Thursday

And if the war
is a long one . . .

Might not cripple ad spending. But many ifs.

By Kevin Downey

     A short war with Iraq would have only a slight effect on ad spending, media forecasters tell us. But what about a longer war?
   The thinking among media forecasters now is that even an extended conflict in Iraq, lasting many months, would probably not dampen ad spending all that much.
    In either scenario, say forecasters, advertisers might be inclined to pull back in the initial weeks of fighting but would then resume spending.
    Even in an extended conflict, spending would resume as the initial shock of the war began to wear off and the country came to accept the war as part of their nightly news, much as it has come to accept the ongoing occupation of Afghanistan.
   “At the outset of the war, saying hypothetically that it’s a long war, it will have a direct impact for the first month or two,” says Glenn Eckert, vice president and senior analyst with Moody’s Investors Service.
   “But clearly, advertisers need to reach consumers. If we are talking about a yearlong war, there would be an early impact and then a return to normalcy. I think that’s what most people are baking into their plans.”
   Michael Russell, media analyst at Morgan Stanley, agrees.
    “Advertisers are impacted because people are waiting to see what happens,” he says. “If the war is drawn out and it’s back and forth, TV viewers might lose interest and simply check in as they would a primetime show.”
    Of course, what would dramatically disrupt ad spending would be either a great loss of American lives or another attack on American soil.
    The latter especially could cause a major disruption in ad plans, as it did in the months after 9/11. Concerns of such an attack have been raised in recent days with the reemergence of terrorist leader Osama bin Laden.
   Ad spending for 2001 was off 10 percent, and while it was a year of recession, much of that decline was credited to the attacks.
    In recent weeks, as war became more certain, forecasters were quick to predict only a slight impact on ad spending for a short war, and they were looking back to the Persian Gulf War of 1991 for their best clues.
    Total ad spending that year fell 2 percent, but the effect of the war appears to have been slight. The country was in a tough recession, and the conflict’s effect was to worsen an already bad situation, as one analyst puts it.
    But forecasters have been reluctant to project for a longer war, and one reason is that there was no similar experience from which data could be extracted. In the event of a longer war, Universal McCann’s Robert Coen told Media Life, “All bets are off.”
   The last protracted U.S. conflict was the Vietnam War, ending some 30 years ago, and that conflict defies comparison for several reasons. One, it was fought very far away and got only slight press coverage in its early years.
   But more important, the U.S. economy was booming, and then President Lyndon Johnson was able to pursue what he called a policy of guns and butter—overseeing a booming domestic economy that was able to finance a distant war without calling for Americans to go without either luxuries or necessities, as they had in World War II.
   “Vietnam, although I have not seen any reports on this, was not even recognized as a war," says Eckert. "It was considered a police action that escalated. As a result, it didn’t have a direct impact on the consciousness of advertisers.
    "Going back to Korea," he says, "TV as a percentage of advertising was smaller at that time,” thus less likely to be affected.
   Predictions for a longer war in Iraq assume that U.S. forces will take Baghdad in a matter of weeks and then preside over an extended occupation in order to install a new regime the U.S. and its allies could live with.
    It also presumes some level of protracted fighting in Baghdad and the countryside to quell uprisings among the crushed forces 0f Saddam Hussein. That scenario would not be substantially different from that in Afghanistan.
   In that case, analysts say television and radio will take an initial hit but will bounce back after a few months, right along with other media types, with most of the displaced ad dollars returning to the market.
   Morgan Stanley’s Russell, who has examined the effects on the 1991 conflict on ad spending, estimates that 2003 ad spending would rise by 4.7 percent without a war but by 4.2 percent if the U.S. attacks.
    “I think this war will be shorter, not longer,” he says. “It’s probably the post-war that will be longer and that is a less important media story.”
   There is some risk in drawing too many comparisons to 1991. The short duration of that war resulted because the U.S. pulled out before any resolution was reached, at least in ousting Saddam Hussein.
   Moreover, the Gulf War lacked the threat of terrorist strikes and was planned with considerably more support from U.S. allies.
    In sum, there's still much uncertainty.
     “A short conflict of one to two months will most likely mean a displacement of ad dollars,” writes Sally Shoquist, senior vice president of media management at Empower MediaMarketing, in a report issued yesterday.
   “A longer, more drawn out conflict could have far more dire consequences for advertisers, with some categories pulling out for the year. Certain categories, notably tourism and those associated with the oil industry, would naturally be impacted to a greater degree no matter what the duration.”
   “There are no media events like elections or the Olympics that tend to bump things up,” says Jack Trout of Greenwich, Conn.-based Trout & Partners.
   “We are sort of bouncing along the bottom, waiting for a number of things to change. But advertising isn’t going to increase until things are resolved.”

-Kevin Downey is a staff writer for Media Life.

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