News

Some Major Ad Categories May Be at Risk

5/12/2002 8:00 PM Eastern

While most network sellers are looking at the hot pharmaceutical category to bolster yet another upfront marketplace in the weeks just ahead, they would do well to scan the horizon for possible storm clouds forming over that and several other lucrative ad categories.

The latest warnings were sounded by Association of National Advertisers executives at the organization's Television Advertising Forum, held in New York late last month.

Washington-based ANA executive vice president Daniel Jaffe said that "spending on DTC [direct-to-consumer drug] advertising has rocketed" to $2.5 billion across the various major media last year (including $1.5 billion on TV and cable alone), versus $600 million in 1997, when the Food & Drug Administration eased DTC ad restrictions.

RX FOR DECLINE

But, Jaffe added, "DTC advertising is at serious risk."

Apparently some in Congress are blaming the increase in advertising for climbing prescription drug costs. Legislation has been introduced that would impose taxes on DTC advertising, limit Medicare and Medicaid reimbursements for advertised drugs, or include incentives to tout generic-drug sales over brand names, he said.

According to a National Institute for Health Management study released in March, consumer spending on prescription drugs has soared — by 17 percent to $154.5 billion — fueled at least in part by the heftier ad budgets.

But two weeks ago, House Ways and Means Committee chairman Bill Thomas (R-Calif.) decided against reducing drug companies' Medicare reimbursements for the most heavily advertised drugs. Instead, he wants to give the FDA more money to better regulate such ads.

According to recently published news reports, among the organizations complaining to Congress are AARP, formerly the American Association of Retired Persons, and the Detroit automakers.

Much of the possible legislation would require additional information in drug advertising, which Jaffe complained already contains "enormous disclosures." Among the brands whose commercials are weighed down with cautionary copy are Pfizer Inc.'s Lipitor and Merck & Co.'s Zocor (both to lower cholesterol) and Schering-Plough's Claritin allergy remedy.

Cholesterol and allergy drugs are two of the most active segments in TV and cable ad spending. Other cholesterol-fighting brands include Bristol-Myers Squibb Co.'s Pravachol, while brands targeting allergies include Aventis Pharmaceuticals' Allegra, GlaxoSmithKline's Flonase and Pfizer's Zyrtec.

Other key drug categories include heartburn, where advertisers include AstraZeneca's Nexium and Prilosec and TAP Pharmaceuticals' Prevacid, and anxiety or depression medicines, with activity from GSK's Paxil and Pfizer's Zoloft.

Trouble also continues to brew for alcoholic-beverage advertising, Jaffe added.

Even after NBC recently withdrew from its brief period of accepting hard-liquor advertising, Mothers Against Drunk Driving signaled its intent to continue pressing for stiffer ad restrictions "for all alcohol ads" — including beer and wine.

"Unfortunately, the genie appears not to be put back in the bottle," he observed.

"The ANA actively protects all forms of alcohol advertising," he said, since such products — distilled spirits as well as beer and wine — are legal under the law.

But, he conceded, the issue has become more political than legal.

'BIG FOOD'

Perhaps most surprising is the possibility that the advertising and media industries may be hit with a big "food fight," according to Jaffe.

"There are hard battles facing us," he said. Jaffe noted that some critics have blamed the television and food industries "as [being] responsible for the obesity problem." In some quarters, he said, the debate has become so heated that that marketers of food, especially snacks, are being tarred as "Big Food" in much the same way the tobacco companies were attacked as "Big Tobacco," he added.

"In the words of the Boy Scouts, 'Be prepared,'" he told the buyers and sellers in his ANA Forum audience.

SANGUINE FORECASTS

Despite such concerns, most sellers looked to a handful of ad categories for healthy budget outlays in the upfront coming off a lackluster 2001. Some like president of Turner Entertainment Group sales and marketing and Turner Broadcasting Sales Inc. Mark Lazarus felt the outlook appeared strong across virtually all categories.

He singled out pharmaceuticals as a very promising sector once again this year, along with telecommunications, fast-foods and beverages, the latter including not only soft drinks but malt beverages.

At Lifetime Television, executive vice president of ad sales Lynn Picard could not point to many categories as promising hefty ad spending this year, except for pharmaceuticals and automotive. The latter, she said, "has bounced back since the first and second quarter."

Bravo senior vice president of ad sales Hanna Gryncwajg similarly said, "We're certainly seeing strength in scatter with categories like financial, automotive and movies — they exploded this year. And pharmaceuticals have certainly done extremely well."

She added, "High-tech also is coming back, or at least talking about coming back."

At MuchMusic USA, a Bravo sister service under the Rainbow Media Holdings Inc. umbrella, senior vice president of ad sales Bob Dahill said, "A lot of our business will be new business." The movie sector "will increase a lot," he forecast, and video game and music categories will continue their gains. In addition, he foresaw automotive, both import and domestic, as "building for MuchMusic."

TOP FIVE ARE ...

The Cabletelevision Advertising Bureau, citing CMR spending data, reported that cable's top five ad categories in calendar 2001 were: automotive ($905.1 million); direct response ($790.2 million); financial ($736.7 million); medicines and proprietary remedies ($693.5 million); and retail ($535.1 million).

Rounding out cable's category top 10 for last year: media ($525.4 million); telecommunications ($429.9 million); computers, software and Internet ($407.9 million); restaurants ($363.9 million); and miscellaneous services and amusements ($345.6 million).

A look at the top 10 cable categories shows a mixed bag as six sectors — direct response, media, retail, telecommunications, restaurants and services and amusements — all increased spending compared with 2000 levels, while the other four categories allocated fewer ad dollars, according to CMR (formerly Competitive Media Reporting).

A CAB spokesman said that direct response's jump past financial to No. 2 behind automotive in the 2001 totals was attributable to that industry's growing recognition of cable's targetability.

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