While many businesses have been searching for signs of an economic recovery, big media conglomerates were enjoying a robust revival _until quite recently.
For the likes of Disney, CBS, NBCUniversal and News Corp., advertising revenue growth _which slumped during the Great Recession _ had come roaring back in 2010. But now, as consumer sentiment dampens and the economy shows signs of another recession, ad revenue growth is beginning to slow again.
Two advertising agencies have cut forecasts in the past month. Media companies head into an uncertain final half of 2011, as investor worries have sent their stock prices tumbling.
"We've had this great advertising market, which everybody's been benefiting from," said Martin Pyykkonen, an analyst with media company research firm Wedge Partners. "The term I keep using is, `Is this as good as it gets?'"
In 2010, the mid-term congressional elections generated hundreds of millions of dollars in political ad spending. Retailers and auto companies increased their spending late last year, as well. That robustness a year ago will make it tough to show growth in the second half of this year. Economic uncertainty will make it even tougher.
When the economy slows, advertising spending by companies does as well. The deepest trough in the ad market and in media companies' stocks came in March 2009 as companies pulled back marketing expenditures and the U.S. economy collapsed. The Dow Jones Media Titans 30 Index, which tracks media company stocks, hit a low of 128.81 on March 9, 2009. The index, whose top components include The Walt Disney Co. and Time Warner Inc., came back strongly as the economy rebounded, cresting at 300.78 on July 5 of this year.
But in recent days, economic news hasn't been good. Consumer sentiment hit a historic low. Job growth is not enough to dramatically lower U.S. unemployment. And, the housing market remains in the doldrums.
At its close at 252.74 points on Friday, the index is down 16 percent from its peak.
ZenithOptimedia, a unit of advertising agency parent Publicis Groupe, recently trimmed its forecast for ad spending growth in the U.S. in 2011 to 2.1 percent from 2.5 percent.
GroupM, the media investment management arm of marketing services company WPP, cut its outlook for global ad spending in 2011 to 4.8 percent from 5.8 percent. Its forecast for U.S. ad spending in 2011 is for 3.8 percent growth.
"There's more caution that is creeping into the forecast, but still optimistic that there is growth," said Antony Young, the former CEO of Optimedia US and incoming CEO of marketing company Mindshare NA.
Not all ad spending was created equal. Money tends to flow to TV and its reliably large audiences, especially when ad budgets are tight. Broadcast television has given ground to the more targeted audiences that flock to pay TV. Radio, newspaper and magazine ads have steadily fallen while Internet spending, with its measurable clicks and sales, is on the rise.
Still, even dominant players such as Disney, which owns pay TV channel leader ESPN, have seen slippage.
Excluding such special events as the FIFA World Cup and NBA finals a year ago, Disney said this week that ad revenue at ESPN was up 9 percent in the quarter through June, compared with a year ago. That's slower than the 23 percent gain the previous quarter and the 27 percent gain the quarter before that.
Comcast Corp.'s NBCUniversal division saw ad revenue grow 10 percent from a year ago at cable channels including USA and Bravo in the three months through June. That's also slower than the previous quarter. Comcast had reported a 14 percent growth from the previous year during the first quarter, when the cable company bought NBCUniversal from General Electric Co.
"We're obviously concerned about the economy the way you would expect us to be, but so far the advertising market continues to be strong," NBCUniversal chief Steve Burke told analysts on a conference call last week.
Help is not far away. Next year, advertising experts expect a boost in spending because of the Olympics and the U.S. congressional and presidential races.
The 2012 Summer Olympics in London will largely benefit NBCUniversal, which paid $1.18 billion for the TV rights. The election will heavily favor Disney, News Corp., CBS and other owners of local TV stations, although News Corp.'s right-leaning Fox News Channel could score a double whammy from the Republican presidential primaries.
Overall U.S. ad spending, projected to be $148 billion this year, has not yet returned to the pre-recession level of $156 billion in 2007, according to GroupM. Even the predicted 4.2 percent growth to $154 billion in 2012 won't match that high-water mark.
Reaching that peak could remain some years away. If the U.S. economy stumbles, next year's forecast will need to be trimmed, said GroupM Chief Investment Officer Rino Scanzoni.
"When we put out our revised estimate in December, I wouldn't be surprised if we have to make some adjustments," Scanzoni said. "Advertising spending pretty much parallels nominal (gross domestic product) growth. We have GDP that's relatively anemic. If we don't see a pickup, it will start impacting ad spending for 2012."