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TV Execs See Pain Coming

Nov 9, 2008  •  Post A Comment

The economic crisis that rocked Wall Street showed up as a ripple in many media company earnings reports for the third quarter—but a more ominous harbinger of hard times emerged Friday.
General Motors, which reported a $4.2 billion third-quarter loss, said Friday it had decided to cut back on its upfront advertising buys with national broadcast and cable networks in the first quarter as part of a plan to conserve $1.5 billion in cash.
The local TV marketplace has been a mess despite big election-year spending. Station owners such as News Corp. reported big drops in profits because of lower ad revenues.
The details of GM’s advertising cuts signal more pressure on stations as a slowing economy reverberates both from the top, with national advertisers, and from the ground up, with local businesses such as car dealers.
Until GM’s announcement made certain the hard times to come for the television business, executives at companies including Walt Disney Co., Time Warner, Viacom and Discovery Communications had been saying their third-quarter performance was good, considering the environment.
“While this is a period of considerable uncertainty, we believe our business will remain resilient, thanks both to our diversified revenue streams and to our proven ability to make compelling content consistently in good times or bad,” Time Warner CEO Jeff Bewkes said during his earnings call.
“History suggests that the business of entertainment maintains positive attributes even in such difficult times. In fact, during past economic downturns, the media business has clearly outperformed the general economy,” Viacom Chairman Sumner Redstone said on his company’s call.
For most companies, there was ad growth in the third quarter—topped by Time Warner’s Turner Broadcasting with 9% (although Viacom posted a 4% decline that it attributed partly to lower ratings at MTV, VH1 and BET).
The CEOs did indicate that after the third quarter, their businesses would face new challenges.
“In recent weeks as the economy deteriorated, our pace of business has been impacted,” Walt Disney Co. CEO Bob Iger said on his company’s earnings call with analysts.
“On the advertising front, we have seen significant softening in the local ad market, as well as a slowing of the pace of national advertising,” Mr. Iger said. “On the national level, ad pacings at ABC and to a lesser extent ESPN are off from last year as spending in the auto, electronics, financial and other categories has slowed.”
Until GM’s cut hit the market, most networks had reported that advertisers had used options to return only a slightly higher than normal amount of upfront advertising.
“Cancellations of upfront commitments in the first quarter, while up from a year ago, are still at normalized levels,” Discovery CEO David Zaslav said on his call.
One ad buyer pointed to the scatter market, rather than options, as a better indicator of how much pain the industry would feel.
In their earnings call, most companies said prices in the scatter market, where advertisers buy time closer to airdates, have been stable. They’ve emphasized that stability rather than commenting on how few customers they have for commercial time they didn’t sell at the May upfront ad market.
“Scatter remains above upfront and year-ago levels. We are obviously operating in a more difficult economic environment these days, but we still expect to deliver advertising revenue growth in Q4,” Mr. Zaslav said. “Granted, it is still early and our visibility is probably less than in years past, so we’re just going to have to wait and see.”
But at some point, less demand will start to translate to lower prices, buyers said. That means all eyes are on the economy.
“I know the macroeconomic environment is top of mind for many of you, and rest assured it is for our senior management team as well,” Mr. Zaslav said.

16 Comments

  1. how is this affeecting jobs in the media/entertainment business? is it a better outlook than other industries across the country or are there lots of layoffs/hiring freezes as well?

  2. GIVE EVERY AMERICAN IN THIS COUNTRY 2 MILLION DOLLARS AND LET US GET THE ECONOMY GOING AGAIN. WE WILL DO A MUCH BETTER JOB OF MANAGEING OUR ON MONEY THAN OUR GOVERNMENT. WE SURE AS HELL CAN’T DO ANY WORSE. THAT WOULD ALSO SAVE A LOT OF MONEY NOT BAILING OUT ALL THESE IDIOTS THAT GOT US IN THIS MESS IN THE FIRST PLACE. THEY OUGHT TO BE ASHAMED OF THEIRSELVES FOR SCREWING UP THE ECONOMY AND CAUSING PEOPLE TO LOOSE THEIR HOMES, AND JOBS. SHAME ON THEM… VERY FURSTRATED WITH MY GOVERNMENT. MY SISTER LOST EVERYTHING WHEN ENRON WENT BELLY UP. NO ONE CARED ABOUT ANY OF THE FOLKS THAT LOST THEIR HOMES OR THEIR RETIREMENTS AND HAD TO START OVER. WHAT IS WRONG WITH THIS PICTURE.. I AM MAD AS HELL. MY SON IS BARELY HANGING ON TO HIS HOME. SHAME ON ALL OF THEM.

  3. Toni, find a calculater that is big enough and calculate 300 million by 2 million. if you don’t want to do that i’ll just tell you that it is 6 quadrillion dollars or That’s six thousand times one trillion. let me know if you think that will work still. P.S. Don’t be mad that your idea sucks. we’re all human.

  4. Sounds like it’s time to bring back cigarette advertisers…and while we’re at it, hard liquor.

  5. it’s important to remember that consumers had a lot to do with the credit crunch and economic crisis as well. people bought stuff they simply couldn’t afford, relying on credit. eventually, that catches up to you if you continue to do it, and that’s what happened. wall street, corporate america, and consumers are to blame. hopefully we can ride it out and learn from our mistakes.

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