Coen's ad forecast more pessimistic

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Declaring that the US ad market is "even worse" than expected when he issued his initial forecast in December, advertising guru Bob Coen (whose new title is Sr. Vice President, Director of Forecasting, Magna) is now looking for US ad spend to rise only 2% this year, not his previous 3.7%. Coen has dropped his radio expectations dramatically, with local now expected to be down 3% and national (spot and network combined) nearly 1%. His outlook for TV stations is much brighter, where he is sticking with his previous forecast that national spot will rise 10% and local spot 4% this year.


The veteran forecaster notes that search marketing, which he says "better fits the definition of a sales promotion activity," has been diverting ad dollars from traditional media. Also, competition for limited consumer disposable income has intensified, which has had the greatest impact at the local level, with price competition cutting margins while taxes, rents and other expenses continued to rise. That put some local marketers out of business. And local ad dollars are also migrating to online marketing tactics, further exacerbating the local ad squeeze.

"The outlook for traditional advertising is currently not very good. Eventually the pendulum will probably swing back to recovery, but not in the immediate future," Coen warned.

Decreased advertising in the automotive sector, the biggest US ad sector, hit hard across the board. For the first half of 2008 Coen estimated that auto spending was down 6% for the National TV and Cable Networks, 10% for Spot TV and 17% for Magazines. Most other major product categories were flat to up slightly, but those modest gains weren’t enough to counter the auto falloff.

"The comparison with 2007 should improve as the year unfolds. Automobile marketers are in the process of modifying their products because of high gas prices, and their announcements of such developments should command higher budgets in the second half of 2008," Coen opined.

The ad guru said network TV ad revenues have been softer than expected in part because of the writers’ strike early this year, but he expects Q3 to be strong because of the Summer Olympics on NBC. "The Broadcast Networks should do better during the rest of this year, but they do not command as much pricing power as they did in the past," he said.

"National Spot TV revenue growth in this election year has so far failed to live up to expectations, but we should see much better gains in the second half of this year; but like the networks, the TV stations are no longer as strong as they had been in the past," Coen noted.

As tough as the national ad market is this year, "the situation continue to be even worse at the local level," Coen said. "The continued reduction in the number of local entrepreneurs has sharply cut into the ad sales by most media to their local market customers. Consolidation of many retailers and local product dealers has hurt newspapers, radio stations, TV stations and the Yellow Pages media. The Internet has often compounded the problem by making available cheaper ways for many local marketers to contact potential customers," he said.

Thus, Coen is expecting local radio ad sales to fall 3% this year. Only newspapers are expected to do worse, with an 8% decline in local ad sales.

Coen’s full forecast chart is below.

RBR/TVBR observation: We certainly would have been surprised (and questioned his sanity) if Coen had not lowered his forecasts. Back in December he didn’t have high expectations for 2008, but now he’s had to go even lower. Certainly radio ad sales thus far have been dismal, so no one we know of is still predicting even a flat year. Coen is banking on heavy political spending to reverse what is thus far a negative year for spot television. Let’s hope that windfall proves to be as strong as he thinks it will be.
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Bob Coen’s advertising forecast for 2008

Dec. ’07

July ’08

Ad spend

Media

Forecast

Revision

(millions)

Four TV networks

5.0%

7.0%

$17,808

National spot TV

10.0%

10.0%

$11,152

Cable TV

6.1%

8.0%

$22,263

Syndication TV

1.0%

8.0%

$3,595

National radio (net & spot)

1.0%

-0.9%

$4,216

Magazines

3.0%

1.0%

$13,925

National newspaper

-1.0%

-7.0%

$6,146

Direct mail

4.5%

2.5%

$61,731

National yellow pages

2.0%

0.0%

$2,185

Internet

16.5%

12.0%

$11,792

Other national media

5.7%

3.5%

$38,249

TOTAL NATIONAL

5.5%

4.2%

$193,062

Local newspaper

-2.0%

-8.0%

$32,682

Local TV

4.0%

4.0%

$14,987

Local radio

0.0%

-3.0%

$14,452

Local yellow pages

1.0%

0.0%

$12,065

Other local media

1.0%

2.4%

$17,860

TOTAL LOCAL

0.2%

-2.4%

$92,046

GRAND TOTAL

3.7%

2.0%

$285,108

Source: Magna