Television broadcasters need to stop partying like it was 2006 and adjust to their new reality. Improved advertising forecasts are not what they seem.
Spending by brand marketers is coming off record lows; it has nowhere to go but up. Gradual recovery spending is not the same as real sustained ad revenue growth.
Don't expect advertiser spending to match prior highs since two things have irrevocably changed local TV revenue expectations.
First, advertisers realize they can spend less and make more valuable target consumer connections pursuing online and mobile strategies. One indication: 62% of advertisers representing $14 billion in measured media budgets say TV is less effective, according to a recent survey by Forrester Research and the Association of National Advertisers. They have allocated only 41% of their media budgets to TV in 2010, down from 58% in 2008.
Second, companies will remain under economic duress for years. Automotives and other leading advertisers are a shadow of their former selves and will never spend as they once did. The temporary surge they realize in mid-term election year spending is not enough to carry their ongoing costs and debt. Digital and online revenues are still trickling in. TVB reports that more than half of local TV 29% decline in spot revenues in 2009 were caused by massive falls in political and car ads.
Morgan Stanley, CitiGroup and Forrester Research recently warned that ad spending estimates are unjustifiably bullish. Barclays Capital forecasts local television advertising will only gain 5% this year and see zero growth in 2011, or $12.3 billion -- well off an $18 billion high in 2007.
Note to local broadcasters:
- Use this year's temporary improvement to continue transforming your physical operations to less costly, more efficient digital operations. Invest in innovative, proactive use of interactivity. Broadcasters must experiment and take some measured risks instead of cutting core operations to the bone.
The permanent advertising slack will be partially offset in 2013 by retransmission fees growing to nearly 10% of total TV station revenues (depending how much is siphoned by their networks-ABC (DIS), NBC (GE), CBS (CBS) and Fox (NWS)) and online advertising (growing to 7%), according to SNL Kagan. TV broadcasters will not be in line for new revenues unless they work for them, and they can inspire local marketers to do the same.
Only one-quarter of the top 100 online retailers have a Facebook presence even though more than half of all online shoppers say they are among the social network's 400 million active users, according to a study by ForeSee Results.
- Take a hard look at what your nonelection year revenues will look like coming out of this recession.
In this mid-term election year, 63% of $4.2 billion in national political advertising will go to broadcast TV, about $2 billion of which will land at TV stations. Only 1% will be spent online, according to Borrell Associates.
The overall local TV advertising outlook is not as bright. After traditional TV station ad revenues fell 20% to $19 billion in 2009, they will claw their way back only to about $21.7 billion by 2013, well below the nearly $25 billion in better days back in 2006, according to SNL Kagan.
- Execute ways to ramp Internet, mobile and digital revenues playing your hyper-local card.
Media evangelist Jeff Jarvis provides instruction on how hyper local Web sites can generate increased revenues. McClatchy Co. (MNI) executives told a recent Borrell Associates conference on local advertising that the newspaper publisher has generated $2.5 billion from its hybrid hyper local sites.
By 2014, local mobile video advertising will hit $1 billion, or 10% of the national spend, Borrell estimates. Broadcasters looking for an easy way out may have the option to sell and vacate their airwaves to the Federal Communications Commission which hopes to alleviate network strain caused by the surging use of smart phones and other mobile connected devices.
Disclosure: No positions