The Television Bureau of Advertising's annual conference presented good news for the spot TV industry but analysts also outlined several pressure points that could drag the economy (and ad spending)
back into recession and might even kill one of the Big 3 automakers.
TVB predicted total spot revenues would grow 11% in 2004, aided by heavy spending in the presidential election (see related
story in today's MediaDailyNews) and summer Olympics. Local spot would grow 8%, with national spot TV up between 15%. That compares to network TV up 8%, syndication up 6% and national cable up 9%. But
2005 would be a bit tougher by comparison, with spot TV up between 2% and 4%, TVB said.
The forecast was released Thursday morning at TVB's New York conference, attended by 300 local television
executives. The TV station executives heard mixed and sometimes depressing opinions from analysts on the future of the economy as a whole and the fiscal health of the automotive industry, local TV's
biggest advertising category.
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"The good news is that this was a very mild recession. The bad news is that it's not much of a recovery either," said David Wyss, chief economist at Standard & Poors.
Wyss said the Federal Reserve's policy of keeping interest rates low helped lessen the recession's severity, as did the continued pace of consumer spending. But the unemployment rate has remained high
and business spending, so crucial to recovery, hasn't started to turn around like it should.
Wyss said second-quarter business investment is up but it's still fairly tentative, replacing of
worn-out machines like five-year-old computers than adding capacity. Productivity is at 73%. "If 27% of your machinery is idle, why do you need to buy new machines," he asked.
Excess capacity
remains a big problem in automotive, with automakers increasing their spending in an industry that isn't likely to grow. Morgan Stanley analyst Stephen J. Girsky said auto sales may bottom out this
year. Girsky said that it isn't how many cars are sold off the line and lots but how much each car brings in profit, which particularly for the Big Three isn't as much as it used to be.
"It's not
how many cars you sell, it's how much money you make," Girsky said. "For the most part, automakers are spending for growth in an industry that does not grow."
Domestic automakers are turning out
more cars than they can sell, the costs per unit are increasing and the profit is decreasing. They're also being squeezed in market share by foreign automakers like Toyota, Honda and Nissan, which
have started to get involved with incentives where they hadn't before. GM's market share has dropped 0.8% and Ford and DaimlerChrysler have each dropped 0.3% year-to-date, according to Autodata and
Morgan Stanley Research.
"Everybody can't win," Girsky said. He said that each of the Big Three automakers have their own challenges but Ford's situation could become dire if the revitalization
plan doesn't work quickly enough. DaimlerChrysler's profitability is unstable and it needs to focus on new products, Girsky said. And GM needs to lower its cost per unit, which is dragged by $1,1159
in health-care costs and $740 in pension contributions per car. That means GM pays more for employees' health car costs per vehicle than it does for the steel that makes it whole.
"They need to
move a lot of cars to overcome this stuff," Girsky said.
Wyss said it was a "half-speed recovery." He predicted a "three-quarters speed" recovery in the next year, aided by continued low short-term
interest rates with a Federal Reserve unlikely to increase the federal funds rate at least until after the presidential elections. And consumers, who have kept up spending throughout, aren't likely to
be able to continue the pace. The stock market's reversals over the past three years wiped out a lot of wealth, too.
"How do we get much growth? I think the answer is that we can't," Wyss said. "At
this point we don't see the jobs picking up until the end of this year or the beginning of next year." Wyss said more terrorist attacks in the United States, a worse outcome in Iraq or more wars in
the Mideast could impact the economy.
2004 TV Ad Spending Forecasts Local Nat'l Spot Network Synd. Cable
Bear Stearns +3-4% +10-12%
+8-10% +8% +9-11%
Blaylock +7% +10% +10% +2% +8%
CIBC +5.5% +7.5% +10% +8% +7.5%
CSFB +3-4% +9-11% +8-10% +5-6%
+10-12%
Jeffries & Co. +2% +9% +12% -- +11%
JPMorgan Chase +5% +12% +6% +3% +10%
Legg Mason +8% +10% +6% +5% +14%
Merrill
Lynch +2.7% +10.5% +8% +6% +8%
Morgan Stanley +6% +7% +7.1% +6.5% +8%
Prudential +6% +14% +10% +12% +10%
S.C. Bernstein +7% +5%
+5% +3% +7%
SG Cowen +5% +8% +6.5% +5% +10%
Thomas Weisel +8.5% +2.9% +7.7% +11.8% +9.2%
US Bank +6% +8% +4% +6% +4%
Vogel Capital +5% +6% +4% +5% +5%
Analyst Avg. +5.4% +8.7% +7.6% +6.2% +8.8%
U. McCann +7.5% +8.5% +6.5% +7% +9%
Veronis Suhler
+6.7% +7.7% +9.8% +3% +8.1%
Rep Consensus -- +12.8% -- -- --
TVB +7-8% +14-15% +7-8% +5-6% +8-9%
Source: Television Bureau
of Advertising Forecast Conference.