TV’s Tea Leaves Look Promising For 2012

The country’s economic woes will continue to affect local television advertising. But the medium is expected to be more resistant then some in weathering another potential economic storm, possibly even experiencing some growth in 2012, according to a group of experts. “It speaks to the strength of the business model,” said Mike Simonton, managing director of Fitch Ratings.

Simonton was one of several financial experts who track media who were part of a panel, moderated by TVNewsCheck’s Harry Jessell, that looked at the economic and media landscape Wednesday at the TVB Forward Conference in New York.

Marci Ryvicker, Wells Fargo’s managing director, equity research, said she sees spot advertising rising by about 13% in 2012, boosted by political and automotive ads. A forecast by Michael Nathanson, Nomura Securities International managing director, however, came in lower, at 10.1%.

There are other revenue generating opportunities as well, primarily retransmission fees, panelists said. “The important thing here is that retrans keeps growing and keeps going up,” Ryvicker said. “Television and local broadcast television is very important and they should get paid.

“I’m fairly certain that retransmission fees will continue to grow and MSOs will continue to pay them,” she added.

Ryvicker said it doesn’t make sense for companies, like Fox, to be particularly aggressive with affiliates in their battle over share of retransmission fees when it could ultimately hurt TV. “Isn’t it in Fox’s interest to keep their distribution arm as healthy as possible?” she asked.

Nathanson, however, said tough negotiations between the network and its affiliates will not hurt distribution because “the companies we cover have now woken up to the value of retransmission.”

David Lougee, president of Gannett Broadcasting and TVB chairman, challenged Nathanson, posing the possibility that such adversarial negotiations could kill the business.

Nathanson responded that such negotiations are just part of the process of splitting up the retransmission fee pie. “No one wants to kill their distribution,” he said.

Ryvicker said TV is holding its own when it comes to ad share, even in the face of rapid growth in cable and Internet advertising. “Broadcast TV as a whole sector is down only 4% from 2007 versus all advertising which is down 15%,” she said.

While TV certainly is facing a range of challenges — media fragmentation and the sluggish economy among them — there still is room to grow. Auto advertising, for example, may have risen 54% in 2010 but it is still down 28% from where it was in 2007, she said. “As long as you keep your share of auto advertising it will continue to go up,” she said.

Jim Russo, VP of global consumer insights for the Nielsen Co., said TV is actually “winning in the new economy.” While on one hand consumer confidence — and therefore spending — is down, changes in spending habits have led to a “nesting effect” that keeps people closer to home, and their televisions.

Even more cautious consumers, however, can translate to opportunity for advertisers, as their purchasing decisions are being made more carefully then ever before. “You have the attention of the consumer … and you have a consumer who wants to be engaged,” he said.

Using such rapidly changing consumer and economic dynamics is key to TV’s success in the immediate future, panelists said.

“My forecast for 2012 is that broadcast TV is going to have a strong year,” Ryvicker said. “We just need to get through 2011.”