MEDIA OUTLOOK '94: SAME AS IT EVER WAS By RICHARD BRUNELLI with Eric Schmuckler and Mary Huh

Our annual survey of media buyers at the leading agencies and buying services is the rerun that refuses to go away. Slow

When the last commercial flickers off new and trendy briefcase-thin televisions, and when the final media invoice has been duly paid and stored in some computer, what will be said about the financial prowess of the advertising industry in 1994? It’s likely to be remembered as the year of the bystander. As 1993 heads to a sluggish denouement, industry analysts and ad agency execs see a long series of economic question marks beyond their control. What effect will the Clinton administration’s $496-billion deficit-reduction plan have on U.S. marketers? How much will health-care reform crimp corporate spending? What are the prospects for NAFTA in Congress? Are there any more movie deals left for Amy Fisher or Heidi Fleiss? ‘You’re going to have a lot of people sitting and waiting to see how these things will affect their companies,’ says Don Schultz, a professor of integrated marketing communications at Northwestern University. ‘You’ll probably see a lot of companies allocating (advertising) dollars, but, in a lot of cases, those dollars won’t actually be spent.’
With clients doing little more than hemming and hawing, it’s unlikely the ad business will pick up momentum next year. And with nothing out there expected to kick-start the economy, it’s no wonder advertisers – and their agencies – are wary.
Take a look at the ADWEEK Media Outlook survey, which projects a grim year. (The annual survey polled media directors at 168 top U.S. agencies and yielded a 38.7% response rate.) Three-fourths of the respondents say the advertising industry is still mired in a recession, and nearly half predict media spending will stay flat or decline over the next calendar year. A miserly 11% predict overall spending will increase by 4% or more. If the majority is correct, the advertising economy just might lose ground to inflation next year.
Still, it’s not all bad news. We asked media execs what they intended to spend on behalf of their own clients next year. After weighting those numbers by agency size, we (not necessarily the execs) are using those numbers as predictors for the coming year. There are several stand-outs: cable, network sports, spot TV and outdoor.
And there is one surprise this year. Heeding the buzzwords being bandied about, we asked agencies how interested they are in new media technologies, such as CD-ROM, interactive TV and on-line computer networks. A whopping 84% are either very interested or at least moderately interested, while only 3% shrugged it off.
The threshold level for new media will depend largely on the consumer. If agencies’ interest translates into spending, these new media could grab dollars from traditional media as soon as they are commercially embraced.
Betsy Frank, senior vp/director of television information and new media at Saatchi & Saatchi, gets paid to study such trends. ‘Changes in TV, with the explosion of channels, the electronic superhighway and interactivity, are forcing us to rethink the way we have traditionally motivated consumers,’ she says. ‘You’ll still need traditional advertising in the future. But a lot depends on the laboratory experiments that will soon be out there and how consumers react.’
If agencies are rethinking the fundamentals of advertising, you can bet the media will have to do the same. And despite its well-documented erosion, network TV in 1994 will remain the most efficient way to reach large audiences. Still, the major nets appear destined for further slow growth. Overall network spending, the surveyed execs predict, will be up only 3.1% in the 1993-94 season, which would mean the nets could suffer year-on-year losses after inflation. This is unlikely, however. The networks remain the necessary element in any major national media plan, and increased competitive activity in almost any of the top 20 product categories will push spending increases higher than the predicted level. ‘Our erosion has ended,’ boasts Larry Hoffner, executive vp/sales at NBC. ‘The other forms of TV initially took audience from us. Now, with things like video games and pay-per-view, they’re taking it from each other.’
Some buyers seem to agree with Hoffner’s premise. Count Werner Michel, the senior vp/director of national broadcast at Bozell, among them: ‘I’m one of the more optimistic guys. I don’t think the nets are going under. On cable, there’s a place for the niche nets. But in general, except for a few good shows, they’re just rehashing network shows.’
In one daypart in particular, the surveyed media execs already have been proven wrong. They predicted late-night would be up only 2.4% for the 1993-94 TV season. It’s actually up 10% based on upfront buys and early fourth quarter scatter sales. (Some buyers who are active in the marketplace reject this accounting, however, and allege the marketplace is only a bit better than flat.) The gains are due almost entirely to David Lettermen’s defection to CBS and the ensuing war with NBC’s Tonight Show.
