Hurricane Katrina will cause total media spend to fall by 1.13 billion from August '05 to September '06, making it the costliest natural disaster on record to hit the media industry, according to data released yesterday by PQ Media. The loss is estimated to account for 2.2% of media spend in the 20 affected DMAs in the 12-month period. Of these DMAs, New Orleans accounts for 64.8% of the total loss, or 732.5 million, a staggering 14.3% decline in the city's projected annual media spending. From a broader industry perspective, the total represents a decline of only 0.2% of the 887.37 billion in media spending expected in the next year.

Katrina's impact on media spending will be greater then that of hurricane Andrew, which hit South Florida in 1992 and caused between 350 million and 450 million in losses, according to the report, PQ's "Impact of Hurricane Katrina and Other Storms on Media Spending."

"The only catastrophic event to have a greater impact on media spending than Katrina was the September 11, 2001 terrorist attacks, which were man-made and affected media spending nationwide," said Patrick Quinn, president of PQ Media.

Katrina, however, was one of only six storms that battered the U.S. in 2005, causing major interruptions in media spending in numerous DMAs outside of New Orleans. For example, Beaumont, TX and Lakes Charles, LA were impacted during Rita, and Miami and Fort Myers, FL, were affected during Wilma.

When the additional storms are included - Rita, Wilma, Dennis, Ophelia and tropical storm Cindy - the media spending decline reaches 1.59 billion, impacting an additional 19 DMAs for a total of 39 in 2005 and 2006, according to PQ Media.

Rita was the second-costliest hurricane to the media industry in 2005, with losses estimated to reach 210.3 million over the next year, followed closely by Wilma at 206.5 million. The other three storms, Dennis, Cindy and Ophelia, hit with less severity, often in smaller DMAs, resulting in combined media spending losses of 38.1 million. In addition to Katrina, New Orleans was hit by two other storms - Rita and Cindy - accounting for an additional 31.5 million decline in media spending for the period to 764 million, or 48.2% of all media spending losses attributed to the six storms.

PQ's report includes all forms of local advertising, such as yellow pages; marketing services like in-store promotions; consumer media, such as box office; and institutional or business information, including trade shows. Overall, 26 different media were impacted to some degree.

Local advertising is expected to see the largest decline of 470.3 million, representing a 29.7% share of the spending loss, followed closely by consumer media, down 452.6 million (28.6% share). The decline in local advertising represents a 2.4% decrease from the annual 19.73 billion in spending in the affected DMAs, while the drop in consumer media represents a 1.4% decline from 32.16 billion. Spending on local marketing is expected to drop 331.8 million (20.9%), and institutional expenditures are projected to fall 248.1 million (15.6%), representing a 1.3% and 1.1% decline, respectively.

Newspapers, television, consumer promotions, direct marketing and professional & business information services were the hardest hit segments of the media industry. Some of the media spending declines are already documented. For example, public media companies, such as Gannett and Lamar, have acknowledged lower-than-expected profits due to Katrina and Rita, respectively. The impact on various media differs based on the industry's dynamics and infrastructures. For example, the trade show industry in New Orleans will take about a year to recover due to extensive damage at its conference centers and hotels. Of the top-200 trade shows, 11 are held in New Orleans yearly, including six that had been scheduled between September and December.

Meanwhile, other media, like yellow pages, do not exhibit immediate spending declines because 2005 contracts were signed months ago, but the losses will be felt by 2006 when those contracts are renewed, if at all. Finally, many business information providers were not as severely impacted due to the low number of large corporations in these DMAs, except for industry-specific markets, such as tourism and oil.

Some of the hardest hit media (40 million +) include:

* Advertising: Newspapers (190.6 million), Television (108.2 million), Radio (66 million), and Yellow Pages (45 million)

* Marketing Services: Consumer Promotions (91 million), Direct Marketing (87.6 million), Custom Publishing (84 million), and Event Sponsorships (53 million)

* Consumer Media: Cable Access (161.3 million), Internet Access & Content (84.5 million, and Home Video (83 million)

* Institutional Communications: Professional & Business Information (122.2 million), Outsourced Training (57.2 million), and Trade Shows (41.6 million)

The impact on media spending varies widely dependent upon the location of the DMA in relationship to the path of a hurricane. For example, DMAs suffering the most damage were mainly located near a storm's eye while in the Gulf of Mexico, such as New Orleans during Katrina, Lake Charles during Rita, and Naples during Wilma. Except for Wilma, south Florida DMAs such as Miami had less impact because they were hit when the hurricanes were less lethal.

Finally, the impact to media spending could have been much worse had it not been for high percentage of small DMAs that were affected, many of whom took the brunt of the damage. Analysis shows that of the 210 DMAs, only two were in the top-10 markets, Dallas (7) and Houston (10), both of which saw less damage than first expected. Expanding to the top-25 DMAs adds only three other markets, Tampa (12), Miami (17), and Orlando (20). New Orleans, the hardest hit DMA, is ranked 43.

Other than New Orleans, only seven other DMAs are expected to suffer media spending losses between 50 million and 110 million - Baton Rouge, Biloxi, Fort Myers, Houston, Jackson, Miami, and Mobile. Most of these DMAs were close to the eyes of Katrina or Wilma. Another eight DMAs are projected to see declines between 10 and 35 million.