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.