Analyst Warns of Possible Recession in TV Ad Market

Nathanson forecasts bigger drop in revenue

After a weak first quarter in which traditional media ad spending fell 2%, analyst Michael Nathanson is raising concern about a possible ad recession.

Nathanson said that based on weak rating trends and modest volume in the scatter market, he’s lowering his projection for 2017 total TV ad revenue growth to -4% from -3.5%.

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In a research note Wednesday titled "Are We Entering an Ad Recession?" Nathanson added that he participated in the annual IRTS Media Buyers’ Breakfast on Tuesday (June 6). His takeaway is that this upfront “lacked the urgency of last year’s market."

"As such, unlike last year, given the current scatter environment and uncertainty in key verticals like retail and autos, buyers appeared to be in no rush to lock in deals,” Nathanson wrote.

Related: PwC: As Overall TV Revenue Declines, Cable, Internet Video to Show Gains

Nathanson said last year the scatter market was very hot, but he's seeing deceleration during Q2. He added that cable networks are no longer able to increase ad loads to bolster revenue because media owners are looking to rebuild ratings by improving the viewing experience.

“We expect 2Q broadcast and cable networks to be each roughly flat, which could prove to be too optimistic depending on the extent of deceleration in scatter pricing,” he said.