Another indication that advertising is taking serious hits across the board: the Outdoor Advertising Association of America has canceled its annual national convention, scheduled for May 17-19 in Miami. The trade organization said the decision was prompted by members who are battening down the hatches and focusing on ways to weather the worst economic downturn in decades. Reading between the lines, cost is also probably an issue--as many media executives slash ordinary expenses that were once taken for granted, including business travel. The cancellation is especially ominous because in recent years, out-of-home advertising was one of the few "traditional" media to prosper, thanks largely to the rollout of new technologies, including digital billboards and digital out-of-home video. The OAAA showed the industry posting regular year-over-year increases in revenue from 2003-2007, with increases of 5% in 2003, 6% in 2004, 8% in 2005 and 2006, and 7% in 2007. Overall from 1998-2007, out-of-home revenues increased 65%, from $4.4 billion to $7.28 billion. But the party ended in 2008, with most big out-of-home advertisers reporting year-over-year declines in the second half of the year; year-end results from the OAAA are not yet available. Although the expansion of new digital platforms promises long-term growth, the next year looks fairly grim, given the wide-ranging retrenchment in local advertising, the medium's bread and butter. The same cutbacks by retailers and other local businesses have taken even bigger bites out of radio and newspaper advertising revenue. In comparison, out-of-home's situation is less dire. If trade groups for this relatively successful medium cancel long-standing industry events, the implications for other traditional media are worse.
CBS witnessed massive advertising declines among its television, radio and outdoor in the fourth quarter, which contributed to a 52% drop in net profits and a slashing of its quarterly dividend. Fourth-quarter 2008 net earnings went to $136.1 million and revenues slipped 6% to $3.53 billion from $3.76 billion. Analysts were expecting much of this--especially when it comes to the advertising sales picture. Analysts have long worried that CBS has been too heavily dependent on ad revenues. But CBS chief executive Les Moonves says the company has steadily changed this financial equation, noting that now one-third of the company's revenue comes from non-advertising-related activities such as Showtime, syndication, DVD, publishing and retransmission fees. CBS said TV revenues for the fourth quarter of 2008 decreased 8% to $2.21 billion from $2.40 billion. This stemmed from network time sales, such as the time-period sale that presidential candidate Barack Obama made before the election, which took normal prime-time advertising inventory out of the period. CBS says this caused prime-time network ad sales to drop 13% during the period. In addition, ad sales at CBS' TV station continued to suffer, as a result of dramatically slower auto advertising. In regard to current TV ad sales activity, Moonves says: "Second-quarter options are fairly normal... [and] we are getting the lion's share of the scatter market." He adds that pricing is up for scatter, but at lower-than-normal sales volume. Moonves notes that pharmaceutical advertising is doing well--but that retail and financial categories are down somewhat. For the year, CBS says all advertising revenues dropped 8% versus 2007. No matter what happens to the economy, Moonves says CBS will do better in the second half of the year than the first half--in part because of syndication sales--advertising and license fee revenues--as well as an improving financial picture at the network. Radio revenues decreased 18% to $366.7 million from $447.1 million because of weakness in the advertising market and the impact of radio station sales. Outdoor revenues slowed 15% to $526.3 million from $618.6 million. A weak advertising market had an impact on the unfavorable foreign exchange rates as the U.S. dollar strengthened. Revenues in North America were down 14%, primarily due to a revenue decline in U.S. businesses. CBS created an interactive division around its big acquisition of CNET. Interactive revenues for the fourth quarter of 2008 rose $186.3 million from $58.6 million for the same quarter last year. That includes the acquisition of CNET, better mobile revenues and advertising sales. By itself, CNET's interactive revenues increased 1% from the fourth quarter of 2007. Publishing revenues improved a bit--1% to $245.1 million. Top-selling books in the period include "YOU: Being Beautiful" by Michael F. Roizen and Mehmet C. Oz, "The Purpose of Christmas" by Rick Warren and "Just After Sunset" by Stephen King.
