The year 2008 is not going to be a very happy one for the media business.
Usually the Olympics and a presidential election are tonic enough to send ad spending up by double digits. This year, however, with the economy dragging and key categories facing deep troubles, TNS Media Intelligence is projecting a rise of just 4.2% to $156 billion.
TNS is not quite finished totaling up 2007, but it estimates spending was in the neighborhood of $150 billion.
“In absolute terms, 4.2% growth is certainly a whole lot better than where 2007 is going to end up, which is [up] somewhere around 0.5% to 0.7%,” said Jon Swallen, senior VP for research at TNS. “But on the other hand, given the double stimulus of Olympics and elections for next year, 4.2% really isn’t all that great.”
Mr. Swallen expects that between them, the Olympics and the election will generate about $5 billion in advertising money.
“If you take that out of the equation, the rest of the ad market is only looking at about 2% growth, which is comparatively weak by historical standards,” he said.
In the last presidential and Olympic year, 2004, spending rose 9.8%. In 2000, there was a 13.6% jump, but that was fueled by the dot-com boom, Mr. Swallen said.
For 2008, weak general economic conditions are being compounded by difficulties in key categories.
The auto industry in particular has seen sales decline for three years in a row, and another down year is forecast for 2008.
“Over that same period of time, we’ve seen ad marketing budgets falling to be in alignment with the current level of sales,” Mr. Swallen said. “Auto is the single largest category out there, roughly 11% of the market, so that’s a big hit.”
Retail is another economically sensitive category.
“We’ve seen softer cash-register sales and from that softening ad spending in things like department stores and restaurants,” he said.
The troubled housing market also is having an impact, with ads for home furnishing and home improvement products suffering.
“Those conditions are still in place. It doesn’t look like they’re going to improve in 2008, or certainly not until the very end of 2008 at the earliest,” Mr. Swallen said. “So there’s just a lot of fundamental weakness in the economy and in key advertising categories. That’s the brush that’s painting the rest of the ad market, and it’s not painting a very flattering color.”
Some of the flatness in measured ad spending is because marketing dollars are moving to nontraditional media. When it comes to the Internet, TNS measures only display, and that’s expected to be up 14.4% in 2008. But even bigger gains are expected from search and Web video.
Mr. Swallen said TNS plans to begin tracking Web video advertising this year.
Of course, things could be worse, particularly for the broadcast networks if the Writers Guild of America strike continues for a good part of the year.
“I don’t have a crystal ball here in terms of how long the writers strike is going to go on, but I think that network revenues could easily take a 1% to 2% hit from the writers strike, and conversely, cable could easily pick up over the course of an entire year an extra 1% to 1.5% growth,” he said.
TNS’ current forecast has broadcast up 2.7% and cable up 5%. Both figures include the Olympics.
Cable networks, the news networks in particular, also would be getting a boost from the elections, mostly from advocacy group spending.
“The news networks get a double benefit because their political election coverage leads to higher ratings, which leads to higher ad prices for any and all of their advertisers,” Mr. Swallen said. “We’ve seen this in previous years—where ratings tick up around election coverage, ad pricing ticks up as well.”