Having fattened up their coffers with a record $900 million bonanza in political advertising over the past few months, local TV stations are expecting a steady flow of holiday-season ad dollars to carry them to positive revenue growth for the year. But the arrival of the first quarter may well bring an end to broadcasters' recent robust gains.
"It should be a pretty soft first quarter, with flat growth compared to first quarter this year," said Rich Hamilton, CEO of Zenith Optimedia Group.
First quarter is traditionally the lightest advertising period of the year. But first quarter 2003 could be even dicier for spot TV and radio because many agencies are playing a wait-and-see game before allocating budgets. "We are waiting until the [November ratings book] before we place spots for next year. A lot of us are waiting to see how the year sums up before we commit," said Anne Pomeranz, group broadcast director for OMD.
Broadcasters are more positive, betting that several major ad categories will keep spending past the holiday season and into the new year. Vinnie Malcolm, station manager of Tribune Broadcasting's WB outlet KTLA-TV in Los Angeles, said he expects his station's sales "will be flat to up slightly in early 2003 on the strength of the film industry, retail and telecom, led by Verizon."
Riding on the coattails of a strong network upfront should also help, Malcolm said. "Money should continue to flow to spot because network scatter is so expensive, and advertisers don't want to pay the heavy freight," he said.
However, some economic indicators cast doubt upon retail's strength into and past the holidays. In October, the consumer confidence index plunged from 93.7 to 79.4 -- leading to the question: Will retailers heavy-up on advertising to move merchandise and promote sales, or will they cut budgets to boost their bottom lines?
The automotive category, meanwhile, has been a consistent spender on spot TV as well as radio throughout the year, and some believe that trend will continue. "We expect the manufacturers to keep up their incentives into first quarter next year," said Mary Beth Garber, president of the Southern California Broadcasters Association. Garber said stations are expecting dealers and dealer associations "to advertise even more" early next year because they have rising inventories of both new and used cars.
Radio station owners are subject to many of the same market conditions as their TV counterparts, only in smaller degrees. They, too, are bullish about fourth quarter based on strong activity from several categories, but like the TV groups, they stop short of forecasting significant growth into the first quarter.
Radio stations are also expecting continuing good health from auto dollars. "Even if the economy remains sluggish, we'll still see strength from auto," said Lew Dickey, CEO of Cumulus Media. The auto category is not as vital to radio, contributing about 15 percent to 20 percent of revenue compared to 25 percent to 30 percent in TV.
Sandy Brown and Katy Bachman, MEDIAWEEK.COM - NOVEMBER 11, 2002
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