Primetime, the biggest network daypart, will be up 2.9%, according to the survey. This number, too, could prove wrong – though not so wrong as late-night. The reason: The 1993-94 upfront came in at about a 3% increase over last year, and it is unlikely that scatter prices could fall low enough to offset the upfront gains. Early indications are that fourth-quarter scatter is selling at a premium to upfront, which is not unusual for this time of year. And CBS’s coverage of the Winter Olympics in Lillehammer probably will lift primetime spending during the first quarter. ‘We have the Winter Olympics coming up next year, and we have some political activity,’ says Robert Coen, senior vp/director of forecasting at McCann-Erickson. ‘The industry is experiencing growth. It’s poor growth, but it’s still growth.’
Sports, the second largest daypart in network TV, will be up 5.6%, the survey says. That number probably is in the ballpark, with increased inventory due to additional games on the National Football League schedule this year and a whole new network sport – World Cup Soccer – set to air on ABC next summer. And the network-sports marketplace overall is rebounding from four years of lethargy.
Likewise, the buyers’ number for daytime – up only 0.8% – is probably somewhere near reality. CBS dropped an hour in daytime, so there is less inventory available this year than in the past. Even with price increases at the other nets, there is less to sell. The overall number, therefore, probably will remain flat. Daytime also has been the hottest network daypart for several years running, and a correction in the marketplace was sure to occur.
The number on news – down 1.5% – is curious. If we’re talking the three network nightly newscasts, maybe. Even with ABC’s Nightline, which is sold as news but competes for viewers in late night, maybe still. But if you consider the network morning shows, which technically are early-morning but are still sold as news, it’s hard to foresee an actual spending decrease – even though the networks have been giving back time to affiliates as stations add longer local news cut-ins to the morning shows.
And then there is the kids daypart. The buyers said they thought spending would be up about 3.1%. In the upfront, the kids marketplace came in at a CPM increase of about 15-20% over last year. Part of that is because kids ratings have been falling, so the overall dollars in the kids business aren’t up much beyond the mid-single digits. And even that is threatened by a sluggish toy business.
The biggest increase among all media will be logged by cable, which buyers predict will be up 10.3%. The number looks good in comparison to the other media, but it might not be optimistic enough. So far, the cable upfront, still an open marketplace, is showing spending increases in the 12% range, and the Cable Advertising Bureau is projecting increases of 12-14%. There is good reason for the growth in cable spending. The medium is flourishing, both in networks and in eyeballs those networks reach.
The syndication number looks stingy. According to ASTA estimates, ad revenues in syndication will climb 12% to $1.5 billion by the end of this year. The survey respondents showed a spike of just 1.9%.
In spot television, the media execs predict a 6.7% increase in revenues, which comes down smack in the middle of rep firm forecasts calling for growth between 5% and 7%.
In the remaining categories, the respondents’ predictions appear to be close to reality. Consumer magazines, for example, just might see the 5.8% spending increase the buyers expect. Based on the medium’s current performance, the industry has been keeping ahead so far this year, thanks mainly to rate hikes. But there has been little overall volume growth, and the trend is likely to continue next year. David Verklin, senior vp/corporate media director of Hal Riney, likes what he sees for print in the long term. The short term may be another story. ‘I’m bullish about print in general but not for the next two years,’ says Verklin. ‘1994 may be the year clients try to get blood from the turnips.’
Those surveyed expressed some guarded optimism for trade magazines, predicting a 3.3% increase for next year. Not bad, considering the battering trade magazines have taken in the last few years.
For newspapers, it’s the same old story. Buyers predict the medium will be up only 1.6%. Newspapers likely will suffer significant national linage declines and make up for them in rate increases, as has been the case for the past several years.
Finally, there are outdoor and alternative media, which buyers say will be up 8.2% and 8.5% respectively. The outdoor number sounds right. The medium has experienced something of a rebirth over the past two years as clients searched for a reach and frequency alternative to television. At the same time, new printing technology has allowed for much greater creative flexibility on large-space outdoor boards. McDonald’s, for one, has added its stamp of approval to outdoor by putting together large national campaigns this year and last.
The number for alternative media seems overly optimistic. Turner’s Check-out Channel died an unceremonious death earlier this year, and other ventures into the field are moving slowly or not at all. And the volume in this medium is infinitesimal compared with the other media discussed here. An 8.5% increase would not involve big bucks.
The bottom line on our outlook, then, is that buyers look at the marketplace as buyers. They are naturally jaundiced of eye. And they tend to look at price increases in terms of costs-per-thousand, not overall spending volume.
So, will 1994 be the year of the bystander? Stand by.
Copyright Adweek L.P. (1993)