Each year it is our pleasure to provide several updates and insights to the upcoming year. This service is brought to you by lenoble's media sales insights. Enjoy!
2015 Spot TV: Total Down 6.3%, Core Up 2.4%
According to broadcasters, reps and analysts surveyed by TVNewsCheck, that lower total for next year is due to a number of factors, including a soft national spot marketplace, a weak network upfront as well as uncertainties about leading ad sectors like automotive, telecommunications, retail and fast food. Driving core growth will be auto and telecom, which are predicted to rise 3.9% and 3.6%, respectively, compared to 2014.
By Janet Stilson
,
Without heavy political ad spending next year, TV stations will experience a giant 6.3% drop in total revenue. But so-called core revenue that excludes the biennial political windfall will rise 2.4% in 2015.
That’s the consensus of top executives at nine TV station groups and six media research analysts who took part in TVNewsCheck’s annual survey gauging the health of the spot television marketplace.It comes at a time when the sources now realize that full-year 2014 is likely to fall short of their expectations due to factors that are sure to impact 2015 as well.
Among those factors: a soft national spot marketplace, a weak network upfront as well as uncertainties about leading ad sectors like automotive, telecommunications, retail and fast food.
When they responded to a TVNewsCheck survey a year ago, respondents projected an increase in core 2014 of 2.6% over 2013 — double what is now anticipated, 1.3%. The respondents of the survey last year expected an annual increase of 11% in total advertising (factoring in political), which is in sync with what is now projected, 11.1%.
“It seems like every single TV station group that reported [earnings] talked about how [national spot] was a disappointment, although it’s picked up over the last couple of months,” said Robin Flynn, research director at SNL Kagan.
“More national advertising dollars are going to cable,” added Carl Salas, VP and senior credit officer specializing in media and entertainment at Moody’s Investors Services.
The rep firms confirm national spot’s condition. “2014 is frustratingly behind,” reported a top rep firm executive. “Auto spend has been flat to down, and the telco sector is down dramatically.”
Rep firm executives project that core 2014 national spot advertising will be down 2% compared with 2013, and total will be up 18.2% because of political.
Naturally, total 2015 national spot revenue will decline as the political money dries up; the rep firms are projecting a 14% decline on average. But they expect core national spot revenue will experience a reversal of fortunes next year, with a 1.7% increase on average.
The performance of auto and telecoms, two top ad categories, will be crucial to the rep firms’ efforts to pull national spot out of its funk.
The auto category generally makes up about 30% to 35% of stations’ total TV revenue. Station executives say that ads placed by General Motors, Dodge, Jeep and Chrysler have been strong this year, but the lack of advertising from foreign manufacturers and dealers have created a drag for some.
The TV sales teams are all on notice that they need to turn a possible challenge into a nontraditional ad opportunity: Ford has told its dealer groups that in order to qualify for co-op ad dollars they need to spend half of them on digital advertising.
Despite the somewhat problematic nature of auto revenue now, station execs and analysts are anticipating an average 3.9% increase in the ad category in 2015, up from 1.5% this year.
Auto ad levels generally increase in lockstep with car sales. So it’s worth noting that LMC Automotive US is projecting 16.5 million auto unit sales next year, a rise from 16.3 million this year and 15.6 million in 2013.
In recent months the auto industry’s SAAR [seasonally adjusted annual rate] has been as high as 16.5 million to 17 million units, according to Wayne Freedman, VP of sales for Raycom Media. “From all indications, it’s going to stay in that range or even higher in 2015.
“Interest rates remain low. The average age of the U.S. car fleet remains at 11-plus years. Dealers recognize that television is still critical to their top and bottom funnel objectives, and many are embracing our digital solutions, as well,” Freedman added.
“Television and search are actually very strong complements,” said Jonathan Barnard, head of forecasting for ZenithOptimedia. “If Ford dealers are conducting a search campaign [to lure people to their outlets] they will have much better results if they accompany that with a TV campaign as well.”
The telecom category has been a challenge for many stations on both the local and national levels and could remain so in 2015, although some say the category is rebounding.
A lack of dollars from AT&T has been a major downer, at least partially explained by the telco’s problems with installations of its U-verse service, the executives say. That’s one reason why they estimate that the category will be up by a slim 1.3% this year.
But they’re hoping it will rise to an average 3.6% in 2015 — if the government approves two huge mergers: Comcast’s acquisition of Time Warner Cable and the AT&T-DirecTV combination. Big branding campaigns from the behemoths also could instigate a frenzy of ads from their competitors, sources predict.
But whatever revenue stations gain from the two conglomerates won’t last forever. “If the penetration or the market share of their product is so enlarged, they don’t have to spend the advertising dollars,” said one station group executive. For merged companies, finding efficiencies and cost savings is a primary goal, not adding expenses, he said.
