2005 Ad Outlook: Paging Bill Murray

By: Jennifer Saba December's Media Week presentations in New York brought to mind a movie about another annual ritual, Groundhog Day, starring Bill Murray as a weatherman forced to relive the same day over and over again. As noted industry analyst John Morton says, sticking his own neck out for a look at the future: "Absent any kind of cataclysmic event, it's going to be the same old same old. 2005 is going to be a year like 2004."

At the New York gatherings, many newspaper executives didn't even hazard a guess as to what specific ad revenue gains were going to look like. Most stuck to broad remarks with the expectations of mid-single digit growth.

Reading into the presentations, Goldman Sach's Peter Appert did a quick bottom-line analysis in a report that covered Media Week, concluding that it's going to be a tough 2005 for the New York Times Co., Tribune Co., Gannett, and Belo. McClatchy will manage to get by because of its strong markets. Dow Jones is so far down it can only go up. Knight Ridder will improve.

Armed only with general forecasts, analysts and industry watchers peg growth to hover around the 4% to 5% range (see page 60). Putting that in perspective, James Conaghan, vice president for business and analysis and research at the Newspaper Association of America, predicts 2005 growth will be modest as the forecast for the overall economy foretells a slightly lower growth rate.

On the plus side, job growth is expected to be strong next year. Employment typically lags behind any economic gains, thus the slow down in Q4 in help-wanted revenues. But it's good news for 2005, especially for a category that has floated growth through 2004. Morton calculates classified revenue for the industry to increase 7% in 2005.

And with more jobs comes more discretionary income. Travel is expected to pick up both on the consumer and business side, Conaghan predicts.

National is expected to grow somewhere around 3% to 5%. Though the category affects mostly large metros on the coasts, recent developments in the wireless industry, which represent about 20% of national, could stunt growth. The Sprint/Nextel merger cuts down the player list (as did Cingular's earlier acquisition of AT&T Wireless).

Merrill Lynch's Lauren Rich Fine reported that while the outcome of the merger will take some time to work out, it "will likely result in reduced ad spending for the combined company." Since Sprint and Nextel are heavy newspaper users, "newspapers could feel the disproportionate impact from the merger."

Consolidation will affect the retail category as well, since Sears and Kmart announced their union. Both are also heavy newspaper advertisers, and, though a strategy has yet to emerge, newspapers could get the short end of the stick.

The wild card is Wal-Mart. The behemoth that typically shuns newspapers quickly found the love when it announced a newspaper ad rollout after a less-than-stellar Black Friday. The ad buy, like love, could be fleeting, though the industry is hoping it's a harbinger of more sweetheart deals to come.