Moderation's the Word for '05 Ad Spending

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New York— With the presidential election and the Olympics in the rear-view mirror, advertising spending is expected to moderate next year for the industry as a whole and cable television in particular.

Universal McCann senior vice president of forecasting Robert Coen, who spoke at the UBS Media Outlook Research Conference here last Monday, predicts U.S. national and local advertising spending will grow 6.4% to some $280.6 billion, from an estimated $263.7 billion.

His total for 2004 would mark a 7.4% rise over the 2003 level, an upgrade from his original growth rate prediction of 6.9% made last December.

For cable TV, Coen pegs 2004 spending at $15.6 billion, a 12% gain from 2003. In 2005, the advertising-agency veteran anticipates the medium will register a 7% advance, to $16.7 billion.

Such a ratio would put cable behind Universal McCann's 7.4% rate of overall estimated growth for 11 national media sectors, which would lift spending therein to almost $178.3 billion.

Coen's handicapping calls for network TV (ABC, CBS, FOX and NBC) to increase their take 2% to $16.8 billion, after improving 9.5% this year to some $16.5 billion. Spot TV will retreat 1% to $10.8 billion, according to the analysis, following a projected 10% advance this year to $10.9 billion.

As for the syndication arena, ad allocations may rise 3% in 2005 to $4.09 billion on the heels of a 15% jump this year to $3.95 billion.

Radio will receive 2% more ad dollars to reach the $4.7 billion mark next year, after totaling a projected $4.4 million (up 5.2%) this time around.

Spending on print media in 2005 is expected to outpace 2004's rate. When the final tallies are made, Coen predicts consumer magazines will claim a 6% increase this year to $12.1 billion, before climbing 7.3% next year to just over $13 billion. For their part, newspapers, following an expected 5.5% uptick to $7.7 billion in 2004, will expand their ad base 6.8% in the new year to some $8.3 billion.

Of all the national media, the Internet posted the healthiest gains in 2004. Coen gave the computer vehicle a $7.06 billion take on a 25% advance.

He forecasts that Web spending will match that pace to finish 2005 with over $8.8 billion.

The spending rate on local media — newspapers, TV, radio, the yellow pages and other outlets —is likely to increase 4.8%, to $102.4 billion, according to Coen. These platforms were expected to improve 5.1% this year to $97.7 billion.

Assessing the 2004 landscape, Coen said the recovery in national advertising continued this year, buoyed by the Summer Olympics from Athens and enhanced political activity. TV was the main beneficiary of these developments, according to his analysis.

Through the first eight months of the year, Universal McCann listed drugs/remedies as the top category in terms of percentage growth — 29% — across national TV, a group comprising the seven broadcast networks, cable services and the national syndication market.

It was trailed by beverages/snacks, up 12%; and automotive, ahead 11% in the period.

As to the year ahead, Coen said the extra stimulus from the Olympics and the election will be absent and the pace of the economic recovery should moderate.

Nevertheless, Universal McCann expects the U.S. economy to expand at a reasonable rate — and for improvement to continue in the advertising trends that historically lag behind economic ones. As such, U.S. advertising will grow faster than the nominal gross product, according to Coen.