For the first time in the 22 years since it has been publishing its annual Communications Industry Forecast, Veronis Suhler Stevenson has issued a "mid-term" update, due to the sudden, pronounced shift in the global economy and its impact on the media industry. The update, which comes amid a flurry of similar downward revisions by other leading industry forecasters and analysts, calls for media spending from all sources--including advertising, consumer and institutional users--to decline 0.4% in 2009. That's a revision from VSS' initial 2009 projection of a 4.9% growth rate. The VSS report, which is among the most highly regarded in the media industry for both its accuracy and longitudinal nature, also revised its 2008 estimate to a growth rate of 2.3%, down from the 5.4% it originally estimated when it released its last annual report in August 2008. The update calls the revised rates the "industry's lowest growth rate" since it began tracking the marketplace 30 years ago. It's also the second time ever that total media industry spending declined based on VSS criteria. "The continued negative outlook for economic activity, coupled with secular shifts and cyclical trends underway in the media and communications industry, are expected to limit the sector's overall growth in 2009," the report says, adding that the media industry would nonetheless outpace the growth of the overall U.S. gross domestic product. Advertising as a sub-segment will be among the most severely impacted by the economic downturn, and VSS now expects it to decline 7.4% in 2009, following a corresponding dip in 2008, and marking the first back-to-back years of advertising recession in 75 years. "Steep reductions in traditional advertising spend, such as newspapers, television, and consumer magazines, are being driven by fragmentation of target consumers and brand strategies, which are increasingly focused across multiple venues and platforms," VSS notes. It added that some emerging and new media sectors will continue to grow, albeit at more moderate rates than projected a year ago. The "pure-play" Internet and mobile services segment will grow at 9.1%, down from VSS previous forecast of 15.5%. Other "alternative communications" segments, including branded entertainment, digital out-of-home and professional business information services, are also growing more rapidly than other sectors and much faster than the general economy.
On a recent investor call, News Corp. CEO Rupert Murdoch indicated that the company had every intention of re-signing COO Peter Chernin. But in a surprising development, Chernin--who oversees properties ranging from the Fox network to MySpace--is leaving the company, according to a company statement. News Corp. is not expected to replace the executive. The soon-to-be-78-year-old Murdoch is taking over much of Chernin's West Coast-based responsibilities, which also include the 20th Century Fox film studio. Chernin's departure could significantly affect News Corp.'s standing on Wall Street--the company's share price dropped 4% Monday--since the executive is regarded as a sort of rudder. In strong remarks before a recent gathering of advertisers, Sanford Bernstein analyst Michael Nathanson said investors have soured on both Viacom and News Corp., since Sumner Redstone and Murdoch (and their families) respectively hold such rock-solid control. Wall Street has concluded, Nathanson said: "I don't want to own these companies because I can't stand the people who own these companies." He cited investors feeling as if they hold no sway over major decisions. In News Corp.'s case, he cited its acquisition of The Wall Street Journal as something investors may have opposed, but felt they had no power to block. The voluble and persuasive Chernin's contract is up in June. He is also a member of News Corp.'s board of directors, and has been COO for 12 years. Chernin is understood to have spearheaded many of News Corp.'s forays into new media recently, including joining with NBC Universal to form online video hub Hulu and working to expand MySpace, which now faces heightened competition from Facebook. A Los Angeles Times story said his departure was finalized over the weekend. Chernin has been mentioned as a possible CEO candidate at companies such as Yahoo and--before Bob Iger took over--at Walt Disney. After Chernin--a former book editor and Showtime executive--steps down from the COO post, his contract calls for him to become a producer at the Fox division. Rupert Murdoch is known to want one of his children to follow in his footsteps as CEO, with one perhaps serving as a COO under him before his retirement. James Murdoch, chairman-CEO, Europe and Asia, is believed to be the eventual successor. He and his brother Lachlan are on the company board. This story has been updated.
