NEW YORK (Reuters) - U.S. advertising spending is expected to drop by 5 to 8 percent in 2009, the steepest decline in eight years, a top advertising executive warned on Monday, adding to the growing chorus of dismal forecasts.
Steve Lanzano, chief operating officer of MPG North America, a unit of the French advertising group Havas SA EURC.PA, said local advertising such as radio, television, newspapers and traditional billboards would suffer most as companies curtail spending due to the sagging economy.
“I think the real key for next year is going to be the second and third quarter. I think if the economy continues to go south, you’re going to see some real hits across all media in the second and third quarter of next year,” Lanzano told the Reuters Media Summit in New York.
A top executive at MPG, a media buyer whose clients include Exxon Mobil (XOM.N), Sears SHLD.O and Jones Apparel JNY.N, Lanzano is the latest to join the ranks of media experts warning of a recession in ad spending — the first since 2001. Lanzano cautioned that spending was unlikely to return to normal before the first quarter of 2010.
Concerns about corporations cutting their marketing budgets have plagued stocks of media companies that depend — at least in part — on advertising revenue. So far this year, shares of CBS Corp CBS.N are down about 75 percent and McClatchy Co (MNI.N) shares are down more than 80 percent.
Lanzano said that while every category of media will feel the pinch of shrinking corporate marketing budgets, cable networks and Web search would likely hold up better than other areas in 2009.
Web search advertising, for instance, is more targeted than most other types of advertising, and it is relatively easy to judge the results of buying a keyword. Targeted and measurable advertising is always popular with advertisers, but never more so than when budgets are tight.
Cable, meanwhile, has cultivated a crop of high-quality programs like AMC’s “Mad Men,” a portrait of the 1960s Madison Avenue advertising industry, and the FX courtroom drama “Damages,” which have won favor with critics, audiences and advertisers.
By contrast, broadcast TV networks Walt Disney Co’s (DIS.N) ABC, General Electric Co’s (GE.N) NBC, CBS and News Corp’s NWSa.N Fox are coming up with few breakout hits, partly because they are pulling shows quickly if they do not immediately find an audience, Lanzano said.
Cable networks’ “programing is better and they give (new shows) time to grow,” Lanzano said.
But the economic downturn — and the wrenching problems of the auto and financial services sectors — is destined to hurt all corners of the television business. Fourth-quarter spot ad — or scatter market — prices are now down about 4 percent from a year ago, Lanzano said.
Even television sports, which have become more popular with advertisers since audiences tend to watch the events live rather than recording them, will suffer from the broad pullback in marketing spending, said Lanzano.
Lanzano estimated 9 to 10 percent of spending on broadcast sports comes from financial services and automotive, both industries that have been in turmoil. “That’s a lot of money moving out,” said Lanzano.
“Because of the hits in the categories that support sports — whether it’s financial or automotive or retail — I think they might take a little more of a hit than they would in other recessionary periods,” he said.
(For summit blog: summitnotebook.reuters.com/)
(Additional reporting by Sue Zeidler)
Editing by Derek Caney and Matthew Lewis