Of the top ad categories, only telecom and restaurant chains have boosted TV spending over the past few months. TV stations have attracted many of the telecom dollars, but much of the dining spending has shifted to the networks.
Restaurant chains and telecommunications companies are the saving grace of the television business these days. The two businesses stood out as the only top 10 advertisers that increased spending in the fourth quarter of 2008, according to TNS Media Intelligence, the ad tracking service.
While TV sales executives say they still remain two of the best prospects during the current quarter, TV stations are benefiting only from the telecom spending. Most of the restaurant dollars are flowing to the networks.
Driven in part by broadcasters’ DTV transition, telecommunications was up 2.1 percent for TV overall in the fourth quarter, when compared with a year earlier. But the sector was up 7.9 percent for local and national spot, according to TNS.
Total TV spending by casual and fast-food restaurants rose 8.1 percent in the fourth quarter over the same period of 2007, but TV stations’ total plummeted 9.4 percent as the restaurants shifted money to networks.
Not all sellers are showing telecom growth during the first quarter, but it’s still one of the strongest performers.
“That’s a promising category,” says one TV station rep, requesting anonymity. Right now, he says, telecom is up 2 or 3 percent for his clients in the first quarter.
“AT&T is spending, Comcast, all the cable guys,” he says. “Their business model isn’t recession proof, but people are still paying for cable; they’re still paying for wireless. If you go by a Verizon store, people are still lined up to buy.”
Others sellers say the category is pacing negatively during the current quarter.
But “the negative pace is going down, down, down,” says one rep, noting that at his firm telecom is the second best-performing category this quarter, behind movies.
He notes that spending from both Comcast and Alltel is strong, despite the fact that Verizon Wireless is merging Alltel into its operations.
Susan Cuccinello, senior vice president of research at the Television Bureau of Advertising, says satellite TV spending was up a whopping 150 percent last year, and cable spending was up 71.5 percent within the local/national spot sector. The biggest part of the spending came in the latter half of the year.
Not bad, considering that the TVB now estimates that total spot declined 7.1 percent last year and will drop between 7 and 11 percent this year, with local spot revenue declining 4-8 percent and national spot down 11.5-15.5 percent.
Cuccinello says that the telecom bump has been due in part to the digital transition, which was originally scheduled to come to an end on Feb. 17. Cable and satellite providers advertised heavily in an effort to convert over-the-air TV viewers to their services.
Now that the transition deadline has been extended to June 12, she says she “wouldn’t doubt” that the spending will continue into the second quarter.
Winter Horton, COO of Spanish-language Liberman Broadcasting, says his company is certainly benefiting from the DTV transition marketing. In recent months, he has seen strong spending on the part of both DirecTV and Dish Network.
“Time Warner has definitely increased their spending,” he says, noting that ad agencies use dollars from both spot and multicultural budgets when they place buys on the Hispanic station group.
On the minus side, Nathan Price, corporate director of sales for News-Press & Gazette Broadcasting, warns that consolidation of companies like Verizon and Alltel could affect the category’s prospects moving forward.
Unfortunately for TV stations, they have not be able to reap the heavier spending in fast food and casual dining.
Budgets have shifted from spot markets to national TV,” explains Jon Swallen, TNS’s senior vice president of research.
That said, some restaurant chains showed big spot TV increases in the fourth quarter: Burger King was up 52.5 percent; Wendy’s rose 86.7 percent and Outback Steakhouse was up 28.5 percent.
But those gains were more than offset by less business from McDonald’s (down 9.9 percent), Subway (off 29.7 percent), KFC (down 59.4 percent), Quiznos (off 85.7 percent) and others.
Jane Williams, vice president of sales at Cox Television, terms the overall category “dismal” in the first quarter, but notes that fast food is performing better than casual dining for her stations.
One TV rep firm executive takes a positive attitude toward the negative numbers. Sure, he’s showing about a 10 percent decline for the sector in the first quarter — a number echoed by other sellers. But given the “recessionary times, I wouldn’t call it bleak. It’s not that bad. And every month it gets better.”
He notes that fast food/casual dining revenue tends to increase in the second quarter. It’s “seasonal” business, he says.
What’s more, he says, although McDonald’s spending is flat so far this quarter, the restaurant chain has posted strong financial results. That’s adding to his “pretty bullish” feeling about the sector moving forward.
NPG’s Price also sees hope for fast food. “The trend over the last two quarters seems to indicate a movement north on the fast food expenditure,” he says. “I believe we will continue to see activity in the fast food category, more than we will experience on full-service restaurant expenditure.”
“Fast food is doing better than casual dining because of the economy,” says Val Napolitano, president-CEO of Petry Television. People are economizing by stepping down to fast food, he says.
However, he also notes that spending from Pizza Hut in the first quarter is up because it added a new product line. Others note buoyant business from Red Lobster, Burger King and Olive Garden.
“There are two factors at play,” says TNS’s Swallen. “The level of competition between these companies has heightened as the recession has taken hold and consumers have begun to cut back on the amount of money they spend dining out of home.”
“In 2009, we’ll be watching that category because, if anything, people tend to trade down, in terms of their dining-out options in a tough economy, Swallen says.
“So things like QSR [quick service restaurants] should actually see an uptick. There’s a possibility that on a regional basis and for certain chains, you’ll see some increased spending as their business changes.”