The auto advertising rebound was an important factor in Cumulus Media posting a 2.7% increase in Q1 revenues. However, CEO Lew Dickey told analysts that the auto supply chain problems in Japan have taken a toll on Q2 pacings.
“You’ve already heard from most of the broadcasters, who have reported that Q2 pacing has worsened throughout the month of May. Auto has been the most severely impacted, due to the extreme disruption of the supply chain from the Japanese automakers as well as the parts suppliers. So it’s not just the cars made in Japan, but some parts made in Japan for the automakers who are actually producing cars in this country as well,” Dickey said in his quarterly conference call with Wall Street analysts.
“In addition to the Japan earthquake and the tsunami, the unrest in North Africa and the Middle East also had an impact on fuel prices. And that’s had somewhat of a dampening effect on consumer confidence, as has been published. And all of this plays a part,” Dickey said of the advertising landscape.
At this point, Dickey said, local ad sales are pacing flat for both Cumulus Media, the public company which owns medium and small market radio stations, and for Cumulus Media Partners (CMP), the privately-owned (partly by Cumulus) large market radio group which Cumulus has a deal pending to roll-up into the public company. However, for national advertising Cumulus Media is pacing down slightly and CMP is pacing down in the mid-teens.
“Fortunately the Japanese supply chain disruption is temporary and oil is now declining in price, as once again the market begins to reflect more of a realistic supply and demand relationship,” Dickey said. “I continue to believe that fuel prices, above all else, are the single largest risk to consumer and small business confidence on a week-to-week basis. It’s the tax that people pay every week at the pump – and many people pay more than once a week at the pump – and it has a very hard-hitting impact on overall confidence.”
But he is upbeat. “We don’t see this being a long-term issue, though, and look forward to more normalized automotive ad spending as production and the supply chain disruption is corrected and things correct themselves during the course of the year,” he concluded.
Asked in Q&A why radio has been harder hit in automotive than TV and outdoor, Dickey had a ready answer: “Radio is the easiest to cancel.”
RBR-TVBR observation: Hardly surprising if you’ve checked this week’s RBR-TVBR poll. Most of our readers say the problems in Japan have impacted auto advertising on their stations. You can add your input at www.RBR.com. Lew Dickey is just the latest big group CEO to report that auto slowed noticeably this month.