TV broadcasters worldwide face rapidly changing business conditions. A weak global economy continues to affect core advertising spending, while evolving alternate entertainment options have fragmented audiences and raised concerns among investors that ad spending could migrate to these new options.
We believe that the culmination of these factors could weaken TV’s long reign as the king of all media but not likely harm the credit quality of TV broadcasters in the long run.
We forecast a U.S. ad spending decline of 1% in 2013 from 2012. This includes the loss of about $3.7 billion in political and Olympics spending that benefited results in 2012. Excluding these items that largely occur in even-numbered years, we expect core advertising spending will rise 0.8%. This is lower than our expectation of 2.2% U.S. GDP growth.
We expect local television core advertising to grow in line with GDP growth. For the TV broadcasters, 2013 will present somewhat tough comparisons to 2012. In 2012, TV broadcasters experienced a recovery of auto advertising, which was down significantly in 2011 as a result of the Japanese earthquake and tsunami in March 2011. The fourth quarter of 2012 marked the end of easy comparisons for auto spending.