Advertising Likely To Wane Against a Backdrop of Battle
By DARRELL SATZMAN
The prospect of war in Iraq is threatening to hit local television and radio stations with a financial double whammy: stretching budgets for news coverage while dashing expectations for a long-awaited advertising recovery in 2003.
With armed conflict in Iraq becoming more likely, local broadcast outlets are finalizing costly plans to offer round-the-clock coverage as soon as the fighting begins.
At the same time, stations are girding for almost certain revenue losses as advertisers shy away from the airwaves and, at least in the conflict’s early days, uninterrupted news and analysis erasing thousands of dollars in commercial time every hour.
“The uncertainty is killing everybody,” Ben Wiener, managing partner of WongDoody Inc., a local advertising agency. “Advertising is still in a recession, and there will not be a recovery until this is settled one way or another.”
Thanks in part to a late-year surge, national advertising increased by 2 percent in 2002 over a miserable 2001. Forecasters were projecting a 2-5 percent bump in overall ad spending this year, a total expected to somewhat higher in Los Angeles. But the recovery is considered fragile at best and the prospect of war in Iraq could easily push down those numbers.
The after-effects of Sept. 11, 2001 are a telling reminder of that fragility. Some analysts estimate that the nation’s television broadcasters lost more than a $1 billion in advertising revenue in the two weeks after the terrorist attacks.
Although radio, and to a lesser extent the print media, would feel the pinch, it’s television that is most vulnerable. Last week, American Express Co. asked for “additional flexibility” to pull TV ads during a war with Iraq, Dow Jones reported.
“The first instinct will be, ‘Let’s wait and see.’ And when those words are uttered, budgets are put on hold and schedules are canceled,” said Dennis Washburn, vice president at Young Co., a Los Angeles advertising agency. “You could find some significant impacts in the short run.”
Playing it safe
The issue for many advertisers is not necessarily saving money, but finding an appropriate message that fits the public’s mood, said Wiener, whose firm has produced commercials for the Los Angeles Dodgers and Alaska Airlines, among others.
“Right now, you’re trying to do your planning for the year and you’re trying to figure out what your message is going to be in May, and you have to do that in the context of, ‘Oh my God, there’s going to be a war going on,'” Wiener said. “Nobody wants to be the advertiser who gets beaten up for being remotely unpatriotic. And no advertiser wants to exploit the war from a marketing standpoint.”
During the one-year anniversary of the Sept. 11 attacks, many advertisers elected not to run radio and television spots.
“When you see American bodies being removed from a helicopter draped in the red, white and blue flag, you don’t want your commercial for deodorant, or chocolate pudding or your used car deal to follow that,” Wiener said.
KNBC-TV (Channel 4) President and General Manager Paula Madison said she has instructed her sales department to forward any advertiser concerns to management. “We can work that out. We can structure content so that your ads are not placed against disturbing pictures,” Madison said.
Manuel Abud, vice president and general manger of Telemundo Los Angeles, which operates Spanish-language stations KVEA-TV (Channel 52) and KWHY-TV (Channel 22), said the possibility of war hasn’t concerned most advertisers as they negotiate their packages for the year. But that could change if and when actual fighting breaks out, he acknowledged.
Erik Braverman, program director for radio stations KABC-AM (790) and KSPN-AM (710), echoed that fear. “It’s at that point that advertisers decide, based on the mood of the country, if they want to be in or not,” Braverman said.
Braverman said he did not anticipate the same level of disruption as local television stations. “If some advertisers pull out, we have a lot more inventory to fall back on,” he said.
Madison acknowledged that advertiser skittishness hits television worse than other forms of media. But the logic, she said, defied her.
“The irony is that advertisers who have reservations (about television) continue to advertise on radio and in newspapers, which publish the same disturbing stories,” she said. “It is not as though we are going to show 24 hours of nothing but disturbing images.”
Local television stations have also taken costly steps to combat loss of audience during wartime.
The 1991 Gulf War trained many people to tune to CNN, which was the only U.S. network to have correspondents in Baghdad at the time. With CNN and Fox cable news devoting huge resources to war coverage this time around, local stations even those affiliated with major networks will be hard pressed to maintain viewers.
To be more competitive, many local television stations will send news teams to the Middle East, much as they did in Afghanistan when U.S. forces were fighting there last year.
“We’ve put hours and hours of work to plan these contingencies. Nobody wants to get caught off guard,” Abud said.
But these efforts are expensive.
“There’s a lot more people, a lot more equipment and it requires a lot more money,” said David Merritt, managing director of the media advisory group at investment banking firm Gerard Klauer Mattison. “Whenever there’s an international event like this and people go to around the clock coverage there is going to be a profit hit.”