• by June 21, 2004

MERRILL LYNCH FLEXES '04 QUAD, IMPROVES ITS OUTLOOK -- Just one day before Universal McCann ad scorekeeper Bob Coen issues his midyear outlook for the U.S. and world ad economies, the prognosticators in Merrill Lynch's equities research group have issued their own revision, and it's a marginally upward one. The team, led by Madison Avenue securities diva Lauren Rich Fine, now expects U.S. ad spending to expand 6.6 percent in 2004, up from its previous projection of 6.0%. That would mark the biggest expansion in the U.S. ad economy since the heady days of 2000, a so-called quadrennial year (Olympics and presidential election) that was still riding high on the dot-com expansion.

U.S., Worldwide Ad Growth

U.S.    Worldwide 
2001     -7.8%        -8.2% 
2002     +1.9%        +1.2% 
2003     +3.5%        +2.4% 
2004     +6.6%        +5.5% 
2005     +5.5%        +5.0% 

Source: Merrill Lynch. Estimates include measured media and exclude direct mail.

The Merrill Lynch revision follows some other upward adjustments, and we wouldn't be surprised to see UM's Coen make a similar upgrade to his 2004 growth, which he last pegged at +6.9 percent.

Meanwhile, Merrill Lynch's Fine declares that it is "important to note that advertising is finally back on track with its historic trend line, i.e. in line with nominal GDP." Despite that, she says the Wall Street crowd nonetheless is disappointed that "in a year with strong political spending and a Summer Olympics, that advertising isn't outperforming. Call us greedy."

But the analyst's report suggests that "greed" may be an important factor holding back on the expansion of certain media - namely the broadcast network ad marketplace, which has seen a sizeable share shift to cable during recent upfront ad negotiations. "We now estimate the broadcast upfront to be flattish overall - led by nearly 10 percent gains at Viacom's CBS," says a second opinion issued later today by Merrill Lynch's broadcast equities guru Jessica Reif Cohen. While that might seem "unimpressive" on an absolute growth basis, Cohen notes that the broadcast networks nonetheless "met or modestly exceeded our upfront forecasts." And that, Cohen called the "big positive surprise" of the 2004-05 upfront marketplace, given the relatively weak positioning the networks has coming into this year's sales bazaar.