Local-market pricing issues strain ad-market recovery

By Published on .

The ad market is in the midst of a comeback, but pricing is still an issue, especially in local markets, according to speakers at a recent financial conference.

Network and cable TV are experiencing strong sales, but for other media, the recovery has a forced-march quality, with local media lagging behind national and larger local markets improving faster than smaller ones, said speakers at the 12th annual Communacopia conference. The meeting, sponsored by Goldman, Sachs & Co., brought together heads of media and telecommunications companies.

Broadcast and cable networks reported that fourth-quarter scatter is strong and pricing holding above the levels set during the upfront marketplace. But local radio, TV and newspapers are facing difficult comparisons to last year's second-half, when a surge of political advertising for the mid-term elections inflated their results.

"The national advertisers are trying to get in front of what they see as an improvement in the economy," said Lowry Mays, CEO of radio behemoth Clear Channel Communications. Meanwhile, local advertisers are more closely tied in to the sagging consumer-confidence and employment trends, he said.


Local advertising has been an industry concern since the last quarter, as newspaper companies have reported slowing in their key retail category and local-radio revenue growth has slowed after a strong recovery earlier in the year. Merrill Lynch & Co. advertising analysts recently downgraded their U.S. ad spending forecast for the year to 2.8% growth from 3.1% due to the weaker local ad trends.

As prices for spot TV have risen, local advertisers have shifted to radio, said Mel Karmazin, Viacom's president-chief operating officer. But these marketers are buying advertising much closer to air time than they used to, which has had the effect of driving radio prices down, he said.

"We're still giving advertisers too much of a bargain for the value we're giving them," Mr. Karmazin said.

Ironically, the most optimistic words came from the executive who has been the biggest bear in the business so far, WPP Group Chief Executive Martin Sorrell. In hindsight, the U.S. has been in recovery mode since August of 2002, Mr. Sorrell said. But he warned it is a muted recovery.

"This is not going back to the year 2000, this is not going back to 15% organic growth," he said.

But 2004 should see a strong "quadrennial kick," thanks to the coming U.S. presidential elections, the 2004 Olympic Games in Athens and the European Football Championships, Mr. Sorrell said. He added that political and Olympic ad spending, coupled with economic-growth initiatives taken by a president seeking re-election should translate into healthy ad spending next year.

Most Popular
In this article: