The slowdown, said TNS President-CEO Steven Fredericks, is a "result of advertisers taking a cautious approach in the face of uncertain economic indicators and wavering consumer confidence." The big winners, he predicted, will be cable TV and Hispanic media while radio, business-to-business magazines and spot TV will all decline. Network TV is expected to eke out only a minor increase and Internet spending, while still strong, will show reduced growth.
`THE REAL STORY'
First quarter's 4.4% growth was the smallest year-over-year gain since the end of 2003, but Mr. Fredericks said he was optimistic because it was still outpacing the GDP.
TNS predicts a rosier 4.1% rise for the first half of 2005 than for the latter half, which is expected to grow at a more sluggish 2.7% rate. A third-quarter slowdown is natural in a year following a presidential election and summer Olympics games.
The majority of media would see growth, with cable TV and Hispanic robust at 11.6% and 10.5%, respectively. "The real story here," said Mr. Fredericks, "is that cable TV registered 18.2% growth to $3.5 billion, taking share from broadcast TV, which only grew 3.8%."
Hispanic media, meanwhile, has been fueled more by retailers such as Wal-Mart and Sears, Roebuck & Co. than by traditional advertisers, such as Procter & Gamble Co. and PepsiCo, according to TNS data. "The insight to be made here is the companies who count the foot traffic and cash-register receipts each day recognize first hand the value of the Hispanic consumer," he said, "and are targeting their marketing dollars to this key source of revenue." Internet outlays will be up 7.6%-a healthy increase but not quite the double-digit growth the medium saw the last two years. On a share basis, according to TNS, Internet has just now recovered to its 2001 levels, accounting for just over 5% of total ad spending.
"I don't think we've seen such buzz around the media industry since its heyday in 2000," said Mr. Fredericks. He noted the growth hasn't just been fueled by blue-chip marketers' investments in interactive but also the marketers outside of the top 50 spenders. Smaller marketers, he said, are allocating more of their budgets to the Internet.
Magazines will be up 7.5% and outdoor should rise 5.5%. Newspapers are expected to see moderate 3.8% growth, syndication a 3.3% increase and network TV 1.1%.
Three media are expected to see drops in ad spending: radio, down a sliver at 0.1%; business-to-business magazines, down 0.9%; and spot TV down 6.4%.
The significant downward forecast for spot TV was mostly attributed to less political advertising this year and more competition from spot cable.
But despite this being an odd year, political advertising has become a perennial category, Mr. Fredericks noted. "Election 2004 was a watershed event with spending exceeding $1.45 billion," he said. "The number and diversity of advertisers and messages created a roadmap of new standards by which future campaigns and advertising battles will be waged."
With more than 400 mayors up for re-election this year, cities such as San Antonio, Pittsburgh, Cleveland, Detroit and San Diego will receive an injection of political-advertising dollars. And, of course, "New York TV will get a huge chunk of change from Mayor Bloomberg," he said.
Outside of elections, special-interest groups are advertising around issues, such as prescription drugs, the environment and, likely soon, a Supreme Court justice appointment. To date, those groups have spent $90 million on advertising, according to TNS data. Fourth quarter, estimates Mr. Fredericks, could see an additional $50 million from groups spending money in preparation for the 2006 midterm election.
Mr. Fredericks also challenged the notion that the TV upfront be considered an indicator of the year's TV ad spending, noting the cumulative error over 14 years of predictions has amounted to $24.5 billion-about $1.9 billion a year. In only five of 14 years was total TV ad spending within five percentage points of the upfront-based prediction. It's a "poor predictor," he said, because buyers can exercise options to cancel their buys during first through third quarters, the networks vary their sellout levels from year to year. The third reason it doesn't work, he said, drawing what were likely cynical chuckles from the buyers in the crowd, is that sellers are the primary reporting sources for the totals.