Universal McCann Sr. VP and Director of Forecasting Bob Coen is no longer as bullish about 2005 ad spending as he was back in December (12/7/04 RBR #237). Instead of 6.4% overall growth, he now expects US ad spending to grow 5.7% this year.

Why so slow? Coen points to tough comps as one reason - - it's hard for media who got a windfall from last year's election and Olympics spending to post significant gains against those numbers. He also says the new Sarbanes-Oxley law may be a factor, making national marketers more cautious about how they do business. On the local level, he says consolidation by retailers has reduced local advertising prospects in many communities. "Many of the new giant retailers like Wal-Mart and CVS are concentrating heavily on building store traffic by offering the lowest possible prices to their local consumers, foregoing any form of joint cooperative advertising efforts and focusing just on the lowest possible price for the products of national manufacturers," he noted. "Eventually the pendulum should swing back to the use of a broader range of inducements other than price alone," he said, but for now the big discounters pose a problem for local media.

In his mid-year update, Coen reduced his 2005 growth estimates for radio and television, but boosted his estimate for cable. He even cut back his growth estimate for Internet advertising, although it's still a double digit number. Our chart compares Coen's original forecast to yesterday's update.

Bob Coen's advertising forecast for 2005

Media	December Forecast	June Forecast	Ad spend (millions)
Four TV networks	2.0%	2.0%	$17,047
National spot TV	-1.0%	-5.0%	$10,802
Cable TV	7.0%	12.0%	$18,395
Syndication TV	3.5%	4.0%	$3,821
National radio (net & spot)	5.2%	5.0%	$4,524
Magazines	7.3%	7.5%	$13,166
National newspaper	6.8%	5.0%	$8,010
Direct mail	9.5%	8.5%	$56,627
National yellow pages	5.0%	3.0%	$2,173
Internet	25.0%	15.0%	$7,881
Other national media	5.6%	5.9%	$35,501
TOTAL NATIONAL	7.4%	6.5%	$177,947
Local newspaper	5.5%	5.0%	$40,934
Local TV	2.5%	2.0%	$14,797
Local radio	5.0%	3.5%	$15,737
Local yellow pages	3.0%	2.5%	$12,189
Other local media	6.1%	6.8%	$17,183
TOTAL LOCAL	4.8%	4.3%	$100,840
GRAND TOTAL	6.4%	5.7%	$278,787

Source: Universal McCann

RBR observation:
Coen's original forecast of 5% growth for local radio was pretty bullish, so the new 3.5% estimate looks a lot more realistic. Even that is pretty ambitious, since the RAB reported growth of only 1% through April. On the TV side, the quarterly reports from group owners indicate that business is a slower than expected, so it's reasonable for Coen to back down some on local and quite a bit on national business expectations. The national cable networks really have their act together this year - - thus, Coen is now predicting 12% growth rather than 7%. If he's right, which appears likely, this will be the first year that the cable nets (all of them combined) have more ad billings than the Big 4 broadcast networks.