Yeah, I know you know. But no one is quite sure what the economy is doing.--For example, Viacom (parent of CBS, MTV, UPN, Nickelodeon, and BET) showed a third-quarter profit with net income of $640.3 million on a 10% increase in revenue to $6.31 billion from $5.71 billion a year earlier. What made that happen was a 14% increase in overall advertising revenue, with the television segment, mainly CBS and UPN, growing at 14% as well. Broadcasting is dead? Yeah...right.
NBC decided to plop down $1.25 billion for Cablevisionâs Bravo channel. Why? Because NBC (and parent GE) believe they can make money from their investment.
Just as nichey as Bravo is TechTV, which appears to be having some major difficulties. It had layoffs a few months ago and last month announced the closing of its ãnewsä bureaus in New York, Seattle, and Silicon Valley, slashing 19 jobs as it restructures its network into a lifestyle channel.
Now on to the manufacturing side. Adobe, maker of Premiere, Photoshop, and Illustrator (I havenât picked on a software company in a while), recently laid off about 260 employees across the company, without giving exact reasons for the cutbacks (letâs see, might it be trying to save money?), but did say the move was part of an overall strategy to shift the business into the enterprise market (hence its recent acquisition of Accelio, a Canadian manufacturer of electronic forms for businesses).
So, if thereâs revenue and income, what the hell is going on?
ãTrickle-Downä My Ass
Think trickle-down economic theory. If some broadcasters and cablecasters are making big money, why arenât they spending it?
Two reasons:
First, if you owned a station (or a small group of stations) and knew that the station would fetch you $50 million once ownership caps were raised and the big boys went on a feeding frenzy, would you really invest $2 million (regardless of income) on a new infrastructure knowing you were still going to get the same $50 million back? Of course not. It isnât the same as doing home improvements to sell your home. The price does not go up significantly.
Second, thereâs shareholder value. If income is up, you might want to pass that on to your shareholders instead of buying capital equipment. Companies care about their shareholders (at least for now) and showing an end-of-year dividend is a nice Christmas present.
Speaking of Christmas, the latest theory is that if we have a good Christmas season economically, it means weâve hit bottom and are starting to crawl our way back out of our economic woes (for the record, the U.S. GDP grew by 3.1% during the third quarter). While Iâm not quite sure what ãgoodä means, Iâm told that a ãmarginalä Christmas season means we wonât see recovery for two quarters. Which brings us to the future.
The Spring
I love the spring. The flowers are blooming, the trees are getting lush, and about 100,000 of my closest friends flock to Las Vegas for their annual pilgrimage. What also might happen in the spring is that pesky war with Iraq. And if there is a war (duh!), it will rape and pillage everyoneâs news budgets. It will be a very interesting NAB.
In the spring, weâll also find out how the networks are faring with next yearâs upfronts. Keep something in mind: CBS has sold almost 90% of its inventory upfront for this year, while NBC has sold 93% of its inventory upfront. The question this has raised in ad circles is are they selling all this upfront inventory because the networks are uncertain? Hell yes, Iâm uncertain too.
According to one expert at the recent Television Bureau of Advertising Forecast Conference, ãMay and June are going to be the telling months.ä So said MediaCom co-CEO and Chief Negotiating Officer Jon Mandel, looking ahead to next yearâs upfronts. Meanwhile, local stations will continue to see increased competition from cable for ad dollars. Finally, cable has figured out that running spots off of 3/4-inch that look like a cataract patient shot them while cutting off the last two seconds is not the way to gain revenue.
Without a doubt, NAB2003 will be very telling for the economic health of the industry...for both broadcasters and manufacturers.
Michael Silbergleid is the editor. He can be reached at:msilbergleid@uemedia.com
