Television-Ad Growth Will Be a Challenge

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New York— Reports about the death of TV advertising may be exaggerated, but major growing pains lie ahead for both advertisers and outlets as they adjust to shifts in media usage.

That was the consensus on a panel last Tuesday at Pricewaterhouse Coopers’s annual Outlook for the Entertainment & Media Industry conference.

$73.2B BY 2009

According to PWC, U.S. TV cable and broadcast networks will reap $73.2 billion in advertising, subscription fees and other forms of consumer spending by 2009, at a compound annual growth rate of 6.4%. Pure ad spending in the sector is projected to reach some $44.8 billion in 2009, based upon a rate of 5.9%.

But prognosticators at the PWC panel sessions noted that ad growth won’t come without some winces. Jack Myers, editor and publisher of the Jack Myers Report, noted that for the first time in history, the broadcast networks’ upfront was down two years in a row. “If you look back 20 years, every five years the ratings have plateaued and then dropped off precipitously. Last year was the fifth year in the 20-year cycle.”

Tim Hanlon, senior vice president of Starcom MediaVest Group, said that “this is first year that there’s clear evidence that the unbundling of television is underway,” noting that marketers are starting to put their money into broadband video and the Internet.

Broadband video changed over the last 18 months from a “negligible business to — going into this year’s upfront — well over $100-$150 million of historically TV money,” Hanlon said. “The bleeding of linear television has already started.”

Peter Winkler, global entertainment and media director at PWC, forecast that cable operators will continue to gradually lose video subscribers to new wireline services, such as those offered by telcos, at the same time the cable systems steal telephony customers away. By 2009, he expects the telcos will count some 7 million video subscribers.

GOOGLING TV

Winkler also predicted that Internet services like Yahoo! Inc. (www.yahoo.com) and Google (www.google.com) will enter the TV space as Internet-protocol television and interactivity move forward.

Prudential Securities senior vice president Katherine Styponias reiterated her view that at least one of the broadcast networks will begin to garner subscription fees from operators, perhaps at the local-station level. However, MSO executives, such as Brian Roberts, chairman and CEO of Comcast Corp., have told her that they’ll “raise holy hell” in Washington to stop that from happening.

Dennis Miller, managing director of Constellation Ventures, which has invested in such networks as CSTV: College Sports Television and TV One, is “very cynical” about video on demand. He said that Cartoon Network — the most lucrative asset in the Time Warner Inc. family, valued at $12 billion to $14 billion — would be worth “about 10 cents” if it were a fledgling service that was forced to gain carriage on MSOs’ VOD platforms, particularly because operators “have not proven themselves as great marketers.”

Miller also noted that as MSOs continue to build VOD movie channels through library deals with Hollywood studios, it will make it extremely difficult for linear movie channels to renegotiate carriage deals.

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