Coverage Cost Nears $1 Billion

Television and radio companies lost as much as $1 billion in advertising revenue with last week’s shift to around-the-clock news coverage, industry observers said Wednesday.

Total lost ad revenue will increase as newspaper and magazine losses are tallied, and residual losses could dash hopes of an advertising rebound during 2002.

“It’s shaping up to be an ugly third quarter,” said Robertson Stephens analyst James Marsh, who estimated the broadcast industry loss at between $950 million and $1.1 billion.

Other estimates from industry observers are equally bad, and many media companies already have begun issuing third-quarter profit warnings.

Broadcast, cable and local television advertising losses on Sept. 11 alone hit “in the neighborhood of $85 million,” said David Peeler, president of CMR, a New York-based market research firm. From Sept. 11 to Sept. 13, the major television networks lost $320 million in revenue, according to Larry Gerbrandt, chief content officer for Carmel-based Kagan World Media.

The dramatic drop in revenue prompted most industry observers to question whether the anticipated advertising industry rebound will occur during 2002. The Myers Report, a New York-based media research firm, shifted its revenue estimates to worst-case scenarios--including a 6.6% decrease in ad revenue in 2001 and a 7.4% drop during 2002.

“It now appears that the worst case is a probability, with even greater downside potential if future events cause greater disruption to network schedules and advertisers’ plans,” said Jack Myers, the company’s chief economist.

Advertisers, meanwhile, are cautiously returning to television and print advertising schedules, even as they struggle to craft appropriate messages for shaken consumers. “Last week, people in the industry were in shock,” said CMR President David Peeler. “This week, people are trying to do a real analysis of where we go from here.”

Advertisers need to communicate “in dramatically different ways with their consumers,” said John J. Sarsen Jr., president and chief executive of the Assn. of National Advertisers, which on Wednesday canceled its Oct. 10 annual meeting. “The priorities, goals, fears and heroes of consumers are going to be dramatically different after this tragedy.”

One measure of that new sensitivity occurred Wednesday when Sears, Roebuck & Co. and FedEx pulled advertising from ABC late-night show “Politically Incorrect” after fielding consumer complaints about a reference to the U.S. military as being “cowardly.” Sears spokeswoman Lee Antonio said the decision was made after reviewing transcripts: “They were having a discussion, as they’re free to do . . . but we decided it was not a place we wanted to be.”

Other advertisers are pulling spots rather than risk making consumers angry.

Fearful that its commercials would be seen as “opportunistic,” GlaxoSmithKline, postponed a long-planned advertising campaign for its Paxil antidepressant.

“Whether it’s a valuable medicine or a hamburger, you want to make sure your company is appropriate in light of these tragedies,” said Holly Russell, GlaxoSmithKline’s director of product communications.

Airline advertising has been almost nonexistent since the attacks. When Southwest Airlines returned to the airwaves Wednesday night, the airline’s usual sense of humor was absent.

“There will always be a place for humor in advertising, but it clearly doesn’t always have to be there all the time,” said Eric Webber, communications director for GSD&M;, Southwest’s Austin, Texas-based advertising agency. “This tragedy clearly is changing how you reach people. And the very simple way to figure out how to reach them is to go ask them--to really take a good look at people’s perceptions.”

Public service advertisements--spots that promote such peacetime objectives as education and the environment--also will change dramatically. First Lady Laura Bush, for example, on Wednesday filmed a public service announcement encouraging parents to discuss the tragic events with their children.

“The tragedies are going to change [PSAs] totally,” said Peggy Conlon president and chief executive of the New York-based Ad Council, which was born in 1942 as the War Advertising Council. “We’re just a week into this, but we already know of several messages that are being developed in such areas as unity and diversity.”

Patriotism and volunteerism also are evident in a rush of paid advertising from such companies as Radio Shack, which rushed a special print and radio advertising program into place earlier this week. The newspaper advertising that encourages consumers to donate money to nonprofit agencies, includes an American flag and the words, “Thank you and may God bless America.”

Radio Shack’s creative team selected a different typeface and different colors than are typically found in its advertising.

“We wanted nothing in this ad that would make people feel like we were taking a retail approach,” said Radio Shack Vice President Barry King. “That’s not something you would ever want to do in a situation like this.”

Sports marketers also are grappling with decisions sparked by the unprecedented attacks. The National Football League reportedly will compensate broadcasters for lost advertising revenue if wild-card playoff games are canceled, a move that may cost the league as much as $80 million.

Stephen Greyser, a sports marketing professor at the Harvard Business School, said the NFL’s costly decision to trim postseason play was driven by the fact that it has such a short season.

The NFL decided to reschedule last weekend’s games and drop one round of the postseason. Greyser said the decision was understandable: “In baseball, the difference between 161 or 162 games usually doesn’t mean that much, but when you have just 16 games in a season, you want to play those games to ensure the integrity of the league.”

The terrorist attacks are also refocusing ongoing debate over advertising’s role in society.

“Discussion over whether advertising mirrors society or drives society is going to increase,” said long-time advertising industry executive Roger Lavery, now dean of the communications school at Northern Arizona University. “It’s clear that while advertising might redirect a consumer from one brand to another, if people aren’t interested in spending, advertising’s probably not going to help.”

Advertising traditionally shifts its emphasis as the nation evolves, Lavery said, as is evident in the patriotic advertising during World War II, the emphasis on “Buy American” during the 1970s and the wave of zany advertising spawned by cash-flush dot-coms during the 1990s.

Those ad swings evolved over time, however, while today’s advertisers are being forced to come to grips with a dramatic, nationwide change that occurred overnight.

“We are in a wartime economy,” economist Myers said. “These words do not come easy for me, but I feel very strongly that we have to be realistic. Unlike past catastrophic events, which may impact media for a couple of days or weeks, this one seems to me to promise ongoing warlike activity. President Bush has been pretty clear about that.”

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Times staff writer Dana Calvo contributed to this report.