TV ad market posting double-digit gains

Cable networks units, local TV divisions are especially hot

NEW YORK -- The TV advertising market continues to be red hot even amid continuing macroeconomic concerns about a sluggish recovery.

Quarterly earnings reports in recent days generally showed strong -- often double-digit -- TV ad gains, particularly at cable networks units and in local TV divisions. The CEOs of such entertainment conglomerates as CBS and Viacom said the ad market is trending to further improve in the current third quarter. Plus, some of Corporate America's biggest marketers, including Procter & Gamble and General Motors, have in recent days made clear that they are increasing their ad spending this year.

Those two companies were the biggest and third-biggest spenders of 2009 with $2.7 billion and $2.2 billion, respectively, according to research firm Kantar Media.

"It is unbelievable how resistant this ad recovery has been even in the face of macro concerns," RBC Capital Markets analyst David Bank said. "We have particularly seen a tremendous amount of growth from local auto spending."

The return of those once-almighty auto ads and financial-services ads is part of a larger trend that has seen U.S. companies try to get a leg up on the competition.

"Companies like P&G have taken advantage of depressed ad rates to increase their share of voice," Kantar senior vp research Jon Swallen said.

Media CEOs also have touted continuing upward trends. Although the economic recovery is coming only in fits and starts, and some fear a return to recession, "the overall advertising market continues to strengthen," Viacom CEO Philippe Dauman told analysts. And CBS Corp. CEO Leslie Moonves highlighted, "We do not foresee a slowdown" in local ad momentum.

Based on the latest results, analysts are upgrading their ad forecasts for some of the big entertainment companies. "News Corp.'s outlook for the next year (through June) was better than most of us predicted," Bank said.

SNL Kagan analyst Derek Baine has raised his expectations for key cable network groups. "The momentum at the cable networks will continue as they have done their upfront, and most had growth in the double digits and are reporting the scatter market is up in the double digits from that," he said. "So it should be smooth sailing for the rest of the year for cable nets."

Others said that though ad trends were strong, they weren't so much better than forecast that they will sway many investors to buy big media stocks. Janney Montgomery Scott analyst Tony Wible, for one, downgraded his rating on Viacom shares Friday despite a bullish ad outlook.

Swallen cautioned that it is natural that the ad-growth momentum, which started at the end of last year, has been accelerating. After all, ad spend kept declining last year until hitting a bottom in the third quarter.

Still, total U.S. ad spend this year is resembling only the levels of around 2002-03 rather than the pre-recession peak, Swallen said. "We are not sure when it will be back to those levels, but a good chunk of ad spending is wrapped up in consumer marketing, and consumer spending remains weak," he said.

Ad observers said that the TV ad market still faces easy year-ago comparisons until year's end, with the real test of its health coming in 2011 -- a year without Olympics, without the fall's elections and with tougher year-ago comparisons.
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