At a time when the economy is low on gas, auto spots are providing local TV some much needed revenue fuel.
The consumer auto industry — the largest ad sector by far in local TV — is undergoing a comeback after a lengthy decline and an all-time low in car sales in 2008, when declining revenues had major station groups cutting staff at local stations — some even laying off anchors in major markets like Los Angeles and Chicago.
But for the first quarter of 2010, automotive ad revenue is up 75.9% year-on-year for local broadcasters — $589 million vs. 2009’s $335 million, according to broadcast industry trade association TVB. For all of U.S. advertising, the increase was a healthy 22%, according to investment bank Barclay’s Capital. The comeback was delayed slightly by last year’s “cash for clunkers” program, but is now in full swing.
“Just before [the] ‘cash for clunkers’ program was when it really bottomed out,” said Steve Lanzano, prexy and CEO of Television Bureau of Advertising. “Now, manufacturers’ ads are coming back, and tier two and tier three have also made a comeback.”
In fact, the Chrysler Group was the top TV advertiser during the first quarter, with a 108% increase against the same quarter last year — an estimated spend of $103,215.
Car ads are divided into three tiers: Tier one ads are purchased by manufacturers such as Chrysler and Honda, tier two ads are taken out by area-wide dealer associations and tier three ads are purchased by individual dealerships.
All three sales tiers were dealt severe blows during the past several years, damaged at first by inflated gas prices and then sent reeling by the market crash and subsequent increase in unemployment.
TV execs are feeling relieved, at least for now.
“Through the 10 owned-and-operated markets we’re in, we’re seeing strength across all of them,” said Robert Harnaga, VP of sales for NBC flagship O&O WNBC.
But even though automotive is back, it’s not the same: The industry has downsized, with major brands such as Hummer and Saturn throwing in the towel.
“The days of the Hummer are gone,” Harnaga acknowledged, adding that it’s become more difficult to move large trucks. Lanzano said he expected to see increased interest in upcoming electric models such as the Nissan Leaf and the Chevy Volt.
Lanzano attributed the bump in part to pent-up demand, which spurred considerable growth in buying (and then advertising) starting in the last quarter of 2009 and continuing through this year.
NBC Local Media prexy Michael Jack agreed with the assessment. “It was down so much in 2009 it had to go up,” he said.
It’s too early to say what the effects of the revenue increase will be, but a report from Barclay’s predicted that the return of car ads “could have a spillover effect across several different media,” specifically in cost-per-minute increases.
But Lanzano warned that the litmus test is going to be the countrywide unemployment number. “Any event could move that one way or the other,” he said. “(It) affects consumer confidence.”
Brad Adgate, senior VP of research at Horizon Media, advised caution as well. “My gut feeling is that (the recovery) is going to continue, but the economy is still not as strong as it was a couple of years ago. You’ve got to hedge your bets,” he said.