US Broadcast Advertising Remains Off The Pace
Ongoing weakness in the local advertising market and difficult year on year comparisons have persuaded Merrill Lynch to cut its Q4 US radio and TV station growth estimates.
National advertising has been driving radio growth this year with gains of 12% and 16% in June and July respectively. However, August saw only a 5% rise (see US Radio Advertising Update And Forecast) and cycling against difficult national comparisons in the fourth quarter could cause a “notable reduction” in radio’s growth rate.
Total revenues are expected to be flat in October and November with a 2% increase to come in December. Should this transpire, it would mean that growth rates will have fallen every quarter this year with overall growth limited to 1.9%.
It seems that there is little prospect of a leap in local advertising until advertisers are convinced that an economic recovery is in progress. Radio is now seen as a lagging rather than a leading indicator of the health of the US economy but this would suggest a better 2004 and Merrill is maintaining its growth estimate of circa 8%.
| Radio Revenue Growth Revisions 2003 | ||
| Growth (%) | ||
| Old | New | |
| Q1 | 4.0 | |
| Q2 | 2.0 | |
| Q3 | 1.8 | |
| Oct | 2.0 | 0.0 |
| Nov | 3.0 | 0.0 |
| Dec | 4.0 | 2.0 |
| Q4 | 3.0 | 0.6 |
| FY 2003 | 2.5 | 1.9 |
| Source: US RAB/ Merrill Lynch, October 2003 | ||
The wider market Analysts were already pessimistic about the performance of the broadcast TV station industry but the fourth quarter is proving to be especially difficult. Merrill has reduced its Q4 growth forecast from -1.6% to -2.5% to reflect tough political comparisons and weak TV pacings cited by cross-media firms that own television stations.
The broker says that any upward revisions will have to wait until there is proof of an improved near-term outlook for both radio and TV stations. Opinions are divided over the forthcoming holiday retail period with some forecasting stronger sales and others expecting flat growth from a year ago. If, as reported, orders from manufacturers are up from 2002, there could be upside to December estimates.