The rising recession may have resulted in more video watching for consumers at the end of last year. The Nielsen Co. says in the fourth quarter of 2008, Americans watched more than 151 hours of TV per month, a new all-time high--a 3.6% gain versus the same period a year before. In addition, the Internet-inclined watched another two hours and 53 minutes of video--up from 2:31 in the third quarter. Mobile video watchers were at 3:42 in the fourth quarter, up from 3:37 in the third quarter. These two platforms were not the best alternatives to traditional live TV viewing. That came from time-shifted viewing, which amounted to 7 hours and 11 minutes--a gain of 33% versus the same period the year before. However, among younger viewers 18-24, viewing on alternative TV devices was nearly the same--about 5 hours a month each for both the Internet and DVRs. TV usage is climbing, with most of traditional television increasing with age. For example, adults 45-54 watched 173 hours per month, versus 118 hours per month for 18- to-24-year-olds. Internet video usage is highest young adults. DVR usage is highest among 25- to-54-year-olds--10:50 hours a month. Mobile video viewing had a major spike. Nielsen says mobile viewers grew 9% in the fourth quarter to 11 million versus the third quarter. Average monthly time spent viewing mobile video rose 2%, from 3:37 to 3:42, between the third quarter of 2008 and the fourth quarter. Viewing mobile video is the highest among teenagers: 6:38 per month among 12- to-17-year-olds. Nielsen notes that men continue to watch more video on mobile phones than women, and women continue to watch more video on the Internet and television than men.
It's going to be another dismal week for newspapers, judging by the news that both Philadelphia Newspapers LLC, the publisher of The Philadelphia Inquirer and The Philadelphia Daily News, and the Journal Register Co. have filed for bankruptcy. Neither development was particularly surprising, but it sets the stage for even more bad news due later this week, when the Newspaper Association of America releases industry revenue figures for the fourth quarter of 2008. Philadelphia Newspapers LLC filed for Chapter 11 bankruptcy protection on Sunday, saying it would not be able to make upcoming scheduled payments on its debt of $390 million. Most of this debt was acquired in a deal engineered by Philadelphia advertising mogul Brian Tierney to buy the Inquirer and Daily News from McClatchy for about $560 million in 2006. The company technically defaulted on the debt, with missed payments in June 2008 and again in October--incurring $13.4 million in penalties as it tried to renegotiate its borrowing covenant. Having failed to reach an agreement with its creditors, however, the company was left with no alternative except bankruptcy protection, in the hopes of restructuring debt under the provisions of Chapter 11. This would allow it to use a financial arrangement called "debtor-in-possession" financing with NewSpring Capital--which, as the wording suggests, will leave the company under the control of Philadelphia Newspapers. According to Tierney, the company's CEO, the newspapers are actually "sound and profitable" on a current basis. In an email to staff, he added: "We have asked the court to permit all salary and benefits, including pensions and 401(k) plans, to continue as usual"--a significant commitment, as other big publishers are freezing pensions and 401(k) contributions. Still, it indicates that the holding company--like other publishers that closed big deals in the last decade--underestimated the severity of both the secular decline in print ad revenues and the current recession. Tierney summed up the situation in his email: "As a company, we have been hit with a perfect storm, including a dramatic decline in total revenue, the worst economic conditions since the Great Depression and a debt structure which is out of line with current economic reality." This was also the case at Journal Register Co., the publisher of the New Haven Register and hundreds of small-town weekly newspapers, which filed for Chapter 11 bankruptcy protection on Saturday. In its filing, Journal Register asked the U.S. Bankruptcy Court in Manhattan to allow it to cancel its stock and hand the company over to its creditors. Altogether, the Journal Register carries about $700 million in debt, versus assets of about $600 million. After technically defaulting on its debt last year, the company has been forced to close scores of small-town weekly newspapers throughout Connecticut, Pennsylvania, upstate New York and Michigan. Much of the blame for the company's current predicament has been tied to its buying spree in the 1990s and earlier this decade. This built a portfolio of about 300 weekly newspapers around the Northeast and Midwest, but loaded the company with a significant amount of debt as well. Financial distress is widespread in the newspaper industry, and growing more acute week by week. Last week, the Star Tribune of Minneapolis asked a bankruptcy judge to dissolve its contract with the local printer's union, which ultimately falls under the umbrella of the International Brotherhood of Teamsters. According to the newspaper's publishers, freeing itself from the union contract would allow it to renegotiate terms with the printers, including lower wages, thus saving several million dollars a year. Also last week, Lee Enterprises said it had succeeded in renegotiating the loan covenants governing $306 million in debt, most of which was assumed during its purchase of Pulitzer Inc. in 2005. By doing so, the company was able to pay off $120 million of debt right away; payment of the remaining $186 million has been deferred until April 2012. The terms of the new agreement are quite strict, however, raising the interest rate and putting the entire company up as collateral to secure the loans.
