2013 Spot TV: Total Down 7.8%, Core Up 4%

As the monster wave of political advertising dollars retreats back out to sea, spot TV revenue will fall 7.8% next year, according to TVNewsCheck’s annual consensus spot TV forecast.

But the core advertisers who return to TV year in and year out will spend 4% more in 2013 than they are this year.

The total spot forecast for 2013 represents a 22-percentage-point downward swing from this year’s total spot, which, according to a new consensus revised forecast, will rise 14.3%,  thanks to that huge political wave.

At 4%, core growth in 2013 will be nearly 25% higher than the 3.1% revised forecast for core in 2012.

(The original forecast for 2012, published in September 2011, pegged total spot at 10.2% and core at 2.7%.)

The consensus forecast of combined local and national spot TV revenue comprises the individual projections of 16 station groups, TV rep firms and research companies. The groups and station groups participated on the condition that their individual forecasts would not be revealed.

Hopes for core in 2013 ride primarily on the belief that the auto industry will have another strong year and that continued improvement in the overall economy will encourage ad spending in other key advertising categories.

What’s more, core advertising displaced this year by political advertising will return next year.

“We talk to people who run local businesses all day long, and business is better on Main Street than it is on Wall Street and what you hear in the media,” says Kathleen Keefe, VP of sales for Hearst Television. “The economy is getting better. It’s not growing as fast as everyone would like, but it’s definitely improving.”

Some believe that core could do better than 4% if the political parties could simply get on the same page.

“Our government seems to be dedicated to killing consumer confidence,” says another broadcast executive. “I think it is the single biggest factor that could affect us.

“If this ‘we’re not going to work together under any circumstances’ continues, and it’s played out in the press, it will be very difficult to get a head of steam.”

With most of the political spenders taking 2013 off, the key to next year will be auto, where advertising spending is closely tied to how many cars and light trucks are actually sold.

Survey participants point to bullish growth projections for auto sales next year and say that the category will be up around 8%. Among the auto sales forecasts is that of LMC Automotive (formerly J.D. Powers Automotive Forecasting). It says that 15 million vehicles will be sold next year, up 5% from 14.3 million this year.

“Do you know what the average age is of a car on the road today?” asks a station group executive requesting anonymity. “Ten years. I was dumbfounded when I heard this, so I researched it. Ten years! There’s a lot of pent-up demand. Will it grow at 15% to 20% next year? Probably not. Will it grow at 8% to 10% next year? Absolutely.” 

But Vincent Letang, EVP and director of global forecast at ZenithOptimedia, cautions that the whole auto category is a big “question mark” in 2013. “It’s been good so far, but one can wonder how long it can boom like it’s booming right now…. I’m personally expecting it to slow down in terms of auto sales and investments.”

The14.3 million cars LMC Automotive says will be sold this year represents a 12% gain over the 12.8 million of 2011. And it explains much of this year’s growth in core.

“Our auto category this year in Tier 2 [dealer associations] and Tier 3 [local dealers] is double digit over ’11, but high double-digits with Hyundai, Lexus, Honda and Toyota,” says one station executive. “They’re up 25-30%.”

Tier 1 auto [manufacturers] spending has been in flux.  Early this year “there was movement to cable,” says Val Napolitano, president of Petry Television. “Predominately, it was General Motors. They reevaluated their entire marketing strategy. They’ve been buying different dayparts than they have in the past, and less expensive dayparts.”

But the situation appears to be changing, with the departure of GM’s global marketing chief Joel Ewanick.  “Tier 1, Tier 2 and now Tier 3 local dealers and advertisers are spending heavily,” says Jonathan Barnard, head of forecasting at ZenithOptimedia Worldwide.

Also helping out the spot TV market this year will be modest growth in other key categories, particularly telecommunications, restaurants and retail, according to the consensus. All three are negative this year, and are expected to go positive in 2013. (Editor’s note: Although some participants in the consensus offered forecasts in these categories, not enough did to give us confidence to report specific percentages.)

Mark Fratrik, a VP at BIA/Kelsey, believes telecom spending will show steady growth next year “because of the competition between the wireless firms as well as cable and satellite delivery companies.”

Restaurants and fast food are very “fickle,” says one broadcaster. “Pizza Hut and KFC have gone to network television, while Subway has returned from network to local spot.

“I think we’ll see fast food rebound next year,” he adds. “As I’ve seen in many other years, every time a local spot advertiser moves to network and thinks it’s a panacea for sales, they find out it’s not.  I think we’ll see KFC return, and maybe one other [fast food client].”

“We predicted it would be a tough year for restaurants, because that’s one area of consumption that people under financial stress might want to control,” adds MagnaGlobal’s Letang.

The big surprise of 2012 is the enormity of political expenditure. Almost everyone surveyed for the consensus said they expected a big political year, but not nearly as big as what has materialized.

“You’re seeing spot counts that are double what they were at this point four years ago, or even more than double,” says Elizabeth Wilner, a VP at Kantar Media’s CMAG unit that tracks political spending.

According to Kantar, of the $3.7 billion in political money that will be spent on TV this year, $3 billion or 81% will flow to the spot market.

“There’s so much freaking money going into the market, every day,” says a group sales executive. “I’ll get an e-mail that Obama has dropped $500,000 [on a station], and then we have to flush out other advertisers to run it. So there’s a corresponding dip in core. In battleground markets, core is really goofy.”

And the goofiness has just begun. Usually, about two-thirds of all political spending takes place in the last 10 weeks before election day. This year that day is Nov. 6.

Leo MacCourtney, co-president of Katz Television, notes that the presidential election campaigns are largely centered on about eight or nine states, where voters are up for grabs. And that’s where the lion’s share of spending and displacement of other advertising is occurring. They include Colorado, Iowa, Ohio, New Hampshire, Nevada, North Carolina, Virginia, Florida and possibly Pennsylvania.

“So much of the focus has been placed on the swing states, that [stations in them] could be up as much as 20% year to year, whereas others that are not in those areas will be in the 13% range,” says Jack Myers, chairman of the Media Advisory Group, a consultancy and investment firm.

A wild card category for 2013 is political, says Kantar’s Wilner. While the category will be like a “desert” compared to this year, there may be an unusually large amount of issue advertising in the first quarter as the government grapples with budget and tax issues.

There will be a tremendous fight among constituencies like defense contractors, which face automatic budget cuts unless the government alters the current allocations, she says. They may, she says, all have something to say.