Hard-hit spot TV will recover in '02

'One of the things that everybody waits for is that final, really big collapse, when everybody says, ‘that’s the bottom,’ and starts putting their money back in. We’ve had a couple of bottoms already and none of them were it.'

Hard-hit spot TV
will recover in '02

Well, kinda. But first it's going to sink some more.

By Kevin Downey

    Local television stations are in for something of a recovery in ad revenue next year, with spot sales rising 4 percent to 6 percent.
    While that's out of this year's negative territory, those gains will still be off from pre-ad-economy-slump levels.
    Moreover, that recovery will not come until yet a further dip in local-TV ad sales over the coming months, when they hit bottom and begin to regain momentum.
    Next year will see national spot TV, which includes deals made for multiple markets, rise 6 to 8 percent.
    Those are the projections from the Television Bureau of Advertising, which gave its predictions for 2002 and 2003 last week at its Annual Forecast Conference.
    “The one thing that is going on, aside from predicting how 2002 will do, is that a lot of the Wall Street people are forgetting how badly 2001 is doing,” says Harold Simpson, vice president of research and development at the TVB.
    “My current forecast for spot was revised down to minus 16 to 18 percent" for 2001, says Simpson.
   "When you’re coming off that deep a decline, it’s not that difficult to show a middle-of-the-road increase of 5, 6, or 7 percent.”
    While the TVB’s outlook for spot-TV ad spending is certainly upbeat, it’s only one of a slew of projections that have come out in recent months, and those projections are all over the charts, from as high as a 9 percent increase to declines of as much as 3 percent.
   “This is a pretty soft year, so I think things will get better next year,” says Kevin Gallagher, senior vice president of local investment at Starcom North America, adding that he thinks the TVB's projections run on the high side.
    Increases in the volume of ad spending will drive up prices in 2002, says Gallagher. “But it’s all relative."
    “Cost-per-points and CPMs may be up relative to 2001 but we may be getting bargains compared to 2000. We may still be 10 percent better off than we were.”
    Debbie Korcykoski, vice president and local media director at Empower MediaMarketing, agrees.
    “It’s too early right now to know for sure what those increases will be.
    “As of today, we are assuming cost-per-points will be flat to possibly a 2 percent increase. Those increases are being influenced by the Olympics and political dollars in the local markets.”
    The TVB’s forecasts for volume increases are generally more optimistic than others'.
    Compared to the TVB’s forecast of a 4 to 6 percent increase for local spot TV, Merrill Lynch has forecast a 3 percent increase, Prudential Securities expects a 9 percent increase, and UBS Warburg projects a modest 1 percent bump in spending.
    The media agency, Universal McCann, and media investment bank, Veronis Suhler, forecast increases of 5.0 and 6.5 percent, respectively.
    For national spot TV, the TVB’s forecast of a 6 to 8 percent jump in 2002 is higher than Merrill Lynch’s 5 percent. But it’s about the same as Prudential’s 7 percent and UBS Warburg’s 7 percent, according to the TVB.
   Universal and Veronis project increases of 6.5 and 5.0 percent, respectively.
    Dimming the TVB’s sunny forecast for spot-TV spending is the fact that the projected increases in spending will come nowhere near reversing the declines in 2001 spending.
    The TVB is projecting that revenue will increase by single-digit percentages.
    But recently released CMR data shows that spot TV has had the biggest decline of any media in year-to-year ad expenditures for the first six months of 2001.
    Ad spending in spot TV dropped by $1.24 billion, or 14.7 percent, to just under $7.2 billion.
    Spot TV is the third-largest advertising vehicle behind network TV and magazines.
   The one thing few forecasters are willing to say is just when in 2002 the ad rebound will begin.
    “I wouldn’t even hazard to guess,” says the TVB’s Simpson.
    “One of the things that everybody waits for is that final, really big collapse, when everybody says, ‘that’s the bottom,’ and starts putting their money back in. We’ve had a couple of bottoms already and none of them were it.”
    Working in the favor of local television stations next year is that ad dollars always increase at a faster rate in even-numbered years. That’s mostly due to the every-other-year occurrences of major political elections and the Olympics.
    Most forecasters are betting that the battle for control of the House and Senate will dramatically boost ad spending in markets with seats up for grabs.
    The TVB, in fact, expects that 12 percent of national spot-TV spending will come from political ads, compared to just over 10 percent in 2000 and less than 4 percent a decade ago.

AD DOLLAR FORECASTS - 2002 and 2003 Spot Television - % Change from Previous Year
	Local Spot TV		Nat'l Spot TV
Source	2002	2003	2002	2003
Television Bureau of Advertising	4-6	3-5	6-8	2-4
Bear Stearns	-3 to +3		5-8
CS First Boston	-2 to 0	-5 to 0	5	-5
Merrill Lynch	3	2	5	1
Prudential Securities	9	4	7	5
UBS Warburg	1	3	7	-2
Vogel Capital	4	5	4	6
Universal McCann	5	3	6.5	0
Veronis Suhler	6.5	1.8	5	1.5
Source: Television Bureau of Advertising, 2001

SPOT TELEVISION Percent Change from Previous Year
Yr	% Change (from prev. year)
1993	3.9
1994	13.7
1995	3.5
1996	8.4
1997	3.3
1998	6.5
1999	1.5
2000	11.3
Source: Television Bureau of Advertising, 2001

POLITICAL AD DOLLARS Percentage of Spot-TV Ad Dollars
Year	% of Total
1992	3.8
1994	4.8
1996	5.9
1998	8.2
2000	10.1
2002 (estimate)	12.0
Source: Television Bureau of Advertising, 2001

-Kevin Downey is a staff writer for Media Life.

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