"The Academy Awards" made a comeback on Sunday night, its best ratings in two years--but stick an asterisk on this year's event. The ABC show grabbed a Nielsen preliminary 12.1 rating/28 share among 18-49 viewers and some 36.3 million total viewers. That means a 13% improvement in 18-49 viewers and a 12% gain over total viewers of a year ago. But don't cheer too long: Last year ABC was stuck--as were all other networks--in a prolonged three-month writers' strike, which took many viewers out of circulation for the big event. That Oscars show hit the lowest ratings ever, with 32.0 million overall viewers. In 2007, ABC had 40.2 million viewers. ABC's "Oscar's Red Carpet 2009" pre-show also had bigger pull this year, taking in 24.3 million viewers and a 9.3 rating/22 share among adults 18-49 from 8:00 to 8:30 p.m. Total viewers were up 12% and adult 18-49 demo was 13% higher versus a year ago. ABC's annual "Barbara Walters Special" at 7 p.m. was also up--with a 5.3 rating/14 share among 18-49 viewers. The only competition for the night came from Fox's airing of the "NASCAR Sprint Cup: Fontana," which earned a 3.6/9, about the same as a year ago. The race took up all of Fox's two-hour prime-time block. After this, the best prime-time performer of the evening was CBS' "Amazing Race 14," which took a 2.6/6. The second hour of NBC's "Top 100 Most Outrageous Moments," at 10 p.m., poked up over the 2 rating mark, with a 2.2/5. For the night, it was ABC with a 9.6/23; Fox, at 3.6/9; CBS, at 1.8/4; NBC, at 1.6/4; Univision, with 1.2/3; and CW with a 0.4/1.
As Comcast integrates the sales operations of its Versus network and Golf Channel, the company has promoted Steve Margosian to oversee sales and marketing programs for the two. The executive is well-known for his tenure at Anheuser-Busch, where he served as a top negotiator in buying national TV time. Margosian becomes senior vice president of marketing solutions and sports sales under the new Comcast Sports Sales unit, which covers the two channels. The executive had been vice president of marketing solutions, working for Versus, before the two networks combined their sales businesses last month. At Versus, he worked to create branded entertainment opportunities for advertisers in relation to the network's NHL and Tour de France programming. Of his new role, Comcast said: "Margosian will use the programming portfolio of [the networks] ... and each of the network's league partnerships, to develop marketing solutions to drive incremental advertising revenue." At the Golf Channel, he will work with executives to find ways to link with sponsors of the PGA Tour and LPGA to build additional business. Margosian continues to report to Tom Prigoda, senior vice president of marketing solutions and interactive media for all Comcast networks. He has been with Comcast since 2006, when he joined from Anheuser-Busch's in-house media group. Margosian had been at A-B for a decade and headed negotiations for the beer marketer's national TV placements.
