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Five Real Reasons the TV Ad Market Will Suffer This Year

Whether you sold it, bought it, or watched it, television advertising was all fizz and froth in 2000, thanks to Survivor, the Olympics, the presidential election, and -- lest we forget -- Internet companies' absurd marketing budgets.

This year, the party's clearly over. And the numbers for next year could get dangerously close to those of the early 1990s, when ad spending decreased from the year before for the first time in half a century.

While much of the coverage of the slowdown so far has focused on broad trends -- the dot-com shakeout, the worsening economy, corporate caution -- there's more to it than that. Here are a few specific portents of gloom:

SUPER BOWL FUMBLE: As far as danger signs, ''You don't have to look further than the Super Bowl,'' says David Peeler, president and CEO of advertising tracking firm CMR. ''CBS really should have had all those spots locked up,'' he says. Yet less than two weeks before the big game, CBS still hasn't sold about 10 percent of its ad time -- a bad psychological blow to Madison Avenue's confidence. Even worse, the rate the network is getting for a 30-second spot is hovering around $2.3 million. While that doesn't exactly represent a bargain, it's a minimal premium over last year's prices on ABC. Contrast that to the approximately 23 percent increase in rates in 1999 from 1998 and the whopping 38 percent prices shot up in 2000 from 1999.

CBS's struggles highlight not just the reluctance of companies to pony up the cash for Super Sunday ad time but provide a particularly vivid index into the bottoming-out of the Internet economy. Last year, 17 Internet companies advertised during the game, including several, like Pets.com, that don't exist anymore; this year, only three Web companies will be hawking themselves during the broadcast. And two of them -- Monster.com and HotJobs.com -- are job-search sites, appropriately enough.

CAR CRASH: When General Motors announced it would scrap its Oldsmobile brand after 103 years on the market, it took one of the country's most lucrative accounts off the table entirely: Olds spent $334 million on advertising in 1999 alone and $164 million through August of 2000. What's more, other normally big-spending auto makers, like DaimlerChrysler and Ford-owned Volvo, have already cut their marketing budgets for 2001 back. The automobile industry is, clearly, such a large player in the TV advertising game that, as Tom DeCabia, media buyer at Schulman/Advanswers New York, puts it, ''It's not as exciting a story as the dot-coms, but if these guys really cut back, everybody would take a serious hit.'' Adds CMR's Peeler, ''Between the consolidation in the industry and declines in auto sales what we're seeing here is more than a little ominous.''

STRIKE FORCE: The possibility of a strike by the Screen Actors Guild and the Writers Guild of America looms, and with it ad revenue problems for the fall TV season. ''If the season gets delayed, viewership will, no doubt, suffer,'' says Peeler. ''And that will affect the total amount of money significantly.'' And it isn't just television shows whose striking stars -- and non-existent new episodes -- would contribute to the suffering. Without new movies to promote, the movie studios would be unlikely to shell out for those big-money Thursday night spots so crucial to help promote films for potential Friday and Saturday night audiences.

CONSOLIDATION CONSTERNATION: Mergers and acquisitions -- particularly in the financial services industry and the car business -- will, at least in the coming year, contract the amount of advertising by simply reducing the number of companies advertising. Particularly notable in this respect are the investment banks: With Credit Suisse First Boston snapping up Donaldson Lufkin & Jenrette and Chase merging with JP Morgan, ''the amount of competition is reduced, and the media spending declines, and this could very well happen this year,'' says Peeler.

DOT-COM DETENTE: Naturally, the hard landing the Internet sector's absorbing will affect the TV ad market directly -- as with this year's Super Bowl. But the more rippling, and probably more significant, impact of the dot-com collapse will be to cool -- indeed, to occlude entirely -- the furious advertising arms race between New and Old Economy companies that escalated to its height last year. As Web start-ups threw money in truckloads at the networks, their more traditional brethren, fearing a consequent underexposure, did the same. In 2001, without all those dot-com dollars to force its hand, the brick-and-mortar crowd will feel free to scale back its own ad spending.


Will Lee, Inside.com. January 15, 2001

Copyright © 2001 Powerful Media Inc.. All rights reserved.