NATIONAL SPOT UP DISAPPOINTING 4% IN 2Q

Sellers of national spot advertising are tearing up their 2008 forecasts and downsizing expectations. It’s not hard to see why. Led by auto, most categories are pacing negatively in the second quarter, when compared with same time last year.

Core spending is pacing down 5 percent this quarter, due in large part to a big slowdown in auto sales and telecom spending.

As expected, revenue from political candidates is providing lift, but even with that added in, sellers say they expect total revenue to be up only 4 percent.

“When I did the budget originally in the fourth quarter, I didn’t anticipate that spot would be so negative,” said Val Napolitano, president-CEO of Petry TV. “It’s a deep concern.”

The soft second quarter is following an equally disappointing first quarter, when, according to station reps, core spending was down 6-7 percent and total spending (core plus political) rose just 2-3 percent.

Taken together, the two quarters are forcing sellers to reassess their national spot forecasts for all of 2008.

Napolitano originally expected core to rise by 2-3 percent and total revenue to jump 12-13 percent this year over last. Now, he’s predicting core will drop 5-7 percent and total spending will stall at between 7 percent and 9 percent.

Michael Hugger, president of Katz TV Group’s Eagle Television Sales unit, offers no new forecast for 2008, but concedes that the numbers will be “softer” than those of his originally figured—core up 1-3 percent, and total up 7-8 percent.

“Nobody understood when they forecast this year that we’d be in a rough recession at this point,” said Chris Rohrs, president of the Television Bureau of Advertising.

Ad buyers are aware of the weak demand for national spot.

“One of the gauges that we have is when we’re trying to negotiate within the quarter, with limited lead time, and we’re still able to get efficient rates. Then we know there’s less stress on inventory than anticipated,” said Mary Barnas, executive VP of local media at Carat.

The big drag on national spot is auto spending, said to be down almost 12 percent this quarter compared to last year.

Complaints about the auto category are being heard as the publicly traded companies with TV stations begin reporting their first quarter earnings and providing guidance to Wall Street on the second quarter and remainder of the year.

Auto advertising is in a double-digit decline in the second quarter, Meredith Broadcasting Paul Karpowicz told securities analysts yesterday. “Now we are seeing cancellations on a pretty regular basis. That's been very frustrating.”

Some stations may be losing national auto dollars, but picking some of them back up locally.

“GM is moving the business out of national spot and into local by virtue of allowing local dealer groups to form their own buying mechanism,” said one TV rep executive who requested anonymity.

The telecommunications sector, which was ablaze most of last year, is flat this quarter.

However, there has been some business from Verizon in markets where it’s launching its FiOS service, stirring up some rival ads from the cable operators.

On the mobile side, both Alltel Wireless and U.S. Cellular have been notable spenders. In fact, Nathan Price, broadcast director of sales for News-Press Gazette Co., said his cell phone business will be up 8 percent this quarter.

Price also noted a gigantic lift in the finance/insurance sector, thanks to new business from Farmers Insurance Group. But that was a rare exception.

On average, sellers contacted for this story reported a 2 percent decline in the category due to all the chaos in the finance business.

The mortgage debacle is also affecting retail, where merchants selling products for the home are experiencing a drop-off in sales.

While the category was flat in last quarter of 2007 and first quarter of this year, it’s expected to be down almost 6 percent this quarter.

But there could be some lift as retailers try to capitalize on the stimulus checks that tax payers will be getting from the government in May, said Jane Williams, VP of sales at Cox Television.

Williams was the only salesperson contacted for this story who’s experiencing an uptick in the fast food category. On average, sellers are expecting 4 percent decline in the category and blaming the rising cost of gas and food as the cause.

Movies are the only category beyond political that is actually exhibiting growth. But it is a small victory. Some sellers say the sector is too small to track and those that do say it is up only about 3 percent.

Political spending by candidates and interest groups was supposed to paper over any problem with core spending this quarter, but it’s been slow coming and spotty. Most of the money has been funneled into a handful of states.

“The biggest disappointment for us was Florida and Michigan,” said Hugger. “The Democratic party was not allowing delegates in those states to be assigned, so we didn’t see the spending we thought we’d see.”

What’s more, two of the Republican’s big-spender contenders, Rudolph Guiliani and Mitt Romney, bowed out, and the last GOP man standing, John McCain, doesn’t have a lot of money to spend at this point, the sellers say.

On the Democratic side, Hillary Clinton’s campaign advisers are funneling dollars into local buys rather than national spot, TV reps say.

And with no clear Democratic nominee, “both parties are holding back their money [for ads tied to specific issues]. They don’t know what platform issues they should be attacking,” added Kevin Gallagher, executive VP/local activation director at Starcom USA.