4 percent rise when 2004 is totaled up.
But Mr. Coen said national consumer media will experience a smaller improvement, posting just a 4.3 percent gain in 2005 compared with an 8.8 percent jump in 2004.
“Extra stimulus from the election and the Summer Olympics will not be present, and the pace of the economic recovery should moderate,” said Mr. Coen, who has been issuing forecasts for decades at McCann. “However, we do expect the U.S. economy to grow at a reasonable pace, and we expect continued improvement in the advertising trends, which historically tend to lag behind the economic trends.”
Mr. Coen observed that advertisers have been reacting to political and economic uncertainty by hoarding marketing resources, but he expects that cautiousness to diminish. At that point, “Marketers will shift attention away from cost-cutting to rebuilding brand positions and growing their total company market share,” he said. “We do not expect advertising to boom in 2005, but there appears to be enough momentum to keep advertising growing faster than the economy again in 2005.”
National advertising will be stronger than local advertising, with national showing a 7.4 percent increase compared with a 4.8 percent increase on the local side. But most of the biggest national gains will be in areas such as the Internet (up 25 percent to $8.8 billion) and direct mail (up 9.5 percent to $57.2 billion).
Mr. Coen sees spending on cable TV nearly equaling spending on the four big broadcast networks. Cable will rise 7 percent to $16.72 billion, while broadcast will increase 2 percent to $16.787 billion.
Syndication will rise 4.5 percent to $4.1 billion, he said, and spot TV is forecast to drop 1 percent to $10.8 billion.
Forecast Too Conservative
Also speaking at the UBS conference was David Poltrack, executive VP, research and planning, for CBS, who said broadcast TV would be strong.
“Last year at this conference, I forecast a 10 percent increase in broadcast network advertising in 2004, with a base, underlying increase of 7 percent, adjusting for the Olympics advertising,” Mr. Poltrack said. “It looks like I was too conservative.”
Mr. Poltrack said that for 2004, the final gain should be more than 12 percent, or 8.6 percent, discounting the extra spending caused by the Olympics. For 2005 he forecast a gain of 2.5 percent, which he noted would be a 5.5 percent gain if the Olympics weren’t included in last year’s total.
Mr. Poltrack said he based his forecast on the continuation of the economic recovery already under way, on the strong upfront market bases and the ability of the networks to manage audience deficiencies.
He noted that the networks generated an average cost-per-thousand increase of 7.5 percent in the past upfront and that spending in most of the top advertising categories was up by double digits.
“This broad base of increasing network television spending provides the networks with a very strong foundation going into 2005,” he said.
The networks’ success in the 2005 upfront will depend on how close they come to meeting the audience guarantees they made in 2004.
Mr. Poltrack said that this year’s results so far are “a mixed bag,” with CBS and ABC having strong seasons, while NBC and Fox “are off to weaker starts.”
He said overall network demo numbers are about flat from last year. “If we figure on a 1 percent decline in demo delivery collectively for the four networks, that would shave a point off of the 7.5 percent market base, lowering it to a still solid 6.5 percent.”
But Mr. Poltrack said broadcast was showing gains with its hit shows. He said the top 10 broadcast shows were up 6 percent among adults 25 to 54 and 4 percent among adults 18 to 49.
Demand for hot new shows such as ABC’s “Desperate Housewives” and “Lost” and CBS’s “CSI: NY” help networks keep ad rates high. “These are the relatively price-inelastic programs that sustain the network market,” he said.
Mr. Poltrack said that while cable continues to gain audience overall, the top 10 billing cable networks are down in the key demos, season-to-date. Those networks account for the majority of cable ad dollars.
(Jack Wakshlag, Turner chief research officer, said in a press presentation last week that cable’s gains are accelerating and only one of the 10 highest-rated cable networks was down among people 18 to 49 year-to-date, and that just two were down among people 25 to 54.)
“So as I look forward to 2005,” Mr. Poltrack concluded, “I see the broadcast networks with strong revenue foundations from the upfront market, stable audience levels and some hot new shows. 2005 should be a great year.”