Telecommunications and first rumblings of heavy political spending give business a boost and hope for a strong second half.
Spot TV reps are breathing a cautious sigh of relief as second-quarter national sales appear likely to end 5% ahead of those for the same period a year ago. Political spending, although a little slower than anticipated so far, clearly has had a hand in the increase, as spending by other advertisers is said to be flat or down slightly for the quarter.
The reps’ so-so assessment is being seconded by station group executives in conference calls with analysts. “The latest pacings for second quarter overall are down in the low single digits compared to last year’s second quarter,” said Gannett President and CEO Craig Dubow.
Second quarter sales “are not as strong asÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â¦originally expected,” confessed Media General President and CEO Marshall Morton.
The Television Bureau of Advertising’s Station Group Time Sales Survey pegs first-quarter sales up 4%-6%, according to an industry source. And, according to a TVNewsCheck survey of sales executives, the second quarter looks a lot like the first.
Still, with some luck and heavy political spending in the second half, broadcasters and their reps believe national spot growth could approach TVB’s forecast of 10%-12% for the year. In other words, national spot could shake off last year’s 9% drop and return near to where it was at the end of 2004.
“My auto pace is improving week to week, we anticipate a rollout of new product from domestic manufacturers that will start to kick in in the third quarter and there’s a lot of political yet to hit the fan,” said Petry Television President Val Napolitano.
“I’m very encouraged to be where we are today,” Napolitano said. “Auto is so large in our world, and that category has been consistently off, yet our total business is still looking to be ahead. We’re in relatively good shape as an industry.”
While Olympics advertising propelled the first quarter’s sales increase, sales executives say that robust spending by telecommunications companies, along with healthy increases from the movie, insurance and financial services categories, are driving the second.
Automotive spending, which was down 11% last year and off by 8% in the first quarter, should finish flat in second quarter, even though it’s currently pacing at minus 5%-6%, the executives said.
Late spending by General Motors is expected to help bring the category’s revenues even with those of a year ago. “GM’s agency is telling us that spending will be at last year’s levels,” said Leo MacCourtney, president and CEO of Blair Television, “so we’re basing our expectations partly on that.”
Political spending has been spotty so far, with activity mostly in California, Ohio, Pennsylvania and Michigan. The quarter’s political spending is a little lower than expected, several reps said, in part because primary candidates have dropped out of some races.
This year’s political total is pacing against aggressive, early spending in 2004 by the Republican party, which launched presidential advertising in 18 swing states as early as March. There is no presidential race this time around. Also cause for concern is the lack of spending on issues and propositions.
“We had hoped we’d see a little more of that,” MacCourtney said. “That will come more in the third and fourth quarters.”
Another rep, who asked not to be identified, agreed. “The money is there,” he said. “It’s just a question of when spending will occur.”
By far, the star in the national spot system so far this year is telecommunications. The category is up between 20% and 50%, according to various rep estimates.
Spending is strong in part because of comparisons with a year ago, when AT&T spent little. This year, it is advertising heavily to support a re-branding effort following its merger with SBC Communications. There is also increased spending from other telephone companies and a little from cable firms, which are positioning themselves for an impending battle over video, high-speed access and voice customers.
Movies, financial services and insurance companies are also expected to post gains in the second quarter.
Movies posted a 20% increase in the first quarter and are expected to expand to as much as 15% in the second. The reps find the heavy spending particularly gratifying as the studios had moved much of their spending to network.
“In 2005, that category was down more than 20%,” said one rep. “We’re hoping the studios are realizing that one reason their sales were off last year may have been because they cut their spot spending.”
While the finance category isn’t in the plus column at every rep, it is up strongly at some, with one reporting a 20% increase for the quarter. Insurance company spending is also up, with one rep reporting an expected a 20%-30% gain.
On the disappointing side of the ledger are retail, dining and packaged goods.
Retail, down 5%-7% for the quarter, is highly affected by industry consolidation. “Macy’s is now considered a national brand and will probably do most of its spending in the upfront,” says Maribeth Papuga, senior vice president and director of local broadcast at MediaVest. In addition, several sources mentioned that the combined Sears/K-Mart has done little spending in spot.
Retail consolidation “is a big issue and will remain a big issue for us,” said Bruce Baker, executive vice president of Cox Television. But he’s betting that once all the re-branding and strategizing are over, the stores will return to local TV. “We’ve seen this before, and, ultimately, when you have to compete with a product like that, you find that the local battle is very important.”
Fast food and casual dining, long a key category for national spot, is likely to finish the second quarter down 6%-7%, according to several reps. Spending by Olive Garden is off, and money from other national chains is going to network.
In packaged goods, the quarter is expected to finish with a “double-digit” decrease. The culprit is largely Procter & Gamble, which is moving some of its spending back to network, after having shifted it to spot TV a year ago.
Ad buyers say they have nothing against national spot. It’s just that there are so many other places to spend these days. “What we’re seeing is a natural evolution,” said Sue Johenning, executive vice president and director of local broadcast at Initiative. “Emerging platforms are becoming more mature and advertisers are doing more than putting their toe in that water.”