Slow Ad Sales Signal Cooling of the Economy

The newspaper business nationwide will show just a slight increase in advertising this year, and only political ads this fall will save local television from a poor year--although network TV is getting a boost in some advance sales for next season.

So what? So plenty. To Wall Street odds makers and serious economists those media results are straws in the wind, leading indicators of the state of the economy.

Which makes sense when you think about it: If the economy is humming and the outlook is good, businesses will be confident of finding customers when they spend to advertise. Conversely, advertisers are quick to cut back when customers lack enthusiasm. Therefore a quick look at newspaper ad linage, or sales of commercial time by television stations, should provide a good guide to the future.

But the world is not so simple. Ad signals today, like politicians’ responses to tough questions, are ambiguous.

In newspapers, which accounted for $29 billion, or more than 25%, of the nation’s $109-billion total ad spending last year, ad growth is sluggish. Advertising from department stores and supermarkets is flat to down, and in some areas classified advertising is up only slightly after years of rapid growth.

‘Up Front’ Weeks

In television--the second largest market at $24 billion in commercials annually, according to Senior Vice President Robert Coen of McCann Erickson--commercial sales on daytime shows are lagging.

But the outlook for prime-time, network television is better than expected. ABC, CBS and NBC have just completed what the trade calls “up front” weeks in New York. That is when the big advertisers--the major car, food and cosmetics companies--contract for shows in the 8 p.m.-to-11 p.m. slots in the season that runs from September to June, 1989. This year the new season’s beginning is in doubt because of the Hollywood writers’ strike. Yet the big advertisers are reported to be plunking down billions to secure shows and time slots next spring.

So how do you figure? The truth is, media indicators point to a slowing economy--but you have to think that through because the ad game can be tricky.

(For an example of just how tricky, you take this week when the three networks are featuring the Democratic convention and independent stations have only old movies or reruns of “MASH.” What do you think is happening to those poor independent stations? They’re making extra money, explainsPaineWebber’s Alan Gottesman, a longtime analyst of the business, because advertisers pay a premium for movies and reruns--convinced that viewers are fleeing the convention out of boredom.)

Fewer Advertisers

Special factors, as well as the economy, are causing the drop in newspaper retail ads, for example. Department store and supermarket mergers are one reason for that drop, says analyst John Morton, head of his own Washington research firm. The mergers have reduced the numbers of advertisers, according to Morton, and struck paralyzing fear into the ad budgets of those not hit by takeover.

The more basic truth, however, is that stores are having a lean year--particularly among women who are ignoring the new fashions. Why? Because fashion designers blundered, producing unattractive miniskirts for an older and working female population. The result: slow sales and less advertising.

In network TV, brisk prime time sales reflect a special situation more than the economic outlook. What you have in prime time are big advertisers chasing limited opportunities. For the car companies introducing new models, or the Procter & Gambles and Coca-Colas supporting products in good times and bad, there is really no way to reach a maximum audience other than prime time network TV. (Cable TV, at $760 million in ad revenues, is puny compared to the major networks at $8.5 billion) And so the big advertisers crowd into the few available commercial slots per evening--but their buying may not add up to a prediction on the economy.

For that, local TV and the newspapers provide a more accurate signal. The help-wanted ads, for example, are growing only modestly, indicating--says Conference Board economist Kenneth Goldstein--”that job growth in the second half of this year will be a little slower than it was in the first half.”

On the other hand, department stores hope to bring back the customers with fall fashions featuring a variety of skirt lengths and brighter colors.

The upshot of all those mixed signals? A slower economy, but not a stalled one; perhaps an economy undergoing change. So, as the saying goes, stay tuned.