TVN FOCUS ON SPOT SALES

Despite Balky Auto, 2Q Spot Seen Growing

A TVN check of broadcasters and media analysts finds second-quarter core growth may exceed 3% over the same period last year. The auto category is expected to finish flat or up slightly in the first quarter. Prospects for the telecom sector, spot's No. 2 ad category, seem to be all over the map as battles between providers are waged on a local level, but are expected to land between flat and up 10%.

Broadcasters and industry analysts are relatively bullish on second-quarter core spot sales, even though TV stations aren’t getting the share of auto buys to which they are accustomed and despite continued uncertainty about how much the key telecommunications sector will bring.

Second-quarter core growth may exceed 3% over the same period last year, according to a TVNewsCheck barometer reading of nine TV station groups and three media analysts. If that percentage holds true, it will be an improvement over the 2% core growth that stations are expecting when the books close on the first quarter.

The first quarter 2015 core growth rate suffered because of the heavy spending on NBC stations during the Olympics last year, making for tough comps, but benefitted from relatively better weather this year.

“While we are experiencing some cold weather in the East, as a nation generally we’re not feeling the effects of the weather impact on the economy,” said Mark Fratrik, BIA/Kelsey SVP and chief economist.

Core spot excludes political advertising that comes in heavily in even-numbered election years and makes comparison of total spot from year to year difficult. On average, the experts say, total spot will be down perhaps 3% in the first quarter and 1% in the second.

In TVNewsCheck’s annual forecast last fall, station groups and analysts predicted that 2015 full-year total revenue will be down 6.3%. Full-year core will be up 2.4%, they said.

BRAND CONNECTIONS

Few station executives contacted for this story would divulge their estimates on sales in the auto sector for the first quarter, but those who did suggest it will be about flat to up slightly. Part of the reason is the surge in auto spending last year around the Olympics.

That may sound worrisome, especially as the sector accounts for more than 30% of all spot sales. But it’s an improvement over the fourth quarter of 2014, when results were negative compared to  same period in 2013.

LMC Automotive is projecting that auto unit sales will reach 17 million in 2015, up from 16.5 million last year, based on results for the first two months of the year.

But broadcasters can no longer expect a corresponding rise in auto revenue.

“Overall auto sales in the U.S. continue to be strong, but we can’t completely count on the direct relationship between auto sales and advertising as we once could,” said Wayne Freedman, VP of sales for Raycom Media.

“There’s no question that more auto ad spending — across all three tiers — is moving to digital, and we’re working hard to respond with more relevant and targeted digital solutions for our auto advertisers.”

Another exec agreed. “We’ve seen an increase in our digital, so I wouldn’t say auto is going to other places. It’s staying in the broadcast family. They’re trying different mediums.”

One source reported that revenue from the Nissan, General Motors, Dodge, Jeep and Chrysler brands were all up when averaged across all three automotive tiers — manufacturers (Tier 1), deal associations (Tier 2) and local dealers (Tier 3). However, he said that less spending by Ford and Honda have dampened the overall results.

Ford is spending about 20% less in spot than in the past, according to some estimates. And that’s due largely to greater emphasis on non-traditional media.

On the flip side, “Nissan is on a tear,” said one source. “It did a highly publicized 60-second spot during the Super Bowl; it was their first Super Bowl ad in 15 years.”

“We’re seeing kind of an interesting thing,” said a station exec. “In the first quarter, Tier 1 has led the way, followed in specific order by Tier 2 and Tier 3. Tier 1 is somewhere close to plus 10%, and that’s despite the Olympics last year. Tier 2 is just under flat, and Tier 3 is in the negative single digits.”

“But if I had to predict second quarter, I’d say a stronger Tier 2. Right now our order in second quarter is Tier 2, Tier 3 and Tier 1.”

Prospects for telecom, spot’s No. 2 ad category, seem to be all over the map, quite literally, as battles between providers are waged on a local level. Depending on the station group executive one talks to, the estimates for the first quarter are anywhere between flat and up 10%.

Stations in the right place can really hit the jackpot. “There’s just so much competition, with all the price wars and promotions between Sprint, T-Mobile, Verizon and AT&T. They seem to be spending more and more on TV advertising,” said Justin Nielson, a senior research analyst at SNL Kagan.

Other sales execs are also holding their breath as they wait for the Comcast and Time Warner Cable merger to be consummated, hoping it will pump up the category more broadly.

Among the ad categories showing gains in the first quarter are fast food/restaurants and retail.

However, McDonald’s pulled back spot spending in the first quarter. “I think they’ll get their act together in the second quarter,” ventured one TV sales exec. Not only has a new CEO taken the reins, but the weather is improving, and “they’ve launched a new product, mozzarella sticks.”

Darden was among the restaurant companies that spent strongly in spot in first quarter. Its brands include Olive Garden, LongHorn Steakhouse and The Capital Grille.

In the retail category, furniture and home-improvement companies were particularly active in spot. “New homebuilding once again is growing, and consumers are looking at home remodeling as we continue to emerge from the economic downturn,” said Raycom’s Freedman.

Freedman sees another positive development: “One of the strongest performing categories we’re seeing is the ‘services’ category, which is mostly driven by accounts like attorneys, weight loss and fitness centers.

“It’s a powerful reminder that even with all the changes taking place in the media landscape, accounts like these — driven by traditional ROI and measures like qualified leads, ringing phones, and in-person appointments — continue to increase their investments in local television and our digital platforms.”   


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