Media Outlook: Spot TV – Gaining Steam

Political campaigns and the Olympics should spur growth in spot TV.

Between political races and the summer Olympics, 2004 is shaping up to be a banner year for spot TV. The small growth experienced this year—the Television Bureau of Advertising expects to hit the lower end of its spot forecast for 2003 at 1 percent growth—will be replaced by double-digit gains in 2004, according to the group, which represents broadcasting firms, advertising-sales-rep firms and some 500 individual TV stations nationwide.

The prognostications at the TVB for 2004, based on the consensus of Wall Street and financial analysts, rep firms and independent research, is that total spot growth for 2004 will fall in the neighborhood of 10 percent to 11 percent. The TVB predicts that national spot growth will be strongest at between 14 percent and 15 percent next year; local spot growth will rise a healthy, yet more modest, 7 percent to 8 percent.

David Wyss, chief economist at Standard & Poor’s, says that while economists still have general concerns about terrorism, war in the Middle East and high oil prices, the recession is over. Wyss says the recession during the past two years in the U.S. was mild, and as such we can look forward to a recovery. However, he says, “It’s not going to be exciting.”

Indeed, while the overall projections look good, there are a few factors that might well undermine the hope that 2004 will be a blockbuster year for spot growth.

The strength of the automotive sector remains crucial to the spot market. After two years of unrelenting 0 percent financing offers, questions about whether dealers will be able to sustain that model are emerging. American manufacturers, faced with increased competition from foreign automakers, have little choice but to participate in the spot market or face attrition from foreign car companies such as Toyota and Honda.

As Bear Stearns senior managing director Victor Miller puts it: “Just as McDonald’s has come back, just as Procter & Gamble came back, so has automotive. Marketing pays off.”

Yet auto dealers are becoming more creative in the ways they spend those marketing dollars, and it could hurt both local and national spot. Alan Starling, chairman of the National Automobile Dealers Association, acknowledged that more dealers are turning to the Internet to lure customers to dealerships.

NADA analysis points to the percentage of its members’ advertising devoted to TV dropping from 16.6 percent in 1998 to 14.5 percent in 2002. Moreover, miscellaneous ad spending on direct mail, displays, demos and, of course, the Internet is up 13 percent from 2001 to 2002.

Starling says the challenge for TV is to show dealers the added value the medium provides, since “the competition is working hard to cut into TV’s piece of the pie. TV offers the most personal contact to consumers, but there has been a 15 percent decline.” Starling also points out that cable is offering a more attractive cost alternative for dealers.

Sue Johenning, evp, director of local broadcast at Initiative Media, says the TVB forecast is “in the ballpark” and the entertainment, fast-food and retail categories will perform well next year. Still, while Johenning expresses optimism regarding those sectors and the healthy trickle-down effect of a solid upfront this year, she says automotive spending will be down or flat in 2004. “While the automotive sector will be down, that doesn’t diminish its importance to local and national spot buying,” she says. “To whatever degree a dropoff in spot sales occurs in the automotive category, it will be easily offset by political dollars.”

Those political dollars, however, will not necessarily be the slam dunk they were in 2002, when expectations were beaten and political spending went through the roof at $1.1 billion. Political dollars threatened by limitations to campaign contributions and the soft-money bill that has been set forth by Sens. John McCain and Russ Feingold could pull a hefty chunk of TV-spot spending out of the equation in 2004.

The bill limiting soft-money contributions could eliminate up to $500 million in political spending out of the spot market if the Supreme Court rules in favor of its constitutionality, according to Jan Baran, senior partner at Wiley Rein & Fielding. For the moment, the McCain-Feingold campaign-finance reform act is law, but, says TVB president Chris Rohrs, “political is the wildcard variable in spot.” He says that “by hook or by crook,” politicians will spend the dollars at 2002 levels. He also says the TVB has factored the uncertainty regarding political dollars into its forecast for 2004.

Overall, there is much reason to be optimistic about spot growth next year. According to Rohrs, TV represents a safe harbor for advertisers. That, he says, combined with continued strength in the auto, political, retail and movie/DVD sectors, a strong upfront and spillover to spot, increases in multicultural marketing, and strong media performance overall, make 2004 look brighter all the time.

Sandy Brown is a former reporter for Mediaweek and deputy online news editor for Adweek.