Already looking rocky at the start of the fourth quarter, the media economy this week was dealt a staggering blow by Hurricane Sandy.
In disrupting local TV and radio broadcasts and putting a halt to all New York media buying, Monday’s once-in-a-generation storm is likely to cost the industry as much as half a billion dollars, according to Pivotal Research Group senior analyst Brian Wieser.
"If we assume that spending equivalent to one day of the fourth quarter was ‘lost’—because of interruptions to local TV and radio programming for several days in a significant portion of the country, paired with the impact on decision making among national marketers and media buyers based in the storm’s footprint—the storm will cost the industry almost $500 million of activity," Wieser wrote in a note to investors.
In the wake of the storm’s passing, Wieser revised his U.S. advertising forecast for Q4, predicting a 1.4 percent decline compared to an earlier prediction of 0.9 percent growth.
As a result, Wieser now expects total ad spending will be flat versus 2011, compared to an earlier forecast of 1.4 percent growth. Forecasts exclude political and Olympic spending. Throw both outliers back into the equation and Q4 advertising stands to grow 1.8 percent to $47.2 billion, while the total-year haul should add up to $175.3 billion, an increase of 1.9 percent.
The national TV market is a red flag for Wieser, who notes that broadcast ratings this fall are generally well below the deliveries guaranteed during the 2012-13 upfront. Five weeks into the season, only NBC has posted ratings gains, averaging a 3.1 in the 18-to-49 demo. Second place CBS is down 18 percent versus the same time a year ago, with a 2.7 rating average; Fox is down 24 percent with a 2.6; and ABC is bringing up the rear among the Big Four with a 2.5, down 7 percent.
Wieser predicts the national TV market will grow 1.8 percent in 2012, less than half the rate of his previous projection of 4 percent growth. Broadcast is expected to decline 1.8 percent versus an earlier estimate of 1 percent growth, while cable will grow by 3.8 percent, down a few notches from the previous call (5.8 percent).
All told, Wieser sees national TV (broadcast, cable, Spanish-language and syndication) dollars adding up to $39.3 billion in 2012. Cable will account for 58 percent of all national TV dollars ($22.8 billion), while broadcast will rake in $13.2 billion.
Along with lower-than-expected broadcast ratings and the ravages of Sandy, Wieser says national TV is also straining the scatter market. "TV buyers continue to point to prolonged decision making on the part of marketers and correspondingly weak scatter market conditions," he said, adding that many scatter-only clients have been offered rollbacks in pricing.