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S&P Global Ratings Cuts Its 2020 U.S. Advertising Forecast In The Face Of COVID-19

S&P Global Ratings is revising our 2020 U.S. advertising forecast based on our current assessment of the impact of the global COVID-19 pandemic crisis on the U.S. economy. We believe the virus will peak about midyear and that there will be a U-shaped economic recovery in the second half of 2020. As a result, we forecast overall advertising spending will decline steeply in the second quarter and, to a lesser degree, third quarter, before beginning to grow by the fourth quarter, aided by what will likely be record political advertising spending.

1H20 Recession Followed By U-Shaped Recovery In 2H20

S&P Global economists recently published revised 2020 and 2021 global economic forecasts and now forecast U.S. GDP will contract by 1.3% in 2020, assuming the virus is contained midyear. The country will experience a short economic recession as GDP will decline in both the first and second quarters of 2020. They forecast economic growth will then restart in the second half of the year (see Table 1). However, the path and severity of the crisis will ultimately dictate when the economic rebound will start.

Consumer spending, which is highly correlated with advertising, will take a steeper hit than GDP in the first half of the year and then will take longer to recover. Some degree of government-imposed social distancing restrictions will likely be in place well into the second half of the year, and even when those restrictions are lifted, consumer acceptance toward public gatherings and events may take some time to return to normal.

Table 1

S&P Global's U.S. Economic Outlook (March 2020 Baseline)
Key indicator 1Q20E 2Q20E 3Q20E 4Q20E 2020E 2021E
Real GDP (%) (2.1) (12.7) 5.6 5.6 (1.3) 3.2
Consumer spending (%) (2.0) (13.2) 3.4 5.5 (1.4) 2.6
Unemployment rate (%) 4.9 10.1 6.9 6.5 7.1 5.7
E--Estimated. Source: S&P Global Ratings

COVID-19 Reverses What Would Have Been A Solid Advertising Year In 2020

The impact of the COVID-19 pandemic to domestic advertising will be severe in 2020, with the worst quarters being the second and third. However, the breadth and depth of severity will vary for each media subsector. Sectors that depend on short cycle advertising, for which ads are placed very close to broadcast and can be cancelled quickly, have already experienced steep advertising revenue declines. These sectors include those dependent on programmatic digital advertising (which is every media sector, to some degree), radio, and outdoor transit. In addition, sectors with somewhat longer lead times (measured in weeks), such as local television, are also starting to see declines, especially in forward bookings. Local TV, radio, and outdoor face longer-term issues, even when we eventually head into a recovery because of their dependence on local businesses for advertising. Many small and medium-sized businesses will undoubtedly fail during this crisis. Over the next month, national television, already facing ad losses due to the postponement or cancellation of high-value sports events, faces a further pullback in advertising as both the scatter market weakens and advertisers seek to either cancel or shift already committed ad spending.

The rate at which these subsectors recover will also depend on the health of the advertisers. Advertisers in the travel sector, hotels, cruise lines, film, theme parks, and other sectors dependent on consumer interactions, will recover more slowly as social distancing policies may stay in place longer and consumers' reluctance to take part in group events or activities may take time to overcome.

Table 2

S&P Global Ratings Revised 2020 U.S. Advertising Revenue Forecast
Media Sector Previous (Jan. 2020) (%) Change (%) Revised (March 2020) (%)
Digital 11.5 (13.5) (2.0)
Local television (incl. political) 9.3 (11.3) (2.0)
Network television 6.4 (12.4) (6.0)
Cable television 1.5 (9.5) (8.0)
Local political advertising ($ mil.) 3,050.0 0.0 3,050.0
Total television 5.0 (11.0) (6.0)
Radio (1.5) (15.0) (16.5)
Outdoor 3.3 (16.3) (13.0)
Magazines (10.0) (15.0) (25.0)
Newspapers (15.0) (15.0) (30.0)
Direct mail (2.0) (18.0) (20.0)
Advertising, excluding Digital 0.4 (13.9) (13.5)
Total advertising 5.3 (14.0) (8.7)
U.S. GDP growth 1.9 (3.2) (1.3)
U.S. consumer spending 2.4 (3.8) (1.4)
Note: Both cable and network TV estimates had included the 2020 Summer Olympics, which has now been moved to 2021. Source: S&P Global Ratings estimates.

