A Look At Overall Media Forest, Could Fell Some Media Planning Trees

With Madison Avenue poised to commit more than $15 billion in advertising budgets for the 2004-05 TV season, a new report reveals some startling incongruities in the way advertisers allocate their media dollars. The report, "Investment Considerations For The Communications Industry," which was just released by Veronis Suhler Stevenson, doesn't include any new data, but it is the first time the investment banker has compiled such a long-range perspective of media industry statistics, including 30-years of ad spending and consumer media usage patterns, that suggest the advertising marketplace has grown increasingly distorted.

What it shows, is that Madison Avenue has not kept pace with dramatic shifts in media consumption patterns. While consumers have expanded their media repertoire, embracing newer media such as cable TV and the Internet, the ad industry has continued to reinvest a disproportionate share of its budgets into eroding media, especially print media like newspapers and magazines, but also network TV. Conversely, radio consumption patterns have proven remarkably stable over this long period, but still attracts only a minor share of U.S. advertising budgets.

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On a holistic note, the report does show that broadcast TV ad spending does finally appear to be approaching a market equilibrium, making it the only major medium to strike a balance between the share of time consumers spend with media and the share of budgets advertisers allocate to that medium.

At its base year of 1977, the report shows that broadcast TV ad budgets had a two-to-one deficit versus their share of time consumers spent with broadcast TV outlets, both stations and networks. By 2007, VSS predicts broadcast TV will close that gap to nearly two percentage points (see table below).

While radio broadcasters have closed their gap slightly over the past 30 years, VSS anticipates radio stations and networks will still have an advertising budget deficit of nearly three to one by 2007.

Cable, the fastest growing segment of the traditional media, ironically has taken a dominant position in terms of the share of time consumers spend with TV, but still reap an consumer time-to-advertising ratio of nearly four-to-one.

Interestingly, the Internet has done a much better job of closing its gap in a relatively short period of time, though it still handicapped by a margin of about two-to-one.

Conversely, print media - especially newspapers - maintain an advantageous bias of consumer-time versus ad budget ratios. Despite some erosion in overall market share over the past 30 years, VSS projects newspapers will reap a 25.7 percent share of U.S. ad spending in 2007, but will only have a 5.2 percent share of the time consumers actually spend with media.

While not as egregious, consumer magazines will have an advantageous ad budget bias of about two-to-one.

While there are many reasons for the market shares, including the perceived communications effectiveness of some media, as well as the unique dynamics of individual advertising markets for specific media, the long, historical view provides a new reality check at a time when some major marketers are seriously rethinking their communications mix.

Shares Of Consumer Time/Ad Spending On Ad-Supported Media


---1977--- ---1997---- ----2002---- ----2007----
Time *Ad $ Time *Ad $ Time *Ad $ Time *Ad $
Broadcast 51.5% 25.3% 33.9% 25.0% 26.3% 23.2% 23.7% 21.4%
Cable Nets 0.1% 0.0% 19.0% 4.2% 25.3% 6.4% 26.4% 7.2%
Radio 35.7% 8.8% 34.4% 9.7% 33.2% 11.3% 34.2% 12.0%
Internet 0.0% 0.0% 0.9% 0.7% 5.1% 3.5% 6.8% 3.7%
Newspapers 8.0% 35.7% 6.8% 29.8% 5.9% 25.8% 5.2% 25.7%
Magazines 4.7% 6.5% 5.0% 7.1% 4.2% 6.4% 3.7% 6.4%
(Hrs/$) 2,735 $30.1 2,734 $138.7 2,993 $171.1 3,207 $231.9

Source: Veronis Suhler Stevenson's "Investment Considerations For The Communications Industry."*Ad market shares also include regional cable TV, weekly newspapers, business magazines, outdoor and Yellow Pages not itemized in this table. Ad $ totals in billions.
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