Ad Spending Poised for Growth

Advertising spending is showing unexpected vitality in a lackluster economy, led by broadcast television networks that have hiked their rates by about 10% since early June.

Last month, some analysts voiced concern that advertisers would become skittish after the stock market plunge, followed by the financial collapse of WorldCom Inc., whose MCI telephone service is a leading advertiser. They predicted that some advertisers would cancel or scale back on orders placed during the spring for commercial spots on network TV.

So far, that hasn’t been the case.

“There’s more money coming into the market--it’s amazing,” said Bill Cella, chairman of Magna Global USA, which negotiates ad packages with networks on behalf of advertisers.

“Advertising recovery usually comes two quarters after a recovery in the general market. But it seems like a total reverse here,” he said.

The outlook appears to be improving across several media sectors. CMR, a unit of Taylor Nelson Sofres, which tracks ad spending, reported Monday that advertising spending for all media was down just 0.2%, to $53.7 billion, during the first half of 2002, compared with a year earlier.

Spending in network TV is up dramatically. The six major broadcast networks booked a record $8.1 billion in advertising commitments for the prime-time TV season that begins in mid-September.

According to four key ad buyers, advertisers have been reaffirming those orders placed during the so-called “upfront” sales season in late May and early June, when about 80% of the network’s prime-time inventory is sold. In some cases, advertisers who wanted to expand their orders were told they would have to pay the price.

“If the networks extended the orders, they did it at a higher price,” said Tim Spengler, director of national broadcast for Initiative Media, which handles network TV advertising for Home Depot Inc., Bayer Corp., Bell South Corp. and Coors Brewing.

Mike Shaw, ABC’s president of sales and marketing, confirmed Monday that the network’s rates have climbed along with competing networks since the upfront sales season closed in early June. Rates for all of the networks have jumped by about 10% since June, TV executives said, with some increases to new advertisers as high as 25% over the rates set during the upfront, according to WB executives.

“I don’t know where the pricing will end up, but we feel pretty good,” Shaw said. “There’s very limited inventory available.”

For example, the first two regular season games of ABC’s “Monday Night Football” are sold out, Shaw said. CBS and Fox Broadcasting Co. executives said they’ve sold more than 85% of their spots for weekend National Football League telecasts for the entire season. And CBS executives said advertisers have expressed interest in college basketball, which doesn’t start until December.

“Our pacing has been solid. We are today where we were last year in mid-November,” said Scott McGraw, CBS executive vice president for network sports sales and marketing. “It’s certainly a recovering market.”

Advertisers’ interest goes beyond sports. “It’s prime-time, daytime, news, sports, kids programming....All of the day parts seem to be healthy,” said ABC’s Shaw. “This is broad-based strength.”

According to the CMR report, Spanish-language broadcasting posted the greatest increase, 26.7% for the first half of 2002.

That is not surprising given that advertisers have been flocking to Spanish-language media, trying to harness the buying power of more than 38 million Latinos living in the U.S.

The radio and newspaper industries also showed gains. Radio advertising moved up 7.5% over last year, and spending in newspapers increased by 6.3%.

The biggest declines in the first half were in business-to-business magazines (down 20.8%) as several titles folded. TV syndication was down 12.6% and cable TV fell by 9.7%. However, some cable networks have reported an uptick in pricing since June.

General Motors Corp., which spent $1.1 billion in six months, continues to be the nation’s top advertiser even though the auto maker’s spending was flat compared with the first half of 2001.

Ford Motor Co. trimmed its ad budget by 8.8%, to $610 million, and DaimlerChrysler cut its spending by 19.1%, to $583 million.

Procter & Gamble Co., the nation’s second-largest advertiser, increased spending 23.8%, to $966 million. AOL Time Warner Inc., the nation’s third-largest advertiser, increased ad spending by 3.6%, to $753 million, in the first half. Walt Disney Co., the eighth-largest advertiser, spent the same as the first half of 2001, or $506 million.

Verizon Communications Inc. increased its ad budget by 38.4%, to $541 million. Pfizer Inc., the maker of Viagra, increased spending nearly 22%, to $497 million.

Philip Morris Cos., the nation’s fourth-largest advertiser, cut its spending 16.5%, to $725 million.