That’s the consensus of top executives at nine TV station groups and six media research analysts who took part in TVNewsCheck’s annual survey gauging the health of the spot television marketplace.It comes at a time when the sources now realize that full-year 2014 is likely to fall short of their expectations due to factors that are sure to impact 2015 as well.
Among those factors: a soft national spot marketplace, a weak network upfront as well as uncertainties about leading ad sectors like automotive, telecommunications, retail and fast food.
When they responded to a TVNewsCheck survey a year ago, respondents projected an increase in core 2014 of 2.6% over 2013 — double what is now anticipated, 1.3%. The respondents of the survey last year expected an annual increase of 11% in total advertising (factoring in political), which is in sync with what is now projected, 11.1%.
“It seems like every single TV station group that reported [earnings] talked about how [national spot] was a disappointment, although it’s picked up over the last couple of months,” said Robin Flynn, research director at SNL Kagan.
“More national advertising dollars are going to cable,” added Carl Salas, VP and senior credit officer specializing in media and entertainment at Moody’s Investors Services.
The rep firms confirm national spot’s condition. “2014 is frustratingly behind,” reported a top rep firm executive. “Auto spend has been flat to down, and the telco sector is down dramatically.”
Rep firm executives project that core 2014 national spot advertising will be down 2% compared with 2013, and total will be up 18.2% because of political.
Naturally, total 2015 national spot revenue will decline as the political money dries up; the rep firms are projecting a 14% decline on average. But they expect core national spot revenue will experience a reversal of fortunes next year, with a 1.7% increase on average.
The performance of auto and telecoms, two top ad categories, will be crucial to the rep firms’ efforts to pull national spot out of its funk.
The auto category generally makes up about 30% to 35% of stations’ total TV revenue. Station executives say that ads placed by General Motors, Dodge, Jeep and Chrysler have been strong this year, but the lack of advertising from foreign manufacturers and dealers have created a drag for some.
The TV sales teams are all on notice that they need to turn a possible challenge into a nontraditional ad opportunity: Ford has told its dealer groups that in order to qualify for co-op ad dollars they need to spend half of them on digital advertising.
Despite the somewhat problematic nature of auto revenue now, station execs and analysts are anticipating an average 3.9% increase in the ad category in 2015, up from 1.5% this year.
Auto ad levels generally increase in lockstep with car sales. So it’s worth noting that LMC Automotive US is projecting 16.5 million auto unit sales next year, a rise from 16.3 million this year and 15.6 million in 2013.
In recent months the auto industry’s SAAR [seasonally adjusted annual rate] has been as high as 16.5 million to 17 million units, according to Wayne Freedman, VP of sales for Raycom Media. “From all indications, it’s going to stay in that range or even higher in 2015.
“Interest rates remain low. The average age of the U.S. car fleet remains at 11-plus years. Dealers recognize that television is still critical to their top and bottom funnel objectives, and many are embracing our digital solutions, as well,” Freedman added.
“Television and search are actually very strong complements,” said Jonathan Barnard, head of forecasting for ZenithOptimedia. “If Ford dealers are conducting a search campaign [to lure people to their outlets] they will have much better results if they accompany that with a TV campaign as well.”
The telecom category has been a challenge for many stations on both the local and national levels and could remain so in 2015, although some say the category is rebounding.
A lack of dollars from AT&T has been a major downer, at least partially explained by the telco’s problems with installations of its U-verse service, the executives say. That’s one reason why they estimate that the category will be up by a slim 1.3% this year.
But they’re hoping it will rise to an average 3.6% in 2015 — if the government approves two huge mergers: Comcast’s acquisition of Time Warner Cable and the AT&T-DirecTV combination. Big branding campaigns from the behemoths also could instigate a frenzy of ads from their competitors, sources predict.
But whatever revenue stations gain from the two conglomerates won’t last forever. “If the penetration or the market share of their product is so enlarged, they don’t have to spend the advertising dollars,” said one station group executive. For merged companies, finding efficiencies and cost savings is a primary goal, not adding expenses, he said.
TVNEWSCHECK ANNUAL SPOT FORECAST Continued on LeNoble's Media Sales Insights
2015 Spot TV:
The telecom mergers could have another impact on stations as well: “The consolidation of Time Warner Cable and Comcast will pose a more aggressive local cable challenge to broadcast stations,” said Jack Myers, a longtime media analys and chairman of MyersBizNet.
Myers sees spot TV challenges from broadcast and cable networks as well. "The soft TV network upfront, where we saw overall volume [of revenue] for cable and broadcast down 4%-5%, with the broadcast network upfront volume down a reported 10% to 12%.”
