Firm downgrades ad predictions

VSS says spending will drop more than originally thought

Reacting to a dismal economy, a private equity firm known for its bulky five-year forecasts has taken the unusual step of ratcheting down its already published, most recent predictions.

Veronis Suhler Stevenson is forecasting that advertising will plunge 7.4% this year after dropping 3.9% last year, representing the first two-year decline in 75 years. Those negative numbers are in contrast to original predictions made about six months ago that called for 2.4% growth in 2008 and 1.3% growth in 2009.

Advertising predictions in all media have been reduced. Broadcast TV, for example, is now expected to have shrunk 1.4% last year and will shrink another 10.1% this year. The prediction used to be for 6.4% growth last year while falling 4.7% this year.

The research firm is still predicting growth for cable and satellite TV advertising, though much more modest than before. Last year it will have grown 4.8%, while this year it should grow 2.1%. The older prediction was for 9.5% growth last year and 7.8% growth this year.

Broadcast and satellite radio advertising combined will have shrunk 8% last year and will shrink another 9.5% this year as opposed to the older forecast of negative 3.9% and negative 1.6%, respectively.

Holding up better, though still being cut, is consumer spending on media. Home video, for example, goes from negative 5.7% in 2008 and negative 4.5% this year from negative 1.1% and negative 0.3%, respectively.

Video games and Internet content will still grow, as will spending on satellite radio and TV downloads, but the growth rates will be slower than were previously forecast.

The only numbers improving in the midyear adjustment are boxoffice figures. VSS now predicts U.S. boxoffice revenue to grow 3% this year, whereas they had previously forecast a 0.3% drop.

VSS said overall spending on media is expected to fall 0.4% after gaining 2.3% in 2008. The new numbers indicate the slowest growth rate for media in the 30 years that VSS has been collecting such data. It had previously predicted 5.4% growth in 2008, slowing to 4.9% growth this year.