Ad Fallout Casts a Dark Cloud

New York— Most media and advertising industry executives' reactions to the terrorist attacks on the U.S. last week borrowed from a past Dodge ad-campaign slogan — "This Changes Everything."

Buyers and sellers of ad time agreed that the coming changes involve more than just the redirection of pre-empted spots to later this fall. It also means that some campaigns would be revamped to match the public's more somber mood, while other clients might hold off on advertising indefinitely.

The broadcast and cable networks early last week began the long, steep uphill climb toward ad-sales recovery in the wake of the attacks on the World Trade Center and Pentagon. As if the ad forecasts weren't bleak enough before the terrorist attacks, various industry experts said they foresee a grimmer ad-spending picture for all media than at any time since the Persian Gulf War a decade ago.

During the International Radio & Television Society Foundation's "Newsmaker" panel at the Waldorf-Astoria Hotel last Thursday, four major ad-agency media buyers focused mainly on terrorism's effect on ad spending for the smaller-than-usual luncheon crowd: MediaVest USA U.S. broadcast president Mel Berning; Magna Global USA chairman Bill Cella; MindShare North America national broadcast and programming president Marc Goldstein; and Zenith Media USA executive vice president of national broadcast Peggy Green.

The moderator, IRTS chairman and Petry Media Corp. CEO Timothy McAuliff — who opened the luncheon by asking for a moment of silence for the victims — said many attendees during this "time of uncertainty" had questions about the attack's effect on the fourth quarter.

"We're in the process of working through it," said Berning. "We're now getting back to a more normal footing" than during the crisis' first week by buying time on such "appropriate" shows as Cable News Network's Larry King Live.

Many industry sources said the airline/travel/tourism and insurance/financial-services sectors were likely to keep a low profile for now. Otherwise, Berning told the IRTS: "We have started to see people step back up. That process has already begun."

"We don't know what the coming weeks and months will bring," he added. One question that needs to be answered: "Are viewing patterns going to change [in the new fall season]?"

Cella said that the creative in some ads no longer seems appropriate, which is why many "clients are hunkering down and developing [new] strategies." He predicted that advertisers will "start getting back on their feet" in the coming weeks, barring any more disruptive events.

Goldstein said the industry would "continue to see a significant number of sustaining hours," or hours of programming without commercials.

Green said Zenith's accounts are "honoring their upfront fourth-quarter commitments" in cases in which the creative is deemed appropriate, although many clients may hold back on scatter purchases.

"It's a shaky market for now," she said.

Cella and Green felt that sponsorship of the February Winter Olympics might well be among the best buys ahead.

"What better environment?" asked Cella.

Elsewhere, executives at National Cable Communications and Turner Broadcasting Sales Inc. said the re-expressing situation remains in flux.

An NCC executive said last Thursday that 20 percent of its spot-cable clients have already rescheduled their units and 20 percent said they will do so, although they have not decided when. But the rest of the clients have yet to say what their ad plans are, he said.

At Turner, a spokesman said, "All our advertisers have come back to reinvest in the schedules" on Turner Network Television and TBS Superstation, after pre-empting regular programming to simulcast CNN's uninterrupted terrorism coverage on Sept. 11 and Sept. 12.

On the news side — where CNN, like others, has "gone to a reduced-break schedule" — "Clients are anxious to get back on," he said. (Federal Express Corp. was CNN's first advertiser when it resumed commercials.)

Other cable-network sources said buyers still are uneasy about buying or re-directing inventory, since CNN and all other news channels "might go into pre-emption mode again" — an allusion to the anticipated U.S. retaliatory strikes in the Middle East.

So how bad were the cable networks' ad losses in week one? CMR/Taylor Nelson Sofres CEO David Peeler said last Thursday that network cable lost nearly $11 million from just the ads yanked on Sept. 11, when TBS, TNT, ESPN and the cable news channels pulled ads.

Earlier, CMR — formerly Competitive Media Reporting — had put the broadcast networks' Sept. 11 ad losses at more than $46 million and local television stations' losses at $28 million, Peeler said. All told, broadcast lost $320 million in the first five days of virtually wall-to-wall coverage of the terrorist attacks and the aftermath, according to CMR.

Looking ahead, Cella said, "We want to spend money, but everything's up in the air."

Before Sept. 11, Magna parent Interpublic Group of Cos. had projected "a challenging fourth quarter and first quarter," followed by improvement in the second quarter.

"Now, who knows?" he asked. "Clients, too, are not sure what's happening. Everything's on hold now."

To Goldstein, the mood among marketers is "conservative fiscal management taken to a higher power." He anticipated more short-term thinking, "on a day to day, week to week, month to month basis," potentially lasting "into [the] first quarter and beyond."

Another industry prognosticator, Myers Reports Inc. CEO Jack Myers, expected the already-anticipated ad slump to worsen for the rest of this year and next.

Myers Reports last Wednesday predicted a 6.6 percent decline in overall ad spending as "the most likely forecast for 2001." It also adjusted its 2002 outlook to a 7.4 percent drop.

Referring to that dire 2002 prediction, Myers said, "Assuming that war-related activities will continue to unfold, the impact on 2002 ad spending will be great.

"Broadcasters are the most negatively impacted [because] they are totally dependent on advertising revenues for their vitality," he added. "The ad market already was in steep decline — the greatest in the industry's history — prior to the [terrorist] attacks. The incremental lost revenues [from the wall-to-wall news coverage] are staggering."

Myers said advertisers now are "in a wartime economy," in his electronic-mail newsletter, "Our previous worst-case scenario [on ad forecasts] is now our best-case scenario."

Last Thursday, Myers projected the TV networks' ad revenues would plunge 6 percent this year and 9 percent in 2002 — his August estimates were in the 4 percent range — and said the basic-cable networks would now drop 2 percent in 2001 and 8 percent next year, compared with the former 5 percent upticks.

As for local and spot cable, Myers felt those ad sales will still rise, by 10 percent and 5 percent this year and next; that's down from past growth forecasts in the 12 percent range.

The major broadcasters reverted to mostly ad-supported regular programming over the weekend of Sept. 15 and Sept. 16, followed on Sept. 17 by most cable news networks; MSNBC began airing commercials last Tuesday, Sept. 18, while Time Warner Cable's New York 1 News resumed taking ads last Wednesday (Sept. 19).

NY1 has put its ad losses in the several hundred thousands of dollars.

Multichannel News
estimates that the cable networks' losses were much higher, ranging from $3 million to $5 million each across the first two days for TNT, TBS and ESPN and $5 million-plus for CNN over the first four ad-free days. Most other cable programmers' losses hovered well into six digits.