Ad slump in broadcast TV

How motivated are the networks to settle the writers strike? A new report by Bernstein Research projects a 1 percent decline in traditional ad spending this year - that's newspapers, television and radio - and more weakness is on tap for 2008. The exceptions are Internet, cable and cable operators. Even without strike-related losses, fourth-quarter ad spending in traditional media will decline 2 percent, while online spending will grow 28 percent. It doesn't take an MBA to see where this is going: Should the walkout drag on into next year, advertisers will no doubt accelerate their moves to alternative media (networks already are out big money for last season's losses). The Bernstein numbers, along with the stepped-up contract talks this week, suggest that the big media companies don’t want this thing to get out of control. Two or three lousy quarters won’t look good on anyone’s resume. From MediaPost's Diane Mermigas:

About 30% of News Corp.'s earnings are tied to TV advertising. With advertising comprising 41% and home video comprising 18% of Viacom's total revenue, the company is particularly sensitive to an economic slowdown. ABC Television's revived ratings are quickly dissipating in a prime-time season hurt by an absence of new hit series; the strike abbreviated runs of veteran shows like "Desperate Housewives" and "Lost." Most exposed is CBS, with 34% of its earnings and 72% of its revenues tied to advertising, making it especially sensitive to an economic downturn and ad makegoods as a result of the strike. Even Disney, which has reliably been rescued in the past by its ESPN powerhouse, is vulnerable. Bernstein expects Disney's cable network margins to take a hit over the next two fiscal years as a result of rising sports costs that can only be offset by raising ad rates, which may be difficult to achieve in the current climate.

More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent stories:
Letter from Down Under: Welcome to the Homogenocene
One last Florida photo
Signs of Saturday: No refund
'I Am Woman,' hear them roar
Bobcat crossing

New at LA Observed
On the Media Page
Go to Media

On the Politics Page
Go to Politics
Arts and culture

Sign up for daily email from LA Observed

Enter your email address:

Delivered by FeedBurner

Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
LA Observed on Twitter and Facebook