First VP Lauren Rich Fine, Merrill Lynch's advertising and media analyst, revised her earlier 2001 forecast of 2.5% growth to a decline of 0.7%, followed by 5.1% growth in 2002.
Ms. Fine's forecast -- based on reports from various tracking organizations and Merrill Lynch's media sector analysts -- lowered expectations for newspaper ad revenues from 2.5% growth to a drop of 3%, TV ad revenues from 1.3% growth to a 1.7% decline and magazines from 2% gain to a 4% drop. Internet advertising is still expected to decline 25%, but Ms. Fine noted this does not factor in "positive trends at AOL Time Warner," whose America Online represents 50% of online ad volume.
Ms. Fine's forecast cautions trends could slip further if consumers stop spending, particularly newspaper retail and real estate advertising, which have held up well so far. On the other hand, she also notes the projections don't factor in the effects of tax rebate checks, which could perk up consumer spending.
The report notes newspaper ad revenues may have bottomed out, as May and April declines held at the same 8% levels and recent statements by newspaper executives point to a similar level in June. Meanwhile, the network upfront season has resulted in a 13% to 14% decline in revenues to $7 billion in 2001, compared to $8 billion in the 2000 and the weak upfront could also weaken the upcoming cable upfront's pricing.
"Ad agencies are likely to continue to post positive organic gains, despite soft overall ad trends, as they are benefiting from market share gains through net new business wins and the acquisition of faster-growing businesses," the report concluded. -- Mercedes Cardona
Copyright June 2001, Crain Communications Inc.