• by Paul Gough , January 12, 2004

What kind of a year was 2003 in the media industry? We will find out in the coming weeks when many of the largest media companies and advertising holding conglomerates will report fourth-quarter and full-year financial results. The quarterly updates, required for all publicly traded companies, are eagerly anticipated and heavily analyzed by Wall Street. But they are an important measure to the industry itself as a way to see what's happening in the recent past and the full year.

So, in the words of alternative rock band Third Eye Blind, how's it gonna be?

It's clear that 2002 wasn't much to write home about. The media marketplace under-performed, still spooked by the terrorist attacks in the fall of 2001 and hurting from an economy that had suffered from the burst of the tech bubble and the resulting chill that settled in the United States and the entire world. But that doesn't mean that there weren't bright spots. After a record-breaking upfront in the spring of 2002 -- which would be repeated and pushed past in 2003 -- prices for leftover inventory in the broadcast network TV scatter market were robust. For local TV and radio stations, it wasn't the best year, but the off-year Congressional campaigns, along with races for some key state and local races, boosted the bottom line by providing torrid spending for political advertising.

Therein lies one of the problems for local television and radio, beyond the year's relatively anemic performance, in the fourth quarter of 2003: Comparisons. Despite a hotly contested gubernatorial recall election in California, there wasn't much else going on politically in 2003. There isn't the spending of a presidential election, and few statewide seats were up for grabs. So hundreds of millions of dollars that flowed through to TV and radio stations in the fourth quarter of 2002 just aren't there this year.

And now two ways about it, that's going to hurt.

For months, many of the big station owners have been warning investors not to expect strong revenues in the fourth quarter, at least for the first two months, October and November. (December is considered a stronger month because of the holidays). Political advertising revenues were worth more than $10 million for many of the media companies. Many started initiatives of their own to boost advertising revenues, but it's not clear how much the companies are going to get back from their good fortune in 2002.

But there's going to be more to the financial reports than finding out how bad the fourth-quarter hit was. Here are some questions:

What's going on with radio? The radio industry -- which is represented by giants like Clear Channel Communications and Viacom's Infinity Radio as well as by smaller players like Emmis and Regent Communications -- started the year off pretty well but that didn't last, because of the fear building up before the war in Iraq. Although it seemed to recover, with national leading the way over local, that recovery stalled in October and November when dollars began to dry up. Several companies have said that things began to improve in December. But clearly there were other forces at work here. For the first time in as long as anyone could remember with ease, national radio was lagging behind local radio growth in the fall. Did that continue or did it right itself?

How's the scatter market? Money committed during 2003's upfront for both cable and broadcast TV will start to come in the fourth quarter. But it's also been a goofy couple of months for the scatter market, where the networks make money by selling leftover inventory, hopefully at a premium. While some networks have reported great pricing and demand, others haven't. Look for networks -- like they did in the third-quarter earnings releases in September and October -- to pronounce what's going on.

Will the recovery ever hit newspapers? It's not an idle question, either. While some sectors of the advertising marketplace are undeniably doing well -- including real estate and automotive classifieds -- and national and local ad spending isn't bad, employment advertising hasn't come back any more than the overall job market has. But there's hope that the fourth quarter was the bottom of the three-year pit of employment classifieds.

Many of the fourth-quarter releases are being done within the next three weeks.