Local TV reeling, spot looking for political bounce

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TV station executives in North Carolina and South Carolina, no matter their political leanings, should be celebrating the retirements of U.S. Sens. Jesse Helms, R-N.C., and Strom Thurmond, R-S.C.

As the two Republican icons leave public service, the campaigns to fill their vacant Senate seats should generate plenty of attention and-as with scores of other Senate, House and gubernatorial races around the U.S.-plenty of local TV advertising in 2002. Spot and local TV political advertising historically is a significant source of revenue for TV stations in even-numbered years, regardless of whether the year features a presidential election.

This, of course, is welcome and expected news for TV stations hit hard by last year's tough economy. Local broadcast TV ad revenue decreased 18.9% in 2001 to $14.1 billion, according to a recent Television Bureau of Advertising analysis of estimates using the MediaWatch technology of Taylor Nelson Sofres' CMR.

Local spot spending, according to the TVB, was down 8%-10% in 2001 and national spot spending dropped 22%-24%. For local broadcast TV, 22 of the top 25 ad categories of 2000 were down in 2001.

"Spot TV ended up last year at 1996 revenue levels. So this year, there should not be any way we can't grow," says Leo MacCourtney, president-CEO of Blair Television, New York.

There are signs that the marketplace is improving, at least from the seller's perspective. The TVB's current forecast for 2002 calls for modest revenue increases: 2%-5% for local spot and 3%-6% for national spot with cost-per-thousand prices showing similar gains.

TVB President Chris Rohrs says revenue growth can be attributed to comparing results with a tough 2001, but he also points to increased spending in the automotive category led by General Motors Corp. now that the carmaker is rebuilding its local marketing groups. In addition, Mr. Rohrs says the financial category is making a comeback.

"We're seeing in the market more automotive, movie business and political. Telecom is a heavy spender, too," adds Jennifer Hungerbuhler, associate broadcast director with Cordiant Communications Group's Bates Worldwide in Atlanta.

A tighter network scatter market as the industry heads into the upfront selling season could help push the network marketplace, which in turn also could help strengthen the spot market in 2002 and beyond.

The spot market, however, doesn't have an "upfront," and most buyers and sellers don't expect the current spot market to have any impact on what happens in the upfront.

"Spot will follow the network path," says Val Napolitano, president-CEO for TV rep company Petry Television, based in Atlanta and New York. "We are hopeful that the overall market improves. If you see network rebound, then spot will be a beneficiary. But you won't see spot in the front. It is the caboose."

After declines in ad spending last year, Mr. Rohrs says, the market had to stabilize, followed by a sense of business getting back to normal.

"That's what happened in the first quarter. Now, in the second quarter, we are seeing a quickening and even some political spending kick in early," he says.

spot `pretty tight'

"Spot is now pretty tight in a lot of markets," says Jean Pool, president-operations at MindShare, New York, part of WPP Group.

"This is happening primarily because automotive spending is gargantuan and political spending is coming in. But if spot was not tight in the second quarter, then [sellers of spot TV time] would be dead in the water. This [kind of upturn in the spot market] was expected to happen," Ms. Pool says.

Without political spending, on a pure spot TV basis, revenue this year likely would be flat, though many feel the market is moving in an upward direction after hitting bottom last year.

"We are starting to see continued life in the top category for spot-automotive," says Mr. Napolitano.

Auto categories combined cut spot TV spending by 18.4% to $3.13 billion in 2001, according to CMR. DaimlerChrysler was the top spot TV advertiser with $559.5 million in 2001, down 32.3% from 2000. The top spot category spender was national restaurants at $1.23 billion (down 12.4%), followed by domestic light trucks at $594.6 million (down 30.4%).

The spot marketplace in the fourth quarter was "very, very soft. It was a buyer's market, one we hadn't seen before," says Bates' Ms. Hungerbuhler. Local broadcasters took the brunt of this depressed TV ad market.

Sinclair Broadcast Group, which owns and operates, provides programs for, or provides sales services to 63 TV stations in 40 markets, reported net broadcast revenue of $646.4 million in 2001, down 11.1%, and broadcast cash flow for the year at $258.9 million, down 23.6%.

Tribune Co.'s first-quarter revenue for its broadcasting and entertainment division dropped 2%, vs. a year earlier, to $284 million.

But the company reported its same-station ad revenue for the WB and Fox stations was down 1% for the quarter, another hint that the spot TV market bottomed out in 2001.

Both buyers and sellers agree there's increased pressure on spot inventory, partly because of the expected influx of political spending. "Stations are taking good economic news and running with it," says Laura Silton, senior VP-director of strategy and resources for LCI, the spot buying arm of Interpublic Group of Cos.' Universal McCann in New York.

"The economy doesn't seem to be coming back with the kind of strength people had hoped for. It is coming back more slowly, and we are not seeing ad budgets increase. But if you look closely at 2000, it was not a particularly good year for spot. If you took political out, it would have been a terrible year. Political can save people," she says.

Focus on

Spot TV

Top 2001 spender:

DaimlerChrysler at $559.5 million, down 32.3%

Top 2001 media buyer: Zenith Media Services at $1.98 billion, up 31.7%

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