Perhaps surprisingly, some big marketers such as Procter & Gamble Co. and Unilever aren't at all publicly -- despite prospects for the $607 billion whammy of tax increases and spending cuts due to hit in 2013 to cause a recession. Others, such as the beer industry, appear more afraid of a solution to the fiscal cliff -- one that may be heavily laden with new "sin taxes." But some media companies, already looking at the prospect of difficult comparisons to a relatively weak 2012 that was buoyed by the Olympics and political spending, clearly expect to be the canaries in what might be more like a fiscal coal mine.
One cable-TV sales executive acknowledged that the fiscal cliff was a major topic of discussion for first-half planning. "We have the same concerns as any other business about what happens if there's an abrupt change to the consumer position in the marketplace," he said. "It's a worry for all businesses, especially those in the advertising space. If this happens, we will see a conservative consumer base not spending the money they are spending now." But he's optimistic President Obama and Democrats will reach a solution short of the cliff.
The reality is , the media industry doesn't have much room to avoid a down year, cliff or no. It's already facing comparisons to a 2012 that included a record $6 billion in political spending -- roughly the equivalent of two P&Gs -- nearly all of which will disappear next year.
"Aside from digital media and the 2012 Olympics and political spending, the U.S. ad economy has appeared weak most of the year," said Nomura Securities media analyst Michael Nathanson. "We think worries about 2013 ad growth will soon become a concern."
"As I speak with senior executives across the Fortune 500, it is quite clear that serious uncertainty in the global markets, highlighted by the fear of the fiscal cliff, has put pressure on marketing budgets across the industry," said Jed Hartman, group publisher for news and business at Time Inc. "That's partly because marketers are making preparations for a 'what if' scenario."
Others are more practical about it. "The current gridlock in D.C. is just a continuation of the uncertain economic outlook that 's been in place since 2008," said Sarah Hofstetter, president at digital agency 360i. "This has become the new normal. Smart marketers are still investing in differentiating themselves but are shortening their planning cycles to give them more agility, which is in line with consumer behavior and the economic climate."
Looking at everything in proportion, this year's $6 billion in political ad spending is around 4% of total 2011 ad spending as measured by Kantar and ZenithOptimedia. The "fiscal cliff" combination of tax hikes and spending cuts is equal to around 4% of U.S. gross domestic product, according to the Congressional Budget Office. So, if the hit to ad spending were proportionate to the impact on gross domestic product, the fiscal cliff would represent a hit to ad spending similar to the loss of political spending that 's coming anyway in 2013.
Of course, in prior recessions, the impact on ad spending has been disproportionate to the impact on GDP, so it could be a bigger hit than 4%. Otherwise, without the fiscal-cliff effect, the CBO is expecting a pretty decent year in 2013 -- GDP up 5.3% in the first half and 4.4% for the year. With the fiscal cliff, the CBO expects the economy to contract 1.3% in the first half and grow only 0.5% for the year -- though the bright spot would be a projection of a return to 2.3% GDP growth in the second half of 2013.
The world's two biggest advertisers aren't publicly sweating it yet. "Whether we avert the fiscal cliff or go over the fiscal cliff, consumers are still going to be interested in buying detergent and razors and bar soaps," said P&G Chief Financial Officer Jon Moeller during a media briefing last week. "So we hope this situation gets resolved in a constructive, productive way that both sides agree on, but frankly we're focused on our job, which is delivering products with superior performance and value, and if we do that well, given our product categories, we should do well. We're not that exposed to the macroeconomics."
"We have been around long enough to weather all storms," said Unilever CEO Paul Polman in an email. "We continue to invest in the U.S. and do well. Successful launches of Clear and Simple are the latest examples."
The reality is that even packaged-goods players took a substantial hit and in many cases, such as P&G, pulled back ad spending during the last recession in 2009. It's likely to see fallout again, but Deutsche Bank analyst Bill Schmitz said he believes most executives still expect a deal to avert the cliff.
Retailers collectively aren't quite so sanguine. The National Retail Federation last week said uncertainty over the fiscal cliff already threatens consumer confidence and spending even during the current holiday-shopping season. "Any disruption to consumer confidence and spending during this season could prompt a crisis for retailers and the millions of U.S. jobs the industry supports," said NRF CEO Matthew Shay.
Walmart Stores CEO Mike Duke, among a star-studded chief cast that included PepsiCo's Indra Nooyi and P&G's Bob McDonald that met with Mr. Obama on Wednesday to talk cliff-related matters, was more measured in his statement. "Walmart Moms tell us their confidence in the economy is shaped by whether they believe Washington is working for them," he said. "If the White House and Congress can reach agreement, it will show them the nation's leaders can address big issues, and it will help raise their confidence in their government and their future."
Impending cliff or no, Walmart U.S. CEO Bill Simon said on the company's earnings call the next day that it's planning to step up ad spending for the current holiday period compared with last, and the retailer projected comparable-store sales of 1% to 3%, the same as the prior quarter, when it delivered 1.5%.
A bigger concern for some in marketing is what the road back from the abyss looks like for them. Fearing that Congress might raise taxes on beer, the industry is running a campaign targeting Washington, D.C. opinion leaders and policy makers that portrays beer as already overtaxed.
"Our message is that beer is a significant contributor to the economy and to job creation and remind them that beer drinkers are already paying more than their fair share of taxes," said Chris Thorne, VP of communications for the Beer Institute, a beer trade group. The industry says various taxes made up 45% of what consumers paid for beer in 2010, the latest year available.
The all-digital campaign, by 3 Advertising of Albuquerque, N.M., includes images of beer labeled as "Economic Powerhouse Ale," "Overtaxed Pilsner" and "American Jobs Amber" while stating that "America's beer industry contributes more than $223 billion to our economy." Ad placements include TheHill.com, mobile sites run by the National Journal, Politico's The Huddle newsletter, Huffington Post's HuffPost Hill newsletter and digital properties run by CQ/ Roll Call. The campaign started in mid-October and is slated to run through Dec. 9.