Expectations Lowered Following Sept. 11 Attack

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NEW YORK ( -- Several Wall Street analysts have lowered their expectations for the ad industry in the wake of the Sept. 11 terror attacks, and many are now warning 2002 could be a down year for some media as well.

Goldman Sachs analyst Michael Beebe revised his ad spending estimates for 2001 and 2002 from a drop of 4.5% in 2001 and 1.8% growth in 2002 to drops of 9.0% and 4.0%, respectively.

Mr. Beebe said Goldman's economic team had lowered its forecast following the attacks for 2002 Gross Domestic Product growth to 0.5% from a projected growth of 2%, based on the expected delay in the economic recovery.

Revenue loss
Mr. Beebe also estimated that the lost advertising the week of Sept. 11 would account for 2% of the year's ad revenue, and noted the segments expected to take the worst hit in the aftermath -- such as travel, retail and financial services -- make up a large percentage of the media spending totals.

Merrill Lynch & Co.'s Lauren Rich Fine reduced her advertising revenue projections for the newspaper industry to drops of 6.5% this year and a possible drop of 1% in 2002; her previous forecast was minus 5.9% and 2.2% growth, respectively.

Weak August ad revenue, combined with loss of revenues the week of Sept. 10 and greater costs to cover the attacks, will adversely hit newspapers, in spite of the higher circulation revenue, Ms. Fine said.

The newspaper industry's previous precedent for two years of declines was drops of 0.3% in 1990 and 6% in 1991, according to Ms. Fine's research.

Radio revenue may fall 19%
Noting the economic and social implications of the attacks will exacerbate the weakest radio advertising environment in 40 years, Lehman Brothers broadcast analyst William Meyers dropped his previous estimate for radio advertising from a 3% drop in 2001 to a 8% drop.

The early days of September showed only 2% year-over-year declines from 2000, but due to the lost ad revenues from commercial-free news broadcasting and advertiser cancellations, September revenues will likely fall 19% below last year's, according to Mr. Meyers' projections.

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