Another indication that the ad market will get worse before it gets better was offered by Merrill Lynch's top entertainment analyst, Jessica Reif Cohen, who said she now believes this year's upfront TV ad market will be down compared with the 2000 upfront.
Cohen made her prediction at a NATPE panel on the business outlook for media companies. "We're seeing signs that it's getting pretty ugly," said Reif Cohen, first vice president and managing director at Merrill Lynch. "The first and second quarters are turning out to be pretty bad."
Until recently, Reif Cohen said, she thought the upfront for 2001 might actually surpass last year's record $8 billion market. "We had been thinking low single digits" in terms of growth, she said. "But now, we think it will be down from last year."
Kevin Carton, global leader of PricewaterhouseCoopers media consulting business, stopped short of making a prediction for the upfront. But, clearly, "the ad market is in a bit of a dip," he said. "But we don't believe it's a major trough. We think it will be coming back soon."
Carton also cautioned that the current market should be kept in proper perspective. "The 1990s were so fantastic," and it is unrealistic to assume that such a growth pace could keep on indefinitely. Nevertheless, he said, "we see a very robust market over the next five years."
The good news, Carton and Reif Cohen agreed, is that trading multiples for broadcast properties are down significantly from the highs of just a few years ago-highs that Carton said would likely not be reached again. For some prospective buyers, such as ABC, which refused to pay the high prices, "now is a good time to be aggressive," Reif Cohen noted.
Meanwhile, Carton, Reif Cohen and others on the panel discussed the prospects for such incubating technologies as video on demand and interactive television.
Blair Westlake, head of the Universal Television and Networks Group, said such services will probably be embraced by consumers eventually-but over a longer time horizon than many might think. Consumers have a finite amount of money to spend on entertainment. And just because new technologies are available doesn't mean consumers will leap at the chance to acquire them. Traditional VCR sales in 2000 were double those of the new-generation DVD players, he said. "Consumer habits are hard to change and don't evolve as fast as some might predict."
At Fox, however, some divisions are seeing a receptive consumer response to some interactive applications, said Mary Ann Halford, executive vice president, Fox International Entertainment Channels. Particularly for sports and news channels, "there's a lot of applicability" for interactive services, she said. In the UK, News Corp.'s BskyB, through an interactive transactional service, accounts for huge pizza sales ordered by consumers who are also ordering movies through the service, said Halford.
Reif Cohen, too, believes interactivity has significant potential.
"Cablevision will be a very interesting company to watch" as it rolls out Sony-manufactured cable set-bot boxes that will offer VOD, Internet access, games and other features, she said. "For cable, these are [potentially] high margin products."
