Are you reading this from a forwarded email? New readers can receive our RBR Morning Epaper for the next 60 Business days!
SIGN UP HERE
Welcome to RBR's Daily Epaper
Jim Carnegie, Editor & Publisher

Click on the banner to learn more...


Lehman Bros. predicts 2007 ad spend to grow 3.3%

The Lehman Brothers U.S. Media and Internet team estimates that 2007 total U.S. advertising will likely grow 3.3% to 300.5 billion. This compares with Lehman Brothers Economic team forecast of 2.6% 2007 GDP growth (4.7% nominal GDP growth). For 2007, Lehman Media expects national advertising to outpace local, with national growing 4.9% to 171.2 billion and local up 1.1% to 129.3 billion.

Broadcast TV: While broadcast TV remains the first dollar buy for advertisers due to its mass audience and audio/visual capabilities, in 2007, we do not expect broadcast TV ad growth to outpace nominal GDP growth given the increased penetration of cable television, the increased acceptance of the Internet as a branding medium, and the reversal of key bi-annual events including the Winter Olympics and the Congressional elections. We estimate overall U.S. broadcast TV advertising could decrease 0.2% year over year in 2007.


Lehman's estimates for other media

Cable Networks: We look for continued deceleration in growth in 2007 for cable networks, with an expected 6.2% growth year over year in 2007 down from 7.5% year over year in 2006 and increasing 9.9% year over year in 2005. Decelerating cable advertising growth is a natural outgrowth of the slowing of cable network expansion, but we believe growth reacceleration is a function of the further concentration of audience and a restructuring of the local cable spot advertising business. Programming like Monday Night Football gives cable the ability for greater audience concentration, which could begin to command increasing rates. As larger scale programming like this makes the transition to cable, we believe cable advertising expenditures could begin to reaccelerate.

Radio: As time spent listening continues to decline, in our view, the radio broadcasting industry lacks appropriate pricing power and new technologies continue to take listenership and thus ad dollars away from radio. With few indicators heading into 2007 suggesting improvement from 2006 trends, we expect radio broadcasters to exhibit continually softening fundamentals in 2007, driving our radio industry revenue forecast of 1% year-over-year declines.

Direct Mail: We are forecasting direct mail advertising growth of 6% in 2007 following what we estimate will be roughly 6%-7% growth in 2006. We believe that 2007 direct mail spending growth could slow slightly due to an increase in postal rates and a pullback in financial services advertising spending; however, we believe that long-term trends including limited barriers to delivery, the continued search for improved marketing ROI, and advancing database technology will likely continue to be positive drivers of direct mail growth.

Newspaper: We forecast newspaper advertising revenue down 4.0% in 2007 after being down an estimated 1.7% in 2006. We expect the largest drags on newspaper advertising in 2007 to come from classified advertising, estimated down 8.0% overall including help wanted down nearly 12.0%, auto down 7.5%, and real estate down 9.0%. National advertising in the newspapers, a less important category, is estimated down 4.5% in 2007 as we are expecting pressure from four of the top five categories: telecom/wireless, travel, movies and national auto. Retail store advertising is expected to slip a slight 0.6% next year. Lastly, keep in mind that newspapers continue to significantly lose market share - estimated at 14.9% in 2007 vs. 16.0% in 2006 and 19.5% as recently as 2000.

Internet: In 2007, we estimate U.S. Internet advertising revenue could reach 20.3 billion, up 26% from an estimated 16.2 billion in 2006. With U.S. Internet advertising currently representing only 5%-6% of total U.S. advertising spend, we expect strong secular growth to continue as advertisers look to capitalize on shifting media consumption patterns and reach the consumer through the more targeted and measurable online medium. Although we expect the more established categories of online advertising-display, search, and classifieds-to drive growth and take share from traditional advertising mediums such as newspapers and radio, throughout 2007 we believe that video, local, and mobile advertising will begin to make a more meaningful contribution to the growth in Internet advertising revenue.

Yellow Pages: The yellow pages sector is likely to continue to post low-single-digit revenue growth in 2007 (we estimate 2% year over year) given the recurring nature of directories advertising, and in our opinion, online directory usage can offset at least some of the gradual revenue erosion inevitable in the print yellow pages business. Consolidation may continue to be a notable theme in 2007, potentially driving synergies and supporting the long-term viability of the yellow pages industry.

Outdoor: By virtue of relative insulation from new technologies and inherent audience growth driven by favorable lifestyle and demographic, we believe outdoor advertising expenditures should continue to grow faster than most of the traditional media with an estimated 6.5% year-over-year growth in 2007. We believe increasing fragmentation in other media, the development of digital display technology and expansion of digital boards, increasing traffic congestion and travel time, and improved audience measurement collectively support the value of outdoor advertising's mass market position.

Magazines: We forecast magazine industry ad revenue to increase 3.0% in 2007 after being up an estimated 3.0% in 2006.





Radio Business Report
First... Fast... Factual and Independently Owned

Sign up here!
New readers can receive our RBR Morning Epaper
FREE for the next 60 Business days!

Have a news story you'd like to share? [email protected]

Advertise with RBR | Contact RBR

©2006 Radio Business Report, Inc. All rights reserved.
Radio Business Report -- 2050 Old Bridge Road, Suite B-01, Lake Ridge, VA 22192 -- Phone: 703-492-8191