As we begin 2012, a number of people have requested a forecast post on the U.S. media scene. I canvassed dozens of people and went to a large number of new sources beyond my normal panel to make sure the thinking was fresh and geographically balanced.
If you have read the trade press in recent weeks, some very similar forecasts have emerged. Globally, advertising will be up in the 4.7% range and would have been over 5% had worries over European debt and currency threatened a severe recession there. In the U.S. things will move up fairly well with billing growth in the 3-4% range but pre-recession levels of spending (from 2007) will not be matched across the board until maybe 2015-2016. I have no real issues with any of those prognostications. My point in this post is that if you dig a bit deeper things are significantly different market to market and medium to medium.
In no specific order, here goes:
Network TV—the king will remain king as large brands seeking awareness will continue to flock to it and bid up prices despite declining ratings and continued growth in commercial avoidance. The upfront marketplace will continue for another year for sure. Depending on the economy, a 5-6% gain seems likely.
Network Cable—growth will be nice here but more in line with network TV than the double-digit gains of recent years. As the medium has grown, it is coming off a larger base each year so jumps in billing and pricing will be smaller but still good in a flat-lined economy.
Spot TV—this one will require a lot of attention from media planners this year. Virtually every forecast out there says expect a 4% billing gain for 2012 with a 2.5% uptick if you take out the impact of political advertising. Next year will bring new meaning to the old statistical saw that “you can drown in a river with an average depth of six inches.”
Some markets have come back nicely from the 2008-2009 recession (economists claim that we pulled out of recession in 2009. Tell that to some of the broadcasters whom I interviewed!) . Other markets are really struggling and expect another poor year. One Midwestern TV G.M. told me, “We expect no political billing of note. This is not a battleground state for the presidency and we have no Senate race. I try to explain to headquarters that we have absolutely no pricing power. Good clients come in and want pricing from years ago and we have to give it to them. If not they will go to someone who will meet their demands or load up on radio and local cable. Will we ever return to normal?”
The epicenter of America’s boomtowns is now amazingly Williston, North Dakota. Hiring is so robust that fast food outlets are now paying $15 for counter help. As long as the oil and gas boom continues there, things will be fine. But, most Americans are not willing to spend a winter in Williston. And, if you have a mortgage that is underwater (like 24% of mortgage holders), you cannot leave even if you wish. Conversely, Cleveland and Youngstown, Ohio are bulldozing foreclosed or abandoned homes to provide green space in their cities and prop up sagging property values.
With both parties possibly having a billion dollar war chest for advertising next year one would think the networks would get the brunt of it. Not so. Both sides will run on both network TV and national cable but much of the money will be spent in 10-12 battleground states. Topping the list will be Florida and Ohio (natch), along with Pennsylvania, Iowa, Wisconsin, Nevada, Colorado, and Virginia. This list will change a bit as we move through fall 2012.
With the GOP a few seats away from recapturing the Senate, look for huge spending in local races in the following states—Massachusetts, Montana, Nevada, New Mexico, Wisconsin, Missouri, and Virginia.
Candidly, next October will be a bad time to turn on the TV set in either Ohio or Wisconsin. Being battlegrounds for both the presidential race plus hot and well-funded Senate contests, it might be a good time to stick to PBS, C-Span, or HBO.
Auto and truck sales were up a solid 10% from 2010 to 2011 and that clearly helped some spot markets and will likely do it again in 2012. Please remember that when unemployment is over 10% and housing still tanking, some markets will not sell many cars nor see much local vehicle advertising.
The whole political situation raises a core question that a few people were willing to discuss with me. The parent company wants dollars. As a rule, they do not care where they come from client wise. Twenty-five years ago, stations hated political advertising. They had to charge a low fixed rate, could not pre-empt the politicians and they had to offer good inventory to all candidates. Now, they look forward to it. Across many markets, it has become the mother’s milk of local TV advertising. Without political money, many stations would be down in billing for 2012 and some fairly significantly. This is not a good long-term trend for the medium.
