Don't blame Sept. 11
for network ad woes

Absence of Olympics behind much of 3Q declines

By Kevin Downey

   The tragedies of Sept. 11 are being blamed for many things, including the worst ad-spending downturn since the Depression.
    But just how much are the terrorist attacks to blame?
    Perhaps not all that much, at least when it comes to network television.
    While few media analysts are citing exact figures, an increasing number are now saying that a lot of the downturn is attributable to normal cycles in the network ad economy.
    The broadcast networks lost an estimated $880 million in ad revenue in the third quarter compared to the same period last year, surely an unprecedented sum.
    But consider that last year's Summer Olympics, which aired in the third quarter, pulled in more than $900 million.
    Thus, if you were to take the Summer Olympics ad-spending out of third-quarter 2000, the actual decline for this third quarter would indeed be slight.
    "The downturn is comfortably 90 percent attributable to the Olympics," or rather its absence this year, says Buz Buzogany, president and chief executive officer of the Broadcast Cable Financial Management Association.
    Another factor to consider, says Buzogany, is that the Sept. 11 tragedy actually came quite late in the quarter.
    "Sept. 11 only represented the last three weeks, so realistically it was not going to have a dramatic impact."
    Indeed, in one area, primetime, ad-spending was actually up this third quarter, and by a healthy 10 percent, even as overall network ad-spending fell nearly 29 percent, according to the BCFMA.
    The reason for that, once again, comes down to the Olympics. As is typical, Olympics coverage last year was spread through the day, which meant that some money advertisers might have spent on primetime was diverted to daytime. With no Olympics this year, that money found its way back into primetime, causing the 10 percent increase.
    In addition to the absence of the Olympics this year, analysts are citing several other factors in the third-quarter ad-spending declines, beyond Sept. 11.
    One obvious one is the dropoff of dot.com spending. Dot.coms this third quarter were not advertising in anywhere near the numbers of third-quarter 2000, which was prior to the collapse of the dot.com marketplace.
    But no less a factor, says Merrill Lynch, was a glut of ad inventory this third quarter.
    An increase in the number of available commercial spots coincided with a cooling of advertiser demand, which drove down the ad prices that networks could fetch.
    Contributing to that glut was the rise in the number of cable networks competing for advertising dollars. The number of cable networks selling ad time in the upfront market rose from 27 in 2000 to 42 this year.
    The real effect of Sept. 11, say analysts, was rather to make what was an already bad advertising economy seem suddenly a lot worse. In truth, ad-spending had already been projected to decline for several more months.
    Analysts remain gloomy.
    Merrill Lynch is projecting a 3 percent decline in ad-spending for all media in 2001 and a 1 percent drop in 2002, which would be the first two-year decline since the Depression.
    The fourth quarter certainly won't bring any relief, despite some indications that the Christmas buying season is starting out more robustly than many had expected.
    "It’s pretty safe to say that the fourth quarter will also be a difficult time," says Buzogany.
    "In that case, it will be the advertising economy, not necessarily the impact of Sept. 11, because most of the dollars had already been placed. My contention is that it’s going to be a difficult fourth quarter but Sept. 11 won’t really be the culprit."
    But there are a few upbeat expectations amid the gloom.
    The Winter Olympics on NBC in February are expected to bring in about $700 million in ad revenue, and an NBC spokesperson says that 92 percent of ad time has already been sold.
    And an overall decrease in spending means there will be a lower base of comparison next year.
    While that’s not an ideal situation, it should make it easier for the networks to post percentage increases.
    Moreover, there will be more commercials for the networks to sell next year, since virtually all the networks gave up spots this year for commercial-free coverage of the attacks.

November 27, 2001 © 2001 Media Life

-Kevin Downey is a staff writer for Media Life.