Media industry's hopes for big growth in 2011 ad spending fade
As 2011 winds down, the media industry is seeing its hopes of an advertising rebound fade away.
The year began with a bang as advertisers paid hefty premiums to buy commercial time on major networks and prominent cable channels. TV chiefs were optimistic that the advertising market's momentum would continue throughout the year.
But the March earthquake and tsunami in Japan, which put a months-long halt to automobile production, threw a wet blanket over those hopes. Japanese automakers slashed their U.S. advertising budgets, prompting other car companies to trim their ad spending. The natural disasters, the moribund job and housing markets and a steady drumbeat of bad economic news combined to significantly slow the pace of television advertising sales in the U.S.
“There still is a bit of a slowdown in spending and an uneasy feeling right now,” said Cathleen Campe, senior vice president in charge of broadcast and video spending for RPA, a Santa Monica advertising agency. “The autos were starting to come back, and retail was starting to come back, and then it started to get a little soft again.”
Annual growth in TV advertising is expected to be less than 2%. TV ad revenue is on track to end the year at nearly $68 billion -- still a record -- but the sudden slowdown is a reminder of TV advertising’s vulnerability.
Making matters worse, broadcast networks, including Fox and NBC, overestimated the size of the audience for some of their new shows. Now they must compensate advertisers with free time that they otherwise could have sold to other companies.
Next year's political elections are expected to pump as much as $2.4 billion into the advertising market, helping companies that own local TV stations, which historically have received the bulk of the campaign dough.
Overall ad spending in the U.S. is expected to increase 1.8% this year to $144 billion, according to Kantar Media. MagnaGlobal recently cut its 2012 forecast to 2.9% growth in total ad spending, down from the nearly 5% that the agency was predicting just a few months ago.
Read more about the state of the advertising market in today's Los Angeles Times.
-- Meg James
Photo: Vice President Joe Biden delivers a speech in August to Japanese earthquake and tsunami survivors at the Sendai airport. Credit: KYODO/Reuters