As advertising and media company executives came before Wall Street last week, they warned investors to expect more of the same in 2003. Speakers at year-end media conferences in New York sponsored by UBS Warburg and Credit Suisse First Boston were in a mood of restrained optimism, facing a so-so economic recovery with no consensus on how strongly ad spending will rebound. The conferences opened with generally upbeat forecasts for 2003 (See story, P. 22), but most companies are taking forecasts with a grain of salt.
"I don't care what anybody says. I don't see anyone saying `eureka' for next year," said Interpublic Group of Cos. Chairman-CEO John J. Dooner Jr. Robert J. Coen, senior VP-director of forecasting at Interpublic's Universal McCann, forecasts 4.9% worldwide ad spending growth next year, yet Interpublic is planning its budget on the cautious basis that its revenue will be flat after about a 9% drop this year.
Most speakers said "low visibility" continues to plague the industry. Maurice Levy, chairman-CEO of Publicis Groupe, said advertisers continue to make decisions on a day-to-day basis. Low visibility makes planning "a bit of a roll of the dice," said Sean Orr, Interpublic exec VP-chief financial officer.
The situation is further complicated by the possibility of war in Iraq, although some speakers argued the industry has already factored that variable into assumptions for next year. The impact of a war would be "minimal" as long as it doesn't last long and inflation remains under control, said David Poltrack, exec VP-research and planning at Viacom's CBS.
Broadcasters-buoyed by the strong upfront market and heavy political spending-were generally more optimistic than newspaper companies, whose forecasts ranged from mildly upbeat to downright bearish. While Mr. Poltrack referred to the "positive market environment" that helped CBS's upfront sales before this TV season, Dow Jones & Co. Chief Operating Officer Richard Zannino said his company remains in a "brutally difficult" environment. Dow Jones publishes The Wall Street Journal.
`a bit of mystery'
The difference between forecasts is "a bit of a mystery" said WPP Group Chief Executive Martin Sorrell. He added that he suspected "spin" among media executives hoping to talk their stock price into rising. Yet after a year that included financial restatements at AOL Time Warner and Interpublic, the overall mood was cautious, which may partly reflect a desire to underpromise so that next year's earnings surprises could be positive rather than negative.
Most executives took to the podium to say they plan to manage costs tightly and focus on running businesses so profits will grow next year even if ad spending doesn't. A contrite Richard Parsons, CEO of AOL Time Warner, told investors his company will focus on "how to manage the thing we created," and Mr. Dooner vowed to "stick to our knitting" in 2003.
The bulk of the industry consolidation is over and most companies have completed their restructuring, so the focus in the near future will be on execution, said Christopher Dixon, global media strategist at UBS. Management teams will have to demonstrate to investors that they can deliver results on their business plans, he said.
The theme for next year will be a stabilization of business, with Europe lagging behind other world regions, said WPP Group Finance Director Paul Richardson. He described the process as a "cost-driven recovery" where profit growth will come not from top-line revenue growth, but from cost controls.
"The overall picture is one of caution," said Mr. Sorrell. "We feel good about the prospects for 2004, but 2003 will continue to be a pretty tough year."
contributing: jon fine