Sanford C. Bernstein analyst Michael Nathanson has boosted his fiscal-year 2010 estimates for CBS, Walt Disney and News Corp., saying that demand for new automobiles will strengthen in 2010, which in turn will strengthen local ad markets and local TV stations in particular.
Auto ads slipped 17% in 2008, and fell an alarming 29% in the first quarter of 2009 - and Nathanson doesn’t expect the rest of 2009 to be much better. However, 2010 is likely to not be as bad, he says (via Adweek). He foresees that the worst case scenario for auto advertising would be a decline of 9%.
General Motors, which filed for bankruptcy this week and which plans to hack its brands from eight to four, could reduce its auto advertising by $1.3 billion, which would contribute significantly to the decline. GM spent more than $2.2 billion on media spending in 2008, per TNS Media Intelligence, making it the third-largest advertiser in the U.S., behind Procter & Gamble and Verizon, writes the Boston Globe.
Dealer closures are expected to total 17% of the national dealer footprint - but that may not have as severe an impact as many fear, says Nathanson. The dealers that will close will be the smaller, underperforming dealers that advertise the least. Those dealers tended to spend their smaller budgets on newspaper advertising, which means newspapers will suffer from dealer closures.
Local TV stations, which lost 33% of their auto ads in 2008, are expected to see a spending pickup in 2010 due in part to an increase in auto dollars plus improved local political advertising.
Auto advertising declined $6.1 billion between 2007 and 2009, according to Nathanson.
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