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COEN PREDICTS 5.7% INCREASE IN AD SPENDING

Notes Weakness in Spot TV Market

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NEW YORK (AdAge.com) -- Ad spending will increase 5.7% in the U.s. this year, a significantly smaller gain than the 7.4% increase seen last year, said Robert J. Coen, senior vice president and director of forecasting at Universal McCann, speaking today at his annual midyear report.

Revised downward
Mr. Coen revised downward the estimate he made in December, which called for 6.4% growth in the U.S. This year "is not going to be as good as I expected,” Mr. Coen said.

Mr. Coen’s predictions are considerably higher than those issued yesterday by TNS Media Intelligence, which predicted that domestic ad spending would rise 3.4% this year to $145.3 billion.

The new Coen forecast predicts ad spending abroad will grow 5.9% this year, slightly higher than the 5.8% gain Mr. Coen anticipated back in December. Total global ad spending will grow 5.8% to $575.1 billion this year, Mr. Coen said, reducing his earlier estimate of 6.1% growth.

Retail consolidation cited
In the U.S., where Mr. Coen predicted ad spending would total $278.8 billion this year, several factors seem to be combining to slow spending growth. Consolidation among retailers, like drug stores and hardware stores, for one, has reduced the number of local advertisers that are looking to spend, Mr. Coen said.

Mr. Coen also suggested the Sarbanes-Oxley regulations have put a drag on aggressive competition while encouraging conservative spending.

Projections for individual media, now informed by first-quarter results, also showed plenty of variation. Cable TV revenue, for example, continued to post double-digit growth with an 18.2% increase in the first quarter compared to the first quarter of last year.

“The category that is looking particularly distressing, particularly if you own a TV station, is the spot TV market,” Mr. Coen said. Spot TV advertising posted a 5.8% loss in the first quarter compared with year-ago period, he said. Revenue for the top four broadcast networks grew 5.1% compared with the quarter a year ago.

Lack of Olympics and elections
Comparisons with last year will grow increasingly difficult as the year progresses without the Olympic Games and presidential campaign ad spending that drove revenue higher in 2004. “It’s going to be very difficult for the networks to go against 2004,” Mr. Coen said.

Despite growing media coverage and advertiser interest in nontraditional marketing, Mr. Coen said traditional media will hold its own this year. “I’m only hearing it; I can’t find it,” Mr. Coen said of growing nontraditional spending. “I don’t think there is a wide across-the-board shift into things like product placement.”

Mr. Coen also made his first predictions for ad spending in 2006 today. He said he anticipates that U.S. ad revenue will total $295 billion next year, up 5.8% over 2005. Overseas advertising will reach $313 billion next year, he predicted, for a gain of 5.6% over 2005.

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