Local Cable—with the ability to sell zones or portions of a cable interconnect, this medium with some hustling has been able to bring many small local retailers on to TV over the last few years. Also, they can handle congressional districts or state senate races with far less waste than over the air TV. Growth here will vary depending on the strength of the local economy and the heat of political races. They should do better than local TV stations in most cases.
Radio—most see gains of approximately 2% but, again, it will vary by market. In mid-sized and smaller markets, I am told that collection problems are still a big issue as more and more small retailers are struggling or closing their doors in economically challenged metros. This has always been a problem with local radio but seems to not be improving much even as the economy is inching up.
Certain formats lend themselves well to political advertising. Sports formats continue to do well even in some areas where the economy is not particularly strong. A big development in the last year has been that local radio has been developing digital products for advertisers. They are even elbowing their way in on the daily deal business in certain larger markets.
Outdoor—a 4-5% gain seems likely. Digital boards remain popular and they will benefit from political spending as well. Keep in mind that outdoor remains the last mass medium.
Newspaper—the downward spiral will continue. An optimistic outlook would say that they would be down 9% after strong double digit declines of recent years. Most papers have not been able to convert many readers to their digital product and the under 40’s continue to avoid it. When I travel, it stuns me how weak the products are and how much wire service copy that they all use. Sad, but this is the reality of the 2012 world.
Magazines—they get thinner and thinner except for a few trendy titles and some beauty books. Some well known titles will die this year. It is a shame but most do not fit in to today’s lifestyle all that well. Pricing is often wide open—negotiations should be fun again this year.
On-Line—double digit year over year gains will be found here. And, there is room for growth! They may get 15% of billing next year but we spend 36% of our media time online. As print falters, more players of all sizes will shift money here.
Daily Deals—this business usually means Groupon or Living Social to most people. Actually, there are hundreds of entrants in the category and broadcasters, especially smart radio operators, are getting in to the act via their websites. Groupon timed their Initial Public Offering (IPO) perfectly. To me, their business model seems way too labor intensive and retailers complain that people who use Groupon coupons do not “stick” and return again and again. This could be an area with a shakeout as many daily deal players, especially the under-capitalized, fall to the wayside.
Social Media—this one had the entire buzz last year but may generate more in 2012. Facebook will have 1 billion users this year and should become a public company by year-end. What will they do with all that capital? Acquisitions would make sense but I think that they will use new technology to really heat up social commerce. So will others in the space. There is talk of an Apple TV set that will blend on-line with more conventional TV properties with opportunities for sales.
Major companies have piled in to social media and they are getting a decent handle on it and integrating it with varying degrees of success in to their marketing communications programs. But, small retailers seem to hate it or are afraid of it. Why? They do not devote enough time to it nor do they have the staff on hand to maximize its usefulness. There is still a bit of hocus-pocus here but the big players are getting more accountable and the big spenders are getting more imaginative and are hedging their bets more shrewdly with it.
The Wild Card—Oil Prices. As an economy grows, demand for petroleum-based products, particularly gasoline, goes up. So, as we write, oil is approximately $100 a barrel. The economy can handle that easily and even more if the economy improves modestly throughout 2012. If we get to $130+ a barrel, that would translate to about $4 per gallon at the gasoline pump. At that point, the economy begins to tank. If people are spending $80 twice a week to fill their gas-guzzlers, they have to cut back on other purchases, as they still have to drive to and from work. “Demand destruction” will kick in and people will find a way to drive less and consolidate errands when they do. Gasoline prices will then come back to earth. A geo-political event such as military action by or against Iran could send prices sky high for a brief period and hurt the economy and devastate advertising. Over time, keep in mind that oil prices will likely rise, as overseas demand will continue to grow.
That is how we see 2012. It will likely be a year of incremental growth for many media types but much will be determined by specifically where you live.
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org