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Bernstein Research Q3 Ad Report: Cable Posts Growth

Bernstein Research’s latest report on the third advertising market finds that the broadcast networks, or CBS and Fox, saw a 0.4% decline in ad revenue versus last year’s third quarter, while online advertising fell by 3.4%. Not surprisingly, cable networks were the only media to post growth, though cablers shouldn’t get too excited, ad revenue was up an anemic 0.2%. Disney Co. is set to report its latest quarterly numbers tomorrow (Thursday, November 12).

Four companies out of the 32 tracked by Bernstein posted ad growth in the quarter; Cablevision was up 12%; Google and Discovery grew by 5%, while Scripps Interactive Networks grew by one percent. The continued ability of cable companies to put out positive numbers in a recession – thanks to subscription revenue - underscored the reasons for the much-heated deal market in the sector.

Earlier this month, Scripps put itself on the map with a $1 billion deal for Cox Communications’ Travel Channel while News Corp. is considering partnerships or an outright sale of Fuel-TV. Viacom executives are said to have “kicked the tires” on Fuel, although officials poured cold water on that idea. On a larger scale, NBC Universal’s considerable cable assets are set to become part of a $30 billion venture controlled by Comcast Corp.

Overall the national advertising market is faring much better than local advertising when all media are taken into account, though the report suggests that in the TV category, local is improving at a rate much faster than national. In the third quarter local TV ad growth improved sequentially by 640 basis points compared to 470 basis points in the national category. Still national TV advertising was flat in the third quarter while local TV was down 18%.

Analysts predict Disney’s broadcasting unit will see much less of a decline than in last year’s fall period.

Bernstein’s investor note Nov. 11 also notes a current investment controversy; whether the employment rate is a driver of U.S. advertising growth. Bernstein argues that ad growth is highly correlated to economic growth and in particular personal consumption expenditure. Unemployment figures, and the possibility of a jobless recovery, would not bode well for any advertising uptick in 2010, argue Bernstein’s analysts. The company’s current forecast is for a 2% increase in ad spending in 2010, that’s in between ZenithOptimedia’s forecast of a 4.4% decline in the U.S. and Interpublic Group’s Magna which is forecasting a 0.2% increase.