Media World: Advertising heads into the abyss
If the economy has a canary in the coal mine, it's advertising.
Companies tend to slash their budgets at the first sign of a slowdown, and this recession is no exception. Global advertising spending is forecast to drop 6.9 percent this year, the biggest decline in at least 29 years, according to ZenithOptimedia. Carat, an independent media firm, expects a decline of 5.8 percent this year and growth of 0.7 percent next year. Veteran ad forecaster Robert Coen has a comparatively more optimistic prediction of a decline of 4.9 percent.
The impact of the phenomena can be seen in the rail-thin magazines and Sunday newspapers on newsstands and the endless commercials on cable TV for -- what else? -- the cable company. Ever wonder why sites such as Yahoo! Inc. (YHOO) are filled with the same cheesy ads? Publishers can't afford to be picky because online advertising is expected to fall about 9 percent this year, according to influential blogger Paul Kedrosky.
Late last year, the Television Advertising Bureau, which represents the broadcast networks, predicted that total spot TV revenues in 2009 will fall between 7 and 11 percent. Radio spending is expected to plunge 19 percent, according to forecaster Jack Myers.
"These forecasts are coming at the same time some media buyers and sellers are speculating that spot TV will begin recovering next year and radio in 2011," according to Media Life magazine.
For now investors are avoiding stocks dependent on advertising like plutonium. Shares of Time Warner Inc. (TWX), News Corp. (NWS) and Walt Disney Co. (DIS), three of the largest media companies, have had double-digit declines this year. Interestingly, ad holding company Interpublic Group Inc. (IPG), which Wall Street has claimed is mismanaged, is up 31 percent. Omnicom Corp. (OMC), another ad agency owner, is flat.
As Shari Anne Brill, senior vice president and director of programming at Carat USA, points out that media companies are adjusting to the new economic realities.
ABC's hit show "Desperate Housewives" had one of its characters forced to sell her pizzeria because business had dropped off. Former "Frasier" star Kelsey Grammer is starring in a comedy being developed by ABC about a laid-off Wall Street executive. A new reality show will allow workers the chance to pick which of their colleagues gets fired.
Economic pressure is being applied to networks in real life, too.
"There is a collective quest to get rate reductions," Brill told DailyFinance.
It looks like the bleak times for advertising will get bleaker.