Downshifting

N ext year, without the Olympics and national elections, the spot TV market could well face a tough challenge from advertisers who are uncertain about participating heavily in local TV. However, some predictions show that 2006 will be gangbusters. "Our premise of this being a two-year business cycle has taken [hold]," says Chris Rohrs, president of the Television Bureau of Advertising. "This industry cannot be understood or analyzed without a two-year premise. Without exception, everyone is on board with that." The TVB, the industry organization for TV stations, is forecasting that in 2005 spot will range from negative 1 percent to positive 1 percent nationally. In 2006, however, growth will be 7 percent to 9 percent. "If we're going to miss, it will be on the low side," says Rohrs. "All indications are that spot will be up slightly in the 1-percent to 5-percent range," says Sue Johenning, executive vice president and director of local broadcast at Interpublic Group's Initiative. With local people meters being rolled out to the Top 10 designated market areas, she says, "We will see artificial increases in spending.The question with respect to LPMs is, do you plan at 100 rating points, or do you buy at 85 points under a new 'currency'?" Johenning also points out that continued fragmentation in television viewing habits should force planners and buyers to up the ante and buy more spots in 2005. However, Lee Westerfield, media analyst at Harris Nesbitt, has a different outlook for 2005. Spot TV, he says, could see a 5 percent decline in the absence of political and Olympic spending. "TV spot growth is looking increasingly saw-toothed over any two-year period," he says. "It is more likely to grow 0 percent to 3 percent versus the 4 percent to 6 percent average of the early and mid-1990s. What people forget is that even in the dot-com go-go year of 1999, spot rose only 2 percent."Among major categories, Westerfield predicts auto spending will be down after four quarters of growth. (Johenning counters that auto will be up in general, as local dealer groups are expected to shift an extra 1 percent into spot advertising.) Westerfield says the dealer associations at this point have no guarantee that auto factory matching funds for marketing will present themselves again next year. In contrast, Rohrs says the competitive environment in automotive "screams out for more marketing to hold share, let alone grow it." Factory incentives and dealer associations are expected to contribute to local TV at a higher level in 2005.Other categories of note are pharmaceuticals, which typically buy heavily in local markets, and financial services, which are seeing increased competition. The retail category is difficult to pin down, according to Westerfield, because it typically trends in line with retail spending. Johenning, meanwhile, says that while political spending will be weaker because of the absence of a national election, spot TV will still have off-election congressional spending and issue advertising. Fast-food will be strong, with new product introductions and health-related ads. Johenning also mentions that Orlando, the 20th largest TV market, continues to be very tight, and Florida will see a boost in several categories related to hurricane damage, such as insurance.Westerfield forecasts problems in the beer category. "Alcohol advertising in spot TV is down because of product placement," he says. "Bud and Coors are sponsoring half-time shows [on network and cable] and the revenue goes straight to the shows' producers." He says financial services have been a terrific category in mainstream and Spanish spot TV. "Financial services companies did well last year, as have retail brokers such as UBS and Wachovia. That allows them to open up their advertising purse."Meanwhile, packaged-goods companies have been pacing up in Q4 versus the first nine months of 2004. Westerfield says that category will grow compared to double-digit negatives in 2003. Momentum in the telecom industry has been building steadily, and all agree that with increased competition in wired and wireless services, spot TV should benefit. Johenning says telecom spending will be volatile and vary market to market. So, even though spot TV flourished in 2004 as the Olympics and the election season propelled significant gains, 2005 will look respectable, says Westerfield. As for the following year, he too agrees with other forecasters: "The sun also rises again in 2006." Sandy Brown is deputy online news editor for Adweek.

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Downshifting

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