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What recovery?
2002 looking grimmer following a most-grim 2001
By Thomas J. Watson
The media industry was caught by surprise twice this week. First came a CMR report that 2001 turned out to be an even worse ad year than many had thought, with a decline in spending of nearly 10 percent.
A second broadside came when the Jack Myers Report predicted that 2002 would be another rough year, with ad spending off again, this time by 5.7 percent.
Myers, a longtime industry analyst, is regarded as one of the most conservative--some would say pessimistic--of media economists.
Myers believes the 9.8 percent spending drop-off for 2001 reported by CMR only serves to bolster his predictions for 2002.
"For weeks," he says, "people have been saying 2002 numbers will be plus or minus 2 percent from 2001 levels. When I said they would be down 5.7 percent, they said I was being way too negative. I stand by my prediction, and these latest CMR findings make me feel all the more confident."
Myers is notably pessimistic about this year's TV upfront.
While observing that there appears to be some tightening of first- and second-quarter network inventories, suggesting a recovery in demand, Myers says the tightening is actually based on monies moved out of third- and fourth-quarter 2001, after Sept. 11, and on declining ratings at ABC and Fox.
"This is bad news," the report says, "for network sellers who have become increasingly bullish about upfront prospects."
Among 125 respondents included in Myers’ national survey of marketers and media planners/buyers, 44.7 percent project that 2002 upfront budgets will remain at 2001 levels, 38.8 percent anticipate budget declines, and only 16.5 percent expect budgets to be bigger next year.
"Everything we are hearing," says Bill Sellers, vice president and associate director of national broadcast for Initiative Media-North America, "indicates that Myers is correct. Clients are not willing to base long-range commitments--which is what the upfront is--on projected growth. They will base them on current reality."
Sellers also agrees that any current tightening of the scatter marketplace is based "not on demand but on the lack of network supply."
According to the CMR report, issued earlier this week, advertising expenditures for 2001 dropped to $94.3 billion, compared to $104.5 billion for 2000.
Sharp declines were reported in nearly all media, with national newspapers and national spot radio falling off the sharpest.
Print media also saw a significant drop in revenue.
Many in the media shudder when forecasters such as Myers and researchers like CMR publish such negative reports, fearing that they will become self-fulfilling prophecies, leading to more doom and gloom.
Hoping to put a more positive face on his company’s report, David Peeler, president and CEO of CMR, advised readers that to compare the year 2001 with 2000 is to compare an unusually challenging period with one that was extraordinarily upbeat for the advertising industry.
"The downward turn in the economy, budget cuts, agency consolidations, and the tremendous cuts in television advertising in the days following Sept. 11" each had a negative impact, he said.
Peeler points out that, conversely, the year 2000 was an atypically good year for ad spending, and that perhaps comparisons to 1999 are more in order.
"If 2000’s robust total revenues were excluded, and 2001 were measured against 1999," he says, "spending would be down only 2.4 percent. That seems a better assessment."
Even so, the 9.8 percent decline is huge by all estimations. No one expected the falloff to be so steep.
Only six weeks ago, CMR itself placed preliminary estimates at 9.4 percent, while other industry experts were saying even that was too high.
Of the 12 media studied, CMR reports that national newspapers were hit the worst in 2001, dropping 23 percent to $2.9 billion; followed by national spot radio, which fell 20.5 percent to $2.2 billion. Both media, of course, had been prime beneficiaries in 1999 and 2000 of now-disappearing dot.com spending.
Spending on spot television sagged 18.2 percent, to $14.9 billion, while spending on network television fell 8.1 percent to $19.5 billion.
The only media to show growth were cable television, which grew by 1 percent to $10.4 billion, and national syndication, which grew one-tenth of 1 percent, to $3.2 billion.
As for the advertisers, CMR reports that General Motors Corp. was again the nation’s top spender, with $2.2 billion in ad billings, but that its total was down a huge 25.4 percent versus its spending in 2000.
Philip Morris, which ranked fifth among the advertisers, also slashed ad budgets last year, by 23.4 percent, to $1.4 billion.
New in 2001 among the top 10 advertisers was Verizon Communications, which increased its spending by 13.6 percent, for a total of $843 million.
Also growing their ad budgets in 2001 were AOL Time Warner, which was up by 6.6 percent, to $1.6 billion, and Ford Motor Company, which was up 5.7 percent, to $1.2 billion.
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AD SPENDING BY MEDIA |
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| Media |
Jan-Dec 2000 (Millions) |
Jan-Dec 2001 (Millions) |
percent Chg |
| Network TV | 21,195 | 19,477 | -8.1 |
| Magazines | 17,840 | 16,476 | -7.7 |
| Spot TV | 18,171 | 14,869 | -18.2 |
| Cable TV | 10,316 | 10,416 | +1.0 |
| Sunday Newspapers | 11,366 | 10,507 | -7.6 |
| Daily Newspapers | 8,453 | 7,923 | -6.3 |
| Syndication – National | 3,188 | 3,192 | +0.1 |
| National Newspapers | 3,826 | 2,947 | -23.0 |
| Outdoor | 2,475 | 2,456 | -0.8 |
| National Spot Radio | 2,724 | 2,167 | -20.5 |
| Sunday Magazines | 1,126 | 1,114 | -1.1 |
| Network Radio | 954 | 834 | -12.6 |
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Source: CMR, a Taylor Nelson Sofres company |
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TOP TEN AD SPENDERS |
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| Company |
Jan-Dec 2000 (Millions) |
Jan-Dec 2001 (Millions) |
% Chg |
| General Motors Corp. | 2,931 | 2,188 | -25.4 |
| Procter & Gamble Co. | 1,636 | 1,592 | -2.7 |
| AOL Time Warner | 1,457 | 1,553 | +6.6 |
| DaimlerChrysler AG | 1,683 | 1,392 | -17.3 |
| Philip Morris Cos. Inc | 1,801 | 1,380 - | 23.4 |
| Ford Motor Co. | 1,182 | 1,249 | +5.7 |
| Walt Disney Co. | 1,087 | 1,050 | -3.4 |
| Johnson & Johnson | 885 | 852 | -3.7 |
| Verizon Communications | 742 | 843 | +13.6 |
| Pfizer, Inc. | 807 | 815 | +1.0 |
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Source:
CMR, a Taylor Nelson Sofres company |
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March 8, 2002 © 2002 Media Life
-Thomas J. Watson is a Los Angeles writer and a contributor to Media Life.
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