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Network TV Upfront Forecast: Bad News/Good News Scenarios

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There is bad news and good news for the media and advertising business. First the bad news.

The dynamics of the total advertising marketplace are nothing less than depressing.

  • The core value of advertising as an effective marketing tool is under siege and the advertising-based foundations of the media and advertising business have eroded.
  • More than 90 percent of all media-related ad buying and selling activity operates in a supply and demand, transactional model that is oversupplied, commoditizing services and driving prices and compensation toward zero.
  • A depressed advertising economy and organizational dependence on less effective business models have fostered an extremely challenging long-term outlook for traditional advertising and subscription dependent companies.
  • The resources of the media and advertising industry for further technological development have been depleted and the lack of advertiser underwriting for existing technological advancements have led to a dramatic decline in media industry economic valuations.

The foundations of the media and advertising business have eroded. While much of the beachfront real estate represented by traditional media continues to be highly valued by marketers, enabling them to sustain relatively stable year-to-year revenues, the pillars are unstable and Wall Street valuations have been washed away. The economic models that have well-served the media business for nearly eight decades are less relevant today and will be irrelevant in the near future. Bankruptcies, consolidation and dis-integration are on the near-term horizon.

With that as the bad news, can there be any silver lining? Sure. The day-to-day realities facing television networks, which are certainly feeling the pain of both economic and systemic challenges, are still not that troubling. A new survey of 50 network television media planners and buyers confirms a relatively soft 4.0 percent downturn in 2009 broadcast and cable network advertising. Overall second and third quarter scatter budgets for broadcast and cable are projected to be down 4.3 percent and 2009/2010 Upfront spending is projected to decline 4.0 percent.

The Myers data does not differentiate between cable and broadcast investments although earlier data, issued in December, forecast overall 2009 broadcast network ad revenues to be down 4.0% and cable to be up 1.0%. Early insights also suggest marketers will be exercising more options throughout 2009 than in past years. The question networks must ask is whether the overall stable view of 2009 ad spending reported by media buyers and planners is consistent with market realities or wishful thinking by the agency community.

Based on comparisons to past Myers' surveys, the new Myers 2009 network spending data could be the best news network media sellers receive this year. Historically, projections based exclusively on survey data tend to reflect current rather than anticipated conditions. If the economy becomes even more depressed in the next several months, which we expect, marketers are likely to be more conservative in their actual long-term ad spending commitments. Fourth quarter economic data being released by the federal government and earnings data being reported this week and next by media and advertising companies will confirm overall negative market conditions that are in far worse shape than many media companies have anticipated.

Right now, there is limited visibility into 2009 ad spending and with the general economy trending downward, my instinct is to plan for even worse realities than both buyers and most analysts are projecting. In a bad news/good news scenario, executives would be well-served by preparing for the bad and praying for the good.

Jack Myers is available to speak and consult on the media economy. He can be contacted at (212)875-8002 and jm@jackmyers.com

To communicate with or to be contacted by the executives and/or companies mentioned in this column, link to the JackMyers Connection Hotline.

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This post originally appeared at JackMyers.com.