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WAR WITH IRAQ

Advertising Revenue Holding Up Despite Conflict

Media outlets have lost less than expected. And some firms may even increase ad budgets.

March 26, 2003|From Reuters

NEW YORK — Despite what seems like nonstop coverage of the war in Iraq, media outlets have so far lost less in advertising revenue than analysts expected.

In fact, there is evidence that some advertisers may even pump up future ad budgets despite the conflict.

According to national media analyst Jack Myers, television networks, newspapers and magazines would lose no more than $200 million in advertising revenues if the war lasts a month, and that figure could be as low as $100 million, he said.

"Business is returning to normal much more quickly than anyone anticipated," Myers said, adding that this is contingent on the war continuing at its current pace.

During the first few days of the attack, about 75% of advertisers put their spending on hold, but now the vast majority has come back, he said.

And of the revenue that was lost -- Myers said about $130 million to $150 million was canceled or postponed in the first week -- most will be recoverable through replacement schedules, he added.

Myers' figures are in contrast to some other reports that have put total ad revenue losses in the hundreds of millions of dollars range to date, with some estimates of total losses set at the $1 billion or more mark.

But as the war enters its second week, most executives and analysts agree the hit won't be half as hard as some had expected.

"The large majority of advertising that has been booked continued to run," said Richard Hamilton, chief executive of advertising agency Zenith Optimedia.

"We're seeing a few advertisers that are staying off the air," said Jon Nesvig, president of sales for Fox Broadcasting. "But most [advertisers] seem to be going forward with their campaigns."

Nesvig says Fox cut advertisements for just one night, last Thursday, which cost the network about $4 million, based on annual ad revenue of about $1.4 billion to $1.5 billion.

But unless the situation gets "nastier or dirtier" or something happens that affects consumer behavior, he said the network plans to continue with normal programming.

CBS was forced to transfer some of its early NCAA basketball games to ESPN, but the weekend schedule aired as planned, with a heavy advertising load. A spokesperson for CBS declined to comment.

And the Oscars went ahead Sunday, heavily interlaced with the usual string of glitzy campaigns.

David Doft, analyst at CIBC World Markets in New York, said one of the reasons ad revenues aren't being affected so badly is because companies knew the war was coming and had time to plan their coverage.

"Advertisers were able to plan ahead and line up advertising that would be appropriate," he said.

"Clearly it's going to be something that would impact the results of any ad-driven company," Doft said. "So in general we're expecting the first quarter to have pressure."

Doft said the nature of the war, being played out in several geographical regions with news breaking on a day-by-day basis, was more beneficial to advertisers than if there had been a single, gruesome spectacle to spook viewers.

"The initial expectation was this big 'shock and awe' campaign," he said. "But that didn't happen."

By contrast, an incident such as the Sept. 11 attacks took the world by surprise and forced networks to broadcast 24-hour news, dropping all advertising for several days, he said.

"Sept. 11 was a national tragedy," said Fox's Nesvig. "Now there seems to be a different atmosphere. Life is going on, consumers are still going to the mall, they're still going to the movies," he said.

Media buyer Initiative Media said its research showed that consumers in general think advertising is appropriate during times of war, provided the message does not appear to be exploiting the war, or being aired at a time when important news is breaking.

Some advertisers, most notably in the travel and automotive industries, are planning to pump up their campaigns in the weeks to come, Myers says.

"There are active discussions going on about whether budgets in the next month or so should be beefed up a bit," he said.

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