TVN FOCUS ON SPOT SALES

Auto, Telecom, Restaurants Buoy 3Q Spot

TVN’s quarterly check of broadcasters and media analysts finds third quarter core spot is likely to come in 3% higher than it did in the same period last year. If political is included, the modest growth turns to a modest decline of 1.5%. The great positive is auto, spot's No. 1 ad category, aided by telecommunications, insurance and fast food/casual dining.

Expectations for spot revenue in the third quarter are running high among media analysts and broadcasters surveyed by TVNewsCheck, thanks to a surge of early orders from automotive ad buyers and steady interest from telecommunications, insurance and fast food/casual dining buyers.

Adding to the good vibes are prospects for political money rolling in in August around the first Republican presidential debate.

The negatives come from sluggish retail category, the smaller education sector and continued concerns about the direction of the economy.

The consensus is that core spot (excluding political) is likely to come in 3% higher than it did in the same period last year. If political is included, the modest growth turns to a modest decline of 1.5%.

The third quarter core outlook is a definite improvement over the second quarter.  Those surveyed say when the books are closed on the quarter, it will be up 1.4% in core and down 1% with political included.

Several executives cautioned that spot orders have come in later than what was experienced traditionally, which makes their projections a little trickier and a little less certain.

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The great positive is auto, spot’s No. 1 ad category. “The auto category has definitely been challenging with the shift of revenue toward digital media over the past 12 to 18 months,” said Wayne Freedman, Raycom Media’s VP of sales, “but we’re seeing early signs of a rebound from several auto accounts at this early stage of 3Q.” 

Most notably, Ford’s spending is “way up,” according to another source. That could mark a significant change, because Ford as well as Honda slimmed down their spot expenditures in the recent past.

Another third quarter movement: “Toyota is being much more competitive, and Chrysler has to respond to that,” said one official.

“Thankfully auto has recovered,” said Keith Bowen, chief revenue officer of the Tribune Co. “It’s a good year, by and large, in the auto industry. There will be between 16 and 17 million units sold.”

Other big spenders are the cable and satellite operators, part of the telecom category. “They’re all spending in local markets,” Bowen said.

With the Comcast/Time Warner Cable deal now dead in the water — and the approval of the Charter/Time Warner merger not expected to conclude until at least the end of the year — marketing dollars that had been held back for rebranding have now been released for spot buys, according to one executive.

“Telecoms for some has been very good; for others it hasn’t,” said Carl Salas, senior credit officer in the telecom/media, corporate finance group at Moody’s Investors Services. He noted that the battles waged between telecom companies are at the local level and they shift with time. “What is clear is that services is an increasing percentage of the overall pie — lawyers, doctors, insurance companies.”

“Two years ago insurance did real well with Obamacare, and then it fell off last year. And now it’s rebounding again,” said another executive. “Now it’s high single digits.”

“A little anemic” and “a laggard” are how the retail category is being described. And one executive noted that on the national level, retailers are moving some money out of spot to pump up spending in broadcast and cable networks, along with digital media.

“The economy’s doing better than it was a few years ago, and that’s helped retail, but overall, [retail] is not making huge gains,” added Justin Nielsen, senior research analyst at SNL Kagan.

Similarly, a smaller category, education, has fallen off. “As an industry we were doing extraordinarily well with some of these distance learning facilities. Now a lot of them are out of business because they lost their accreditation,” said one station exec.

Another noted that falling gas prices have done more than just spur auto sales and advertising. “With gas prices almost a dollar lower than they were a year ago, consumers have more disposable income. The restaurant category, for example, is very healthy, both in the QSR [quick service restaurants] and casual dining areas, and we’re optimistic this will continue to have a positive impact for the rest of 2015,” Freedman said.  

Then there’s the political advertising factor. Sure, the next election is a year away from the third quarter, but a “droplet” of spending has already begun. Among the advertisers is Sen. Mark Kirk, the Republican junior from Illinois, who is expected to have a tough time getting reelected, said Elizabeth Wilner, SVP for political advertising at Kantar Media Intelligence.

The networks hosting the debates are using poll standing as a criterion for candidates’ participation. “I think we’ll see some of the lesser-known candidates doing a bit of advertising so they actually might make it into the debates,” Wilner added. Ads bashing Hillary Clinton may also start early.

The core national spot business is also doing fairly well, and may end up in the positive, low single-digit percentage gains in keeping with total spot’s expected growth of 3% in the third quarter and a little lower than that for the second.

“The drivers are really automotive and telecom,” said one sales executive of national spot. “Auto is pacing double-digit percentage gains. That will come down. We’re not going to finish that strongly. And fast food is pacing ahead fairly significantly.”

Spot’s anticipated low single-digit growth in the second and third quarters is in line with the economy, which has been making a surprisingly slow recovery since the recession of 2008.

In an email exchange following the Media Financial Management Association’s annual conference in May at which he gave an analysis of the slow recovery period and presented GDP numbers, Dennis Hoffman, director of the William L. Weidman Research Institute at Arizona State University, said that the most economists expect gross domestic product for the second quarter to come in at around plus 2.5%. But with auto sales doing very well, the number may be better, he added.


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