That means the networks have plenty of inventory for the scatter market, which would mean less money floating down to spot TV, Myers said. If demand for scatter isn’t strong, pricing could be relatively inexpensive, keeping the money in network as well.
But Myers actually increased his overall forecast for spot revenue in 2014, to 9.9%, versus his 6.8% projection made last year at this time. The reason: a much more optimistic assessment of midterm political campaign and advocacy revenue.
Indeed, Kagan’s Flynn estimates spot TV will reap $2.5 billion in political spending this year, a 20% increase over the last midterm election year, 2010. Elizabeth Wilner, SVP, political at Kantar Media Intelligence, forecasts $2.6 billion political dollars for spot in 2014 out of $3.4 billion for TV overall.
An even more bullish spot TV projection comes from Mark Fratrik, SVP and chief economist for BIA/Kelsey: $3 billion.The big difference between this midterm election and the last one is the Citizens United court decision, which instigated an onslaught of Super PACs in January of 2010, after the preparation for election campaigning was well underway.
“In 2014, everyone walked into the start of the cycle with Super PACs up and running,” Wilner said. “We weren’t really seeing Super PACs in gubernatorial and other state-level races in 2010, but we are now.”
The deluge of political advertising will help offset the lackluster restaurant/fast food category. Station executives estimate the sector is down an average 5.8% this year, but could turn positive, to 1.6%, in 2015. “It’s fallen off a cliff for us, and is down each quarter,” said one station executive. He and other executives believe the lack of fast food advertising is reflective of the sputtering economy.
The continued financial strain that some consumers are experiencing is also affecting the retail sector, some sources say. On average, stations expect retail to be up a razor-thin 0.5% this year, and 1.6% next.
“Part of my thinking on 2015 is that the economy will continue to improve. Everybody wants to see this big rise, this big event. But I just don’t see that coming. In fact, it probably wouldn’t be healthy for us if it did, because it would just be some kind of bubble,” said one station group executive.
People don’t usually buy an auto every year, but smaller retail purchases, like investing in a couch or more new clothes, are key economic drivers, the exec added. “It’s millions and millions of people spending $1,000 this weekend. Steady will become the name of the game, versus explosive growth.”
Myers sees spot TV challenges from broadcast and cable networks as well. "The soft TV network upfront, where we saw overall volume [of revenue] for cable and broadcast down 4%-5%, with the broadcast network upfront volume down a reported 10% to 12%.”
That means the networks have plenty of inventory for the scatter market, which would mean less money floating down to spot TV, Myers said. If demand for scatter isn’t strong, pricing could be relatively inexpensive, keeping the money in network as well.
But Myers actually increased his overall forecast for spot revenue in 2014, to 9.9%, versus his 6.8% projection made last year at this time. The reason: a much more optimistic assessment of midterm political campaign and advocacy revenue.
Indeed, Kagan’s Flynn estimates spot TV will reap $2.5 billion in political spending this year, a 20% increase over the last midterm election year, 2010. Elizabeth Wilner, SVP, political at Kantar Media Intelligence, forecasts $2.6 billion political dollars for spot in 2014 out of $3.4 billion for TV overall.
An even more bullish spot TV projection comes from Mark Fratrik, SVP and chief economist for BIA/Kelsey: $3 billion.The big difference between this midterm election and the last one is the Citizens United court decision, which instigated an onslaught of Super PACs in January of 2010, after the preparation for election campaigning was well underway.
“In 2014, everyone walked into the start of the cycle with Super PACs up and running,” Wilner said. “We weren’t really seeing Super PACs in gubernatorial and other state-level races in 2010, but we are now.”
The deluge of political advertising will help offset the lackluster restaurant/fast food category. Station executives estimate the sector is down an average 5.8% this year, but could turn positive, to 1.6%, in 2015. “It’s fallen off a cliff for us, and is down each quarter,” said one station executive. He and other executives believe the lack of fast food advertising is reflective of the sputtering economy.
The continued financial strain that some consumers are experiencing is also affecting the retail sector, some sources say. On average, stations expect retail to be up a razor-thin 0.5% this year, and 1.6% next.
“Part of my thinking on 2015 is that the economy will continue to improve. Everybody wants to see this big rise, this big event. But I just don’t see that coming. In fact, it probably wouldn’t be healthy for us if it did, because it would just be some kind of bubble,” said one station group executive.
People don’t usually buy an auto every year, but smaller retail purchases, like investing in a couch or more new clothes, are key economic drivers, the exec added. “It’s millions and millions of people spending $1,000 this weekend. Steady will become the name of the game, versus explosive growth.”
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