Ad market hitching up to rising economy

Bureau says nat'l radio ad revs rose 2% in January

A trio of upbeat economic indicators Friday was another sign the embattled ad market may be turning up — joyous news for media companies and music to the ears of broadcast execs as networks steel themselves for the upfronts in May.

Also Friday, the Radio Advertising Bureau said national radio ad revs rose 2% in January, the first year-on-year increase since November 2000.

Stronger industrial production, positive consumer sentiment and stable inflation boosted financial markets and yanked showbiz stocks higher. The move followed a surprisingly upbeat assessment by Federal Reserve Chairman Alan Greenspan that a U.S. economic expansion is “well under way.”

Execs like News Corp.’s Peter Chernin and Vivendi Universal’s Jean Marie Messier have been cautious in recent comments on the ad market, describing mixed signals and reluctance to proclaim a turnaround that may not materialize. Some on Wall Street are jubilant. “We believe the U.S. advertising recession is at its end: The cyclical recovery appears to be under way sooner than anticipated,” wrote UBS Warburg analyst Leland Westerfield, forecasting ad growth of 1% this year (revised from a 2% dip).

“Early posturing by network sales and media buyers” points to upfront price increases of up to 5%, he said. Last year, in the throes of recession, upfront sales were down 15% on lower pricing and less inventory as networks held back as well as advertisers. Westerfield said eight of the 10 biggest national spot TV ad categories, led by automotive and retail, were spending more in March.

And he and others think political advertising that will reduce inventory in the fall may make advertisers more eager to ink upfront pacts.

Steve Grubbs, director of national TV buying at BBDO Worldwide, acknowledged a pickup in the second quarter scatter market but said inventory set aside for make-goods accounted for some of it. As for the upfront, “It’s too early to tell, but nothing indicates we anticipate any kind of inflation.” He sees spending about flat from a year ago.

His clients hope so. Network honchos hope not. As both sides have seen, a lot can happen in three months.

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