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Why Advertising Growth Forecasts Are Looking More Bullish


With the worst case on tax increases avoided, forecasters might need to raise their expectations for 2013.

SNL's own Derek Baine issued a 2013 forecast of 1.3% advertising growth for the US market last week. This represents a slowdown from 2012 growth of 3.5%. Excluding the Olympics and political spending in 2012, the growth rate is 1.2%. So on an apples-to-apples basis, Derek sees similar growth in 2013. Interestingly, his forecast for 1.2% growth is below his long-term forecast that calls for a 2.7% CAGR through 2012. Derek back-end loaded his forecast on the assumptions that the sluggish recovery continues.

For TV, Derek sees a pickup in growth for cable networks from 8.2% in 2012 to 9.1% in 2013. Market share gains via relative ratings gains versus broadcast networks likely drive the growth. Derek sees negative growth for broadcast networks, but that is driven by the loss of Olympic and political revenue.

Derek's forecasts are similar to most of what I read from Wall Street analysts. I think they could prove low, especially now that the bulk of the tax increases related to the fiscal cliff have been avoided. There is still a tough negotiation coming over spending cuts and the debt limit. Spending cuts can hurt consumer spending just like tax increases. The debt limit has already shown once the ability to morph into a threat to the economy. As a result of the still-pending negotiations in Washington, I do not expect forecasters to raise their ad growth quite yet. However, we have cleared an important hurdle while housing and auto sales seem to be in an accelerating recovery. Fed policy is likely to remain very easy even if the economic growth picks up – the Fed will not want to take any chances.

The bull case is there and has been strengthened by avoiding the cliff on taxes. Stock prices are responding appropriately and I think more upside lies ahead.

CBS and Discovery Communications are widely held by clients of Northlake Capital Management, including in Steve Birenberg's personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Filings can be found at CBS, Discovery Communications, and News Corporation are net long positions in the Entermedia Funds. Steve is the portfolio manager of the Entermedia Funds, owns a majority stake in the Funds investment management company, and has personal monies invested in the Funds.

This column was previously published by SNL Kagan on
No positions in stocks mentioned.
Entermedia is a long/short equity hedge fund focused on media, communic= ations, and related technologies. Steve Birenberg is co-portfolio manager o= f Entermedia, owns a stake in the Funds' investment management compan= y, and has personal monies invested in the Funds. CBS and Discovery Communi= cations are widely held by Northlake Capital Management, LLC, including in = Steve Birenberg's personal accounts. Steve is sole proprietor of Nort= hlake, a long only registered investment advisor.

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