Group M's Scanzoni Surveys Media Landscape

Rino Scanzoni of GroupM A top media buyer offered a less dire stance than many others Wednesday, saying the ad market may actually be better off than the last recession--at least for now.

Rino Scanzoni, the chief investment officer at GroupM, also told investors: packaged-goods marketers are not looking to renegotiate deals en masse; the Nielsen sample needs to be increased; networks may move to a cable model; and ESPN's short-term prospects are bleak.

He said the early 2000s recession had a more dire complexion--since it followed the dot-com crash. The ad business was soaring with double-digit increases, thanks to online companies flush with IPO dollars. But when "that was taken out of the market, it had a much more dramatic impact in terms of contraction than what we're seeing right now," Scanzoni said.

Still, a recovery from the current downturn could take longer than in 2001-02. Historically, the ad market has bounced back well after the economy at large, as a result of contract negotiations and other factors. A return to solid growth could come in mid-2010 at the earliest, Scanzoni said.



"If we start seeing a recovery in the general economy at the end of this year, which seems to be optimistic, we won't see a recovery in advertising for probably six to eight months [after[," he said.

In the meantime, the online and national TV sectors are the best-positioned to weather the storm. But it will remain stormy. Online will grow at a single-digit rate, a departure from its recent boom. And broadcast/cable television as a combo looks to be down, although Scanzoni said not drastically.

"The five-network business across all dayparts will probably see revenue contraction of probably 5% to 7%--the cable side of the business will probably see 3% to 4% growth," he said. "You put the two together, and that probably translates to a slight negative in terms of growth ... but not substantial."

The broadcast market has suffered recently with some 12% to 13% of the dollars advertisers committed for the April-June period pulled back as they exercised options, he said.

Procter & Gamble and Coca-Cola have said recently that market softness is allowing them to renegotiate deals at lower rates. But Scanzoni dismissed the notion that was a trend. Still, he acknowledged that packaged-goods marketers are likely to accelerate a shift in spending to more below-the-line efforts.

"Whether it be various supermarket chains or the Wal-Marts, they're probably moving some of that working media money into more promotional programs."

With the upfront approaching, in which the dominant currency will once again be so-called C3 ratings, Scanzoni said he doesn't see the need to ask for more granular ratings. He said Nielsen does a "good enough" job measuring viewing at the national level, although its sample size there needs to be larger.

"We probably need to expand the sample base more because we're getting more and more smaller-circulation networks that can't be measured (with a sample size of 12,000 homes)," he said.

Beyond ratings, Scanzoni said GroupM is seeking ways to link ad viewing with subsequent purchase behavior. "We really want to drive better ROI to get better data that relates back to--not just viewer behavior--but matching up those viewers with certain consumption patterns," he said.

Even as he noted that broadcast networks will stay afloat in the near term, he echoed the possibility that they may someday switch to cable distribution. The move would give them access to significant carriage fees from cable, satellite and telco TV operators in addition to ad dollars.

With ESPN getting perhaps $3.50 a subscriber each month, it is difficult to estimate how much more a network with original episodes of "CSI" or "The Office" on a weekly basis could achieve.

"We could see broadcast networks become cable networks," Scanzoni said. "I don't think that's out of the realm of possibility where they will ... be compensated just like the major cable networks on a subscription-fee basis."

Still, if networks remain mostly with the ad-supported model, they could benefit from new addressable-advertising technology, where varying ads are delivered to different homes, depending on consumer profiles.

Regarding the prospects for the once-impregnable ESPN in the economic malaise, Scanzoni was bearish.

"ESPN from an advertising standpoint is probably one of the more challenged networks because of ... their revenue base," he said. "If you take the three categories that are the weakest--financial, retail and automotive--that makes up probably 40% of their revenue base. But having said that, they're the only cable network that pretty much has an exclusive on content. They're the only major sports player."

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