Special Report: Spot TV

NEW YORK The forecast for spot TV in 2008, the peak year in the industry’s two-year revenue cycle, is, not surprisingly, terrific. In a year dominated by political ads and the Olympics, spot is projected to rise 9 to 10 percent over 2007 to $19.5 billion, with national spot jumping 14 to 16 percent and local up 5 to 6 percent, per analysis of Television Bureau of Advertising (TVB) data.

Online revenue, still only a small percentage of station revenue, nonetheless holds promise for broadcasters pursuing secondary revenue streams. Web intake is predicted to increase 40 to 50 percent. New wireless initiatives, which stations began to seriously roll out this year, are anticipated to grow 50 to 75 percent. Borrell Associates forecasts stations will generate just under $1 billion in online ads next year, $1.3 billion in 2009 and $1.59 billion in 2010.

Next year will set the bar high for 2009, when spot is expected to decline 2 to 4 percent. Over the two-year period, the business is projected to grow 5.1 percent.

“The business is predictable and steady in its growth pattern,” said Chris Rohrs, TVB president.

Due in a major way to the large—and growing—number of presidential candidates this election cycle, plus an increasing number of hot political issues being promoted via TV spots, political ad spending could top $3 billion next year, smashing all records, said Evan Tracey, COO of Campaign Media Analysis Group, a division of TNS Media Intelligence.

While cable and radio have set their sites on the category, more than 60 percent of investment is expected to go to spot TV. At $2.6 billion, spot TV’s take from political ads will best $2.4 billion in 2006 and $1.7 billion in 2004, per TNSMI.

“Political is the single most important factor effecting revenue next year,” said Andy Fisher, president of Cox Television. “Olympics is less of a driver because it’s only one network, and since coverage is running in so many different places, it’s somewhat less of a boost than it was 20 years ago,” he added.

Certain markets could really feel the squeeze in “perfect storm” states, including Florida, Colorado and Ohio.

“It will be intense, even though not all markets, stations and dayparts are effected equally,” said Sue Johenning, executive vp, director of local broadcast at Initiative.

Robust though the coming year might look, it doesn’t mean spot TV isn’t facing challenges in its core business. “There are a lot of factors we have to watch very closely, including the state of the economy in general—there are ill winds that are gathering,” said John Miles, director of investments at MediaCom.

TVB’s Rohrs points out that automotive “is volatile with a capital V,” adding, ” I don’t remember when we’ve had so many cross currents. There’s very little stations can do to make up for the loss in the auto category because it’s so big.”

Tracking down 5.4 percent in first half ’07, spot is suffering from weak auto spending for the third straight year. Auto is down 8.4 percent; among Detroit’s Big Three, spending is off 16.7 percent. “The rate of loss is deepening on the dealer side, and that’s directly impacting the category for spot TV,” said Jon Swallen, executive vp, research at TNSMI. “The good news is that spot TV is maintaining its share of the declining category.”

The big question is whether it’s a cycle or the shape of things to come. “Automotive will continue to be a strong, dominant category, but it will be a struggle to maintain revenue levels,” said John Deushane, COO at Granite Broadcasting. “As a counter to auto, we try to expand our base of accounts.”

“We understand there is the ebb and flow, that’s why we’ll look for other things to do to offset auto, whether it’s product integration, or our Web sites,” said Paul Karpowicz, president of Meredith Broadcasting. “The hope is to even the trough year. I’m not sure you can do that when there is an outstanding political year; that’s difficult to offset,”

For now, traditional revenue rules. “One percent of growth over the air dwarfs one percent in digital.” said Cox’s Fisher. “The mother ship is still the critical source of profit, but digital is now a significant piece of revenue and that allows us to make up for supply and demand.”