Slumping TV biz faces ad-versity

Spot market tops problems as upfront looms

With the start of the TV upfront market less than three weeks away, broadcast network spinmeisters are busily whipping up expectations for a top dollar, sold-out upfront market.

But for TV and radio broadcasters selling their advertising inventory month-to-month in the still highly volatile spot market, the road to full ad recovery still faces a few speed bumps, according to an SG Cowan survey of stations and ad buyers.

Station groups such as Clear Channel, Cumulus, Hearst-Argyle Television and Radio One — all of which are due to report stable if less than stellar first-quarter financial results this week — are bearing the brunt of advertiser skittishness. SG Cowan analyst James Marsh said sector advertising, both national and local, is soft, with the second quarter still looking murky, especially for radio.

‘Less than encouraging’

“Results of our survey were less than encouraging given the optimism we heard coming out of NAB in April,” noted Marsh, who said the market is still a bit “lumpy” and unpredictable.

At least for the national and local station market, survey respondents indicated the expected bounce following resolution of the war in Iraq is not yet visible.

Unlike the networks, which sell the vast majority of their inventory in the upfront market almost a year ahead, but book the sale in the quarter in which the ad runs, the stations are selling their avails in real time.

“Radio and TV stations are coincident indicators of the ad economy,” said Marsh, since they are selling ads in the current economy and more vividly reflect advertiser sentiments about consumer sentiment.

While plans for the upfront entail a much longer view of future business prospects, the TV spot market is a highly fluid and evolving market. Marsh believes TV broadcasters are seeing a modest recovery year-to-date, with a slight 1% increase in TV station ad sales forecast for the second quarter, with local avails outpacing national spots. According to the survey, first-quarter TV ad sales were up roughly 1.1%, which is poor, but not nearly as bad as many had feared.

Good indicator

“We’re dealing with today and tomorrow so the spot market is a good indicator of market health regionally,” said one station exec, who fears that if the networks don’t sell out their upfront inventory, TV stations may continue to find it hard through the year to sell their inventory.

Bullish consensus forecasts call for a 10%-15% increase from the 2002-03 upfront with 80% of inventory being sold, though many advertisers insist growth will be half that level, particularly for networks that didn’t hit their ratings goals.

The radio market is particularly hard-hit and continues to be volatile. But while Viacom chief Mel Karmazin scolded his radio team for the division’s dismal first-quarter performance, this week will reveal just how difficult that market is. Infinity and its particular ratings and ad sales woes aside, Marsh said radio advertising was down 4% in March and 3% in April; it’s looking to be down about 5% for May.

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