Uncovering the Silver Lining

Upfront outlook is upbeat, but news isn’t all good

The record-setting attendance at the Association of National Advertisers’ all-day TV conference two weeks ago was probably a sign that the advertising business is set to recover. The 350 attendees, mostly survivors of the downsizing campaigns that agencies, media operators and clients have staged over the past three years, were there for a reason.

Attendees were looking for practical help in setting their ad-spending strategies for the months ahead, and their concerns were quite practical, refreshingly conventional and a notable change from just a few years ago, when Topics A and B were the Internet and interactive TV.

One of the day’s first discussions concerned the upcoming upfront network-TV bazaar, a quaint tribal ritual in the advertising industry and one whose reason for existence has been challenged—and whose demise has been predicted—for at least 20 years. There was little doubt that the market this year would be “robust,” to use the current buzzword. The nation’s biggest advertisers, the core of the ANA membership, buy most of their network-TV ad time for the new “year” in a hectic round of bargaining that occurs sometime during early summer. (The advertising calendar starts in September, like the school year, and it follows that same seasonal rhythm.)

Usually—and it was certainly true last year—deals struck in the upfront market turn out to be bargains. Advertisers that buy time later in the cycle, closer to air date, nearly always pay more. Between the advertisers that feel they did well last year and want, again, to get good prices, and those that fear missing out on the best slots, advertisers more often than not stampede into the upfront market, creating a short-lived but frothy feeding frenzy.

Little of these high spirits carried over into other media last year, and prices for cable TV and many print vehicles remain soft, which may put the brakes on total spending this year, too. The big question is whether the enthusiasm that could be felt in the crowd for TV will spill over into the other media, fueling the long-awaited general recovery in the industry.

While the business outlook gave cause for optimism, the news was not entirely upbeat. The ANA’s political antennae are detecting a resurgence of movement at several levels of government to latch onto the ad industry as a new source of tax revenue. Some states are collecting, or threatening to collect, a sales tax on media or ad services. Over the past 15 years, about 100 such proposals have arisen in 40 states. In addition, social activists are lobbying to limit the tax deductibility of spending that promotes some things that are out of political favor. Beyond that, there are a number of lawsuits that challenge the industry in fundamental ways.

Among the portentous developments: Consumer-targeted prescription-drug ads, one of the few bright spots in the ad business lately, are coming in for criticism on the grounds that encouraging the use of drugs helps drive up the overall cost of healthcare. Alcohol, another important category, is a perennial target. The increasing alarm over Americans’ expanding waistlines may result in pressure to penalize those advertising “unhealthy” food, and there is also some bull about the mental state of the dairy industry’s cows. Between the prospect of new taxes, new laws and new lawsuits, there are enough clouds to balance the emerging silver lining.

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