Heavy political spending coupled with looser spending by domestic auto makers should produce double-digital revenue gains for broadcasters. But where did the dining dollars go?
An uptick in automotive spending and the first wave in a flood of political cash could power national spot TV sales to a 16%-18% increase in the third quarter of 2006 compared to that of 2005, according to reps, station group execs and industry followers.
But, despite the auto spending gain, the first for national spot in more than a year, the total take from core non-political advertisers will grow only about 2%-3% during the quarter, dragged down by weakness in retail and packaged goods spending, and a frustrating 10% drop in dining outlays.
“Spot is positive at the core right now, only because auto is up right now,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says Victor Miller, an analyst who covers the broadcasting industry for Bear, Stearns. “That could change as the quarter goes on.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
That auto spending, national spot’s largest category, is finally on positive ground is encouraging news for broadcasters. It’s due to increased spending by Ford and General Motors and continued big spending from foreign manufacturers. If the spending continues, automotive outlays could be up as much as 5% in the third quarter. “We see a sliver of light at the end of the tunnel,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says Val Napolitano, president of Petry Television.
Political spending, now the No. 2 national spot category for stations in election years, has been flowing faster in a larger number of markets since about three weeks ago, according to sources at the reps and TNS Media Intelligence’s Campaign Media Analysis Group. “We’ve just seen a number of what will be competitive House and Senate races go on the air, and I suspect we’ll see them stay on the air,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says Evan Tracey, chief operating officer of the TNS unit that tracks campaign spending.
Although spending this year has come later than in 2004, Tracey expects it to “eclipseÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â the $1.4 billion spent in 2004. “The money spent on the presidential race two years ago will easily find its way to larger governor’s races, and there’s a lot of money on the sidelines that will wake up to the mid-term elections.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
Miller sticks by his forecast of $1.25 billion in political spending: “I do not think it will reach ’04 levels.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
Some of the money now could come from issue groups, Tracey says. “The activist community has been focusing on 2008, but, as we get closer to the fall, if Republican fears become realized that they’re in danger of losing the House or Senate, business and conservative groups will plough money into races, and the same thing will happen on the left, if Democrats sense they can take back both the House and Senate.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
While reps and station group executives are cheering the potential return of growth in the auto category, they are puzzled by a 10% drop the dining category, a combination of fast food and casual dining advertisers. The pain of that shortfall is doubled by the fact that it comes on top of a 9% drop in the category in third-quarter ’05. “It’s down on a down,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says one rep.
Summer is typically fast food’s biggest spending period, making the category’s two-year decline even more disconcerting. And there’s no single, big culprit behind the trend. Reps report spending is down at all fast food companies. But the downturn apparently doesn’t extend to every station group. “Fast food isn’t down for us,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â asserts Bruce Baker at Cox Broadcasting.
Retail, a top-five category for national spot, is expected to be down roughly 15% in the third quarter, with declines across many different kinds of outlets, ranging from department stores to food chains. “It speaks to the underlying consumer economy,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says a rep. “It’s more expensive for gas, so people are spending less on other things.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
Big back-to-school spending is the only hope for the category. “Retail gets to be more of a factor in August and September,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says Leo MacCourtney, president of Blair Television.
On the plus side, telecommunications companies continue to spend heavily, pushing the category to a probable third-quarter increase of 30%. Because spending is uneven across markets, however, not all stations will enjoy that big a gain, and some, of course, will do better. “This isn’t a uniform category because of the regionality of the business,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says a rep.
Movie spending may also be up for the quarter, although it too is being spent unevenly, and growth isn’t expected to be big. Even so, the category was down 20% for all of last year, so this year’s gains have been welcome. “This category has been down the last six to eight quarters,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says one rep. “It’s not so much that there’s life in the category, as that the declines have flattened out.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â Movie spending growth is difficult to estimate because it tends to flow in heavily early in a quarter and then drop, only to pick up again later.
One category that has lost a little steam is financial services, which has been barreling ahead in recent months, with a 50% gain in the first quarter and a 10% boost in the second. The problem here lies in tough comparisons with a year ago. “A lot of the bank and insurance company spending started in third quarter of last year,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â a rep says, estimating that for the current quarter, the category would be flat to down 5%-10%.
Despite continued shortfalls in retail, fast food and packaged goods, national spot’s automotive upturn, if it persists, bodes well for the television station industry. It means that spot TV is doing at least as well as any other segment of the television business—broadcast network, cable network, syndication
A big unknown in political even-numbered years is how much traditional advertisers are holding back their national spot spending to avoid paying higher prices in a market tightened by political candidates. Broadcasters and their reps hope they are holding back a lot, and that non-political money flows more easily next year. They know they can’t replace all the political dollars, but they would certainly like to replace some of them.