Analyst: Adland, Media Take Major Hit If 'Fiscal Cliff' Happens

A number of economists have predicted that the U.S. could enter a new recession if the government allows the economy to fall off the so-called “fiscal cliff” at the end year, with the tax increases and spending cuts now scheduled to take effect at that time.  

Now a new report from Pivotal Research says the ensuing crash landing after the fall could result in a $9 billion revenue loss to media companies as a result of inevitable ad spending cuts by marketers to help bolster their bottom lines.

“It seems likely that Republicans and Democrats will drive the industry over the edge of the cliff in Thelma and Louise-style,” senior research analyst Brian Wieser wrote in his report. “As with other sectors, the advertising industry and its investors should prepare for the potential crash that could follow.”

“All industries and all countries would be impacted by austerity in the United States if we go over the cliff next year,” Wieser wrote. “Within advertising,” he said dozens of companies, “not to mention every investor and nearly every employee in the industry, would be impacted, too."

The $9 billion that Wieser calculates could vanish is just revenue attributable to media sellers. Adland would also take a big hit, if marketers slash their ad budgets.

“While economists' consensus and our model speaks of optimism that this won't happen, our brain increasingly thinks it just might.”

Wieser believes 2013 will be a lackluster year on the ad spend front. He predicts growth of just 1.2% in the U.S. and that doesn’t factor in the catastrophic effects of an economic crash.

That prediction follows gradually decelerating growth throughout 2012, Wieser reported. First quarter 2012 ad spending (excluding political and Olympics) grew 1.5%, he calculates, while Q2 growth amounted to just 0.9% and Q3 was up just 0.3%. That’s local and national advertising combined, which was buoyed to some degree by robust auto spending at the local and regional levels. National ad growth was more sluggish and showed a nearly 1% decline in the third quarter, Wieser said.

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2 comments about "Analyst: Adland, Media Take Major Hit If 'Fiscal Cliff' Happens".
  1. Douglas Ferguson from College of Charleston , December 3, 2012 at 8:16 a.m.
    Elections have consequences.
  2. Paula Lynn from Who Else Unlimited , December 3, 2012 at 10:27 a.m.
    Although I agree this is far from an ideal situation and we need to resolve these issues with many adjustments, it is really not a tax increase. It is just putting the tax revenues back to where they were before the slide. Before a measly 12 years ago, we would be working within the same tax plan without a fiscal cliff since we are now paying lower rates than the 50's. That is before the tech age scraping our disposable personal income (Cable and phone $2000 + annually) plus security costs through the roof. There are so many more examples.