Kathie Lee Gifford during a taping of the "Today" show at the… (Daniel Acker / Bloomberg )
There's finally some new life in old media.
After pummeling traditional media companies for nearly two years, the advertising recession is showing signs of a recovery. TV networks -- including Fox, CBS and ABC and such leading cable channels as TNT, TBS, USA, Bravo and Fox News Channel -- have benefited the most as advertisers have been snapping up available commercial spots and agreeing to pay significantly higher prices than they did just five months ago.
"In challenging times, people go back to what they know, and what they know best is television," said David Levy, president of sales for Turner Entertainment, which includes TNT and TBS. "It is a little too early to declare victory, but the market is definitely improving."
The welcome news is the result of stronger-than-expected demand for TV advertising in the "scatter" market, in which advertisers frequently have to pay premiums for scarce available commercial time. It also represents something of a win for the networks, which gambled this summer that demand would pick up later in the year and held back a larger percentage of their inventory than in previous years, hoping to capitalize on the improved economy.
Fourth-quarter commercial sales have been propelled by retail chains hoping to ignite their holiday sales; technology giants Microsoft Corp. and Apple Inc., which have new products to promote; cellphone carriers such as Verizon, AT&T and Sprint, which are battling for customers; and even such financial firms as American Express, according to television executives and advertising buyers surveyed this week.
Such strong demand has made up for the weaker orders from other mainstay advertisers, including automakers, still reeling from weak sales, and Hollywood movie studios, which have fewer new movies to hype.
A fourth quarter described by one top network sales executive as "gangbusters" amazed even veterans who have lived through several economic cycles. Only five months ago, the industry was bracing for another dismal year as TV network sales teams were engaged in protracted negotiations with advertisers that were demanding that the networks roll back prices as much as 20%. Networks eventually agreed to trim rates about 5% to 8% to mollify advertisers and begin unloading their time.
But now, in some cases, advertisers have agreed to pay rates 10% to 35% higher than the prices established in June and July, when the networks sold the bulk of their time for the new TV season. In addition, advertisers that placed their orders in the summer are honoring their commitments. Network executives said that few advertisers have canceled their orders for commercial spots, in contrast with a year ago.
"We have all been surprised that the ad market has come back this soon," said Gary Carr, executive director of national broadcast for the advertising firm TargetCast. The networks, he said, also face easier comparisons because last fall, with banks failing and the economy on the skids, companies were afraid to spend on advertising.
"A year ago, people thought the world was coming to an end, and the U.S. economy was falling apart," Carr said. "But the world did not come to an end. Cars still have to be sold, and studios still need people to go see their movies. Advertisers have begun releasing the money that they have been holding onto all year."
Even local TV stations -- among the hardest hit by the slump in advertising spending -- have received a lift, primarily fueled by stores that unleashed their holiday sales campaigns earlier in the season, according to television executives.
Not all media outlets have rebounded, however. Many small cable TV channels and Spanish-language television networks are still hurting, according to television executives. Newspapers, magazines and radio stations also continue to struggle.
"In many sectors, the news is still grim," said Jon Swallen, senior vice president for research at TNS Media Intelligence, which tracks advertising spending. "And there is still a fairly large hole for these companies to dig out of before they get back to the levels they were a few years ago."
Unexpectedly, online advertising also has taken it on the chin.
Many advertisers are no longer as eager to buy Internet display ads as they were two or three few years ago, when firms were steering millions of ad dollars to online sites.
"There is still a big push toward digital and online video, but the Internet display advertising market is challenged," said Greg Kahn, senior vice president of strategic insights at advertising firm Optimedia. "There is so much clutter in the space, and advertisers have begun to question the effectiveness of those display ads."
No one knows for sure how next year will shake out. Many advertisers are waiting for the post-Thanksgiving Black Friday and weekend shopping sales totals to be released next week before they make their decisions for the first quarter of 2010.