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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.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.