Since early March, we’ve been hearing about “green shoots” of supposed economic recovery almost daily. Just the suggestion of this concept, heavily promoted by the current political regime, has sent many banking and retail stocks up a dot.com bubble-like 300 – 400% in a short period of time.
But the more actual economic data we receive, the less it appears the recovery is real. And several recent stories have me wondering how this will impact our long-suffering local media:
— With a large number of car dealerships in Massachusetts closing, how can this not hurt local newspapers, television and radio? Auto advertising represents an important percentage of revenues in the media business. Does this impact the Globe’s survival prospects?
From the San Francisco Chronicle, take a look at how this is already impacting the badly-hurt Bay Area:
In flush times, television stations are accustomed to 30 to 40 percent profit margins. But the recession is goring even these cash cows with a 14 percent drop in advertising revenue in the first quarter of this year compared to last at Bay Area TV stations, analysts say.
Ad revenue took an even bigger tumble at Bay Area radio stations, with a 27 percent decline during the same period.
The main culprit is the imploding auto industry, which provides from 20 percent to one-third of the advertising revenue for broadcasters. With General Motors and Chrysler announcing plans last week to close 1,900 dealerships during the next year, it will take years for advertising levels to recover at TV and radio outlets. “And when it does return, it will be different,” said Robin Flynn, senior analyst at SNL Kagan, who recently conducted a nationwide study of advertising on radio and TV stations and projected the 14 percent TV decline.
“All advertising-driven media have been hit hard by the recession, not just newspapers,” Flynn said. “So companies are really trying to get creative to make up for that revenue.”
Spot TV ads drop
Broadcasters in top-10 markets like San Francisco are generally still profitable, Flynn said. Outlets in large markets are more dependent on national advertisers, so they’ve taken a bigger hit than broadcasters in smaller markets. In the first quarter of 2009, spot TV advertising by the top 200 Bay Area retailers dropped to an estimated $58 million from $62 million the year before, according to regional TV estimates by TNS Media Intelligence. And Bay Area radio stations – which collectively reach 5.5 million listeners a week – saw advertising revenue decline 27 percent in the first part of the year, according to a regional study by Miller Kaplan Arase Co.
“Never seen it this bad. Never,” said Mickey Luckoff, president and general manager of KGO-AM, who has been at the station more than three decades, much of that time with the news-talk broadcaster on top of the ratings chart. “It’s as close to a depression that I’ve seen in my lifetime.”
— Today, the Boston Herald reports JP Morgan Chase is largely exiting the mortgage market here in Massachusetts. That means they clearly don’t see an impending housing recovery here, or they wouldn’t be leaving New England. They’re voting with their feet.
I’m not sure how much local advertising Chase does here, but as a macroeconomic factor, it’s not encouraging.
What do these deteriorating conditions mean for already-weakened media outlets? How much worse does it get from here?
Westminster Dodge / Dorchester image: Mark Garfinkel, Boston Herald