The thorny problem of binge drinking on college campuses has sparked some pretty controversial campaigns lately. The one from the Amethyst Initiative is sponsored by college presidents from various institutions, such as Dartmouth, Duke and Ohio State, who want lawmakers to consider lowering the drinking age from 21 to 18. Infuriated, Mothers Against Drunk Driving has counterattacked. MADD wants parents to question the safety of colleges participating in the Amethyst Initiative when considering their child's academic future. Now, the Century Council, the liquor industry group dedicated to fighting drunk driving and underage drinking, is asking college students to devise a solution. It hopes to kick off a $10 million campaign "that will help combat dangerous over-consumption of alcohol by college students," as part of the American Advertising Federation's 2009 National Student Advertising Competition. This will be the first time in its 36-year history that the AAF competition is featuring a public service advertising campaign focused on behavior change. (It's only open to AAF's college chapters.) AAF President and CEO James Edmund Datri applauds the empowerment angle, calling binge drinking--defined as consuming five or more drinks in two hours by men and four or more in two hours for women--"a dangerous trend on our country's campuses." Some 40% of college students reported binge drinking in the past year, according to the Monitoring the Future study, funded by the National Institute on Drug Abuse, which surveys the behaviors, attitudes and values of college students and young adults. An Associated Press study of federal records from 1999 through 2005 found that 157 college-age people, 18 to 23, died from drinking themselves to death. It's about time somebody asked the students about an issue that directly involves them. We tell them to vote when they are 18. We ship them off to war at 18. But when it comes to alcohol, we eliminate them from the discussion. We've also given the states little say in the matter. That's because states with a drinking age lower than 21 can be denied federal highway transportation funds. The Amethyst Initiative is pressuring lawmakers to consider whether the 21 drinking age is effective public policy, or whether it's driving drinking underground and fueling the binge-drinking problem. Here's why some of the college presidents signed onto Amethyst Initiative. (The name is taken from ancient Greece, where the gemstone was believed to ward off drunkenness.) "My 35 years in higher education and my 30+ years as a parent to three sons convinced me that the 21-year-old drinking age is hypocritical, ineffective, guilt-inducing and counterproductive," says Donald R. Eastman III, president of Eckerd College in St. Petersburg, Florida. "It is a form of mini-prohibition and needs to be replaced with education and a focus on the value of moderation, not intolerance." When it comes to young adults, prohibition and intolerance are words that strike fear in the heart of any savvy cause marketer. People who understand how to change behavior know that the forbidden fruit approach for teens is a dead end. Remember Nancy Reagan's "Just Say No" campaign? That didn't work, Richard Earle points out in his book "The Art of Cause Marketing: How to Use Advertising to Change Personal Behavior and Public Policy," because telling teenagers in treatment for drug abuse to just say no is ridiculous. Asking teens who have already experimented with drugs to just say no is equally foolish. Earle's conclusion: The anti-behavior approach doesn't work. Cynics would say that the Century Council, supported by money from liquor giants such as Bacardi, Brown-Forman and Diageo, is only interested in boosting industry profits; lowering the drinking age would hasten that end. That reasoning is shortsighted. The campaign's goal isn't to encourage consumption, but to ask students how we can solve a serious problem that impacts them. "The behavior is taking place, and the best thing we can do is reduce the harm," says Ralph Blackman, the Century Council's president. Blackman says having the target audience--college students--work on a campaign is what makes the AAF student competition so attractive. He wants to see what they can create--particularly using tactics such as guerrilla marketing and social networks. Having a national debate about the drinking age is part of a viable democratic process. Asking college students to research the causes behind binge drinking, then develop a campaign to combat the behavior, should enhance the project's credibility. In the last two years, the AAF's student competition featured Coca-Cola and AOL as clients. Let's hope we see more socially responsible efforts in the competition's future. It underscores a valuable industry goal: Advertising does more than just push products and services. It's key to changing behavior. Thanks to public service advertising, most of us wear seat belts when driving. Wendy Melillo is a contributing writer to MediaPost and an assistant professor in the School of Communication at American University.