Had the digital transition not been delayed, Nielsen figures suggest that more than 5 million U.S. homes would have lost all TV reception Tuesday morning. Nielsen said Wednesday that some 4.4% of households--some 5 million--are still not ready for the analog-to-digital transition, which is now scheduled for June 12. Nonetheless, Nielsen figures suggest that consumers have increasingly plugged into the coming switchover. Since Feb. 1, 800,000 homes have taken the necessary steps to ensure they do not lose TV service. The transition date, originally Feb. 17, was postponed. The Obama administration pushed for the delay, citing the number of poor, elderly and minority people who were unprepared for the digital switch. The Albuquerque-Santa Fe market continues to be the least prepared, Nielsen said, with about 12% of homes unprepared. Houston is next at some 9%. Nielsen figures show that about 7.4% of Hispanic homes are unprepared. And both markets have large Hispanic populations. Meanwhile, local broadcasters in many TV markets reported relatively low call volume in the 12 hours following Tuesday's wave of stations that went all-digital, according to an initial survey released Wednesday by the National Association of Broadcasters (NAB). The findings support data released by the Federal Communications Commission (FCC) regarding calls received yesterday by the agency. Of the estimated 12.4 million exclusively over-the-air TV households that were impacted yesterday when 421 stations switched to digital, the FCC reported only 28,000 viewer calls - an incredibly small percentage of those affected. While call volume has generally been low, there were some hotspots that received more calls due to unique market situations.
Comcast Corp.--the largest cable television operator in the U.S.--witnessed overall profits falling in the fourth quarter, with one bright area coming from its cable networks. Fourth-quarter profits fell 32% to $412 million from $602 million in 4Q 2007. Revenue rose 9% to $8.77 billion, which was slightly better than analysts expected. Much of this came from a charge related to the decreased value of its investment in the Clearwire Wi-Max service, as well as lower basic subscriber growth. Basic cable customers declined by a faster rate in the fourth quarter--233,000--than in the third, where it dropped 147,000. The decline is attributed to the dismal U.S. economy and increased competition from telephone companies. One of Comcast's better-performing divisions was its cable networks. The nets--which include E!, Versus, Style, Golf Channel, G4 and AZN Television--saw revenue (advertising sales, monthly affiliate fees, and international revenues) hold steady at $350 million in fourth-quarter 2008, from $348 million in the fourth quarter of 2007. Overall, Comcast's programming segment reported 2008 revenue of $1.4 billion--a 9% increase from 2007. Comcast said the group's operating cash flow increased 26% to $362 million in 2008. But that decreased somewhat in the fourth quarter to 10%. Other Comcast business: It added 184,000 high-speed Internet customers in the quarter. This compares to higher numbers in the third quarter--where broadband customers rose by 382,000. Digital cable also slowed in the fourth quarter--adding 247,000 customers in the period, versus some 417,000 in the third quarter of 2008. The same trend existed among Comcast's digital telephone business--adding some 344,000 subscribers in the fourth quarter, versus 483,000 new customers in the third quarter.
In another sign that Oscar revenues could be significantly lower for ABC at large this year, the network's station group was floating a proposal this week offering buyers a package at a sizable discount. The proposed deal includes 35 spots on Oscar night to run across nine of the local stations ABC owns that collectively reach some 21% of the country, sources said. Cost is some $765,000, down from a posted value from ABC of $1.14 million. For the adult 25-to-54 demo, the CPM is in the $80 range, where the sales group projects a delivery of some 9.6 million impressions across the nine DMAs. Most markets include a spot in the Academy Awards show on Sunday, along with ones in the Barbara Walter special beforehand--and the station's late local news and the network's Jimmy Kimmel broadcast following the ceremony. The deal covers each ABC owned-and-operated station minus Philadelphia, which has no remaining inventory. WABC in New York, KABC in Los Angeles and WLS in Chicago are included. Local stations receive several minutes an hour during network broadcasts to sell, and in ABC's case contribute to its overall haul for Oscar night. The local newscasts on the stations, buoyed by the strong lead-ins, might garner some of their highest ratings of the year. An ABC representative declined comment. On a national level, ABC is said to be cutting deals where spots in the Oscar ceremony itself carry a charge of some $1.4 million per spot, down from some $1.8 million a year ago.
Five big regional daily newspapers in New York and New Jersey, including The New York Daily News, have formed a content-sharing club, the Northeast Consortium, that allows them to borrow stories, photos, and graphics from each other. Following announcements by several other newspaper publishers reaching new content-sharing agreements, the Northeast Consortium represents another threat to the Associated Press. Some AP members have already given withdrawal notice, citing the high costs associated with content from the news service, as well as membership fees. The latest iteration of the new content-sharing model brings together The Record of Hackensack, New Jersey, The Star-Ledger of Newark, the Times Union of Albany, the Buffalo News, and New York Daily News, which apparently organized the consortium. According to the papers, the Northeast Consortium "will enhance each publication's coverage in the region by exchanging articles, photographs and graphics." But the club would probably be better described as a cost-cutting measure, given the dire circumstances of many of America's daily newspapers. Although the announcement made no mention of layoffs, a content-sharing agreement would allow the newspapers to trim editorial staff in overlapping content areas. Several of the newspapers involved in the new consortium have cut their workforces significantly over the last couple years, most notably the Star-Ledger. Last year, its publisher threatened to close the paper unless unions made concessions allowing dozens of layoffs. The agreement brings it together with longtime rival The Record; the former competitors will pool resources for local news reporting. The AP has endured newspaper criticism about fees for the past year. In late October, the beleaguered Tribune Co. said it will drop its AP membership after the required two-year notice period. The Columbus Dispatch, the Star Tribune of Minneapolis, and several other regional newspapers have already canceled their AP memberships. The AP desertions coincided with an increase in new content-sharing agreements. In December, The Washington Post and The Baltimore Sun struck a deal to share articles and photos beginning in January. The move allows both to expand their coverage, which focuses on Maryland, northern Virginia, and Washington, D.C. Also in December, McClatchy Co. said it would share foreign news stories with The Christian Science Monitor. A month before, CNN pitched newspapers on CNN Wire, a low-cost alternative to the AP. Eight Ohio newspapers also formed their own news-sharing service, and Pennsylvania papers are considering a similar move.
After its Super Bowl ad promoting a free breakfast created demand on Main Street, Denny's top executive Nelson Marchioli tried Wednesday to serve up interest on Wall Street. The CEO told investors that Denny's has had "a very encouraging lift in guest traffic" since the gimmick, but stopped short of predicting long-term results. The benefit Denny's will receive from its $5 million investment in the stunt--advertising, free meals, etc.--will be determined by whether returning customers post-Feb. 3 become routine visitors. And Marchioli said "we still have a ways to go to cover the costs of the Super Bowl program" and "remain cautious in our outlook," partly because of the economy. Denny's ran a 30-second spot in the game promoting a free breakfast two days later. Two million people showed up for a signature Grand Slam dish (usually $5.99) gratis. (The Slam includes a pair each of pancakes, eggs, sausage links and bacon strips.) At times on Wednesday's conference call with investors, Marchioli may have crossed into hyperbole--calling aspects of the promotion "incredible" and "a game changer," and saying it generated publicity worth some $50 million. Responding to one investor's question, he said "there's no doubt in my mind that we're going to take back share" from competitors as a result. The Denny's stunt did receive high praise last week on a panel at an advertising industry event, with executives touting it as a prime use of a Super Bowl ad. While Marchioli spoke glowingly about the promotion, the conference call's main purpose was to discuss the chain's fourth-quarter and full-year 2008 performance. The results showed that Denny's needs, if not a grand slam, then some sort of home run--as revenues were down 19% for the quarter. The Super Bowl stunt, Marchioli said, was aimed at "light and lapsed" Denny's customers. And he said an exit poll of customers on "Super Tuesday" showed that some 60% fell into that category. Before the free-meal offer was mentioned, the company's first Super Bowl spot featured a waitress spraying whipped cream on a pancake stack as "thugs" discussed business. It was created by agency Goodby, Silverstein & Partners, recently hired by Denny's--partly, Marchioli said, because the shop is based in California, where the chain has roots and 26% of its restaurants. The significant ad spending on the Super Bowl event does not augur Denny's increasing its budget this year; the money came as a result of a reallocation, Marchioli said.