Sector-By-Sector Changes

Programmatic digital will face an immediate impact but see a quick comeback

Digital advertising (primarily banner and search, which are placed programmatically) has the shortest cycle for placement and is the most easily cancellable. Importantly, digital advertising is also the most easily recoverable. We expect meaningful declines in demand for digital advertising, resulting in lower CPM (cost per 1,000 views) pricing. This will affect the entire media ecosystem, which has grown to depend on programmatic placement. In particular, this should impact all digital platforms, including for newspapers and magazines, although declines for the larger internet platforms such as Alphabet, Facebook, and Twitter will be somewhat offset by meaningfully higher user engagement and impressions. One of the fastest growing ad categories, digital video advertising, in particular that which has generally been sold by the TV networks alongside their traditional TV sales, should escape this immediate decline, but will be subject to the same declines as traditional television.

Radio is already affected by short cycle

Given the shorter lead times for broadcast radio advertising, we believe radio broadcasters started to feel the effects of the virus' spread in the U.S. a few weeks ago. We expect broadcast radio advertising will decline 16.5% in 2020, with the steepest declines in the second and third quarters and improvement in the fourth.

Social distancing could slow recovery for outdoor

We now expect advertising out of home will decline by 13% in 2020. This decline is due to advertisers pulling back or simply stopping their advertising, and to lower consumer engagement. Outdoor is very dependent on consumers viewing billboards from their car. Mandatory government orders to stay at home have completely disrupted commuting and out-of-home patterns, so outdoor will also not meet expected consumer viewing metrics. While billboard advertising may take some time to decline (contracts need to roll off) the outdoor companies will see quicker declines in their digital billboards. In addition, many outdoor companies, such as JCDecaux S.A. and Outfront Media Inc., have sizable transit contracts (accounting for over 30% of revenues) that, given the immediate declines in global travel (airports, out-of-home, commuting), have already resulted in revenue declines in many markets around the world.

The spot market for local television is already hit, but political spending provides some relief in the second half

Given the somewhat longer lead times for local television advertising (generally measured in weeks), local television broadcasters are only now feeling the effects of the virus' spread in the U.S. Overwhelmingly, local TV advertising is sold through the shorter-cycle spot market and, hence, local TV doesn't benefit from the long-term commitments like the national networks do. We expect there will be a reduction in spending on television advertising likely in the second and third quarters. Consumers may choose to stay home and watch more television because of the pandemic, which would boost audience ratings and help advertisers achieve their audience guarantees, though we believe this would be insufficient to offset the reduced advertising spending.

Our forecast for over $3 billion in political advertising revenue for 2020 remains unchanged. We expect the U.S. economy will recover in the third and fourth quarter, when the majority of political advertising dollars are spent. Television is more attractive than other forms of media for political advertisers given its meaningful reach and ability to target voters in select districts, but would be an even more effective outlet to reach consumers if they are slow to leave their homes as the risk of the virus abates. Additionally, politicians and political action committees will still be required to spend any raised funds in the current election cycle.

Will limited supply moderate potential declines for national TV?

We expect television advertising to decline more modestly than other media segments in 2020, with cable network advertising declining by 8% and broadcast TV advertising declining by 6% (both also incorporate the postponement of the Summer Olympics to 2021). National TV advertising is somewhat less exposed to economic shocks as a significant percentage (around 75% for network TV and 50% for cable) is committed in advance through the annual upfront. Advertisers can cancel these commitments but must provide advanced notification to the networks. The remainder of television ad inventory is sold through the scatter market. We believe that scatter, which is generally purchased just weeks and months in advance, is already feeling the pain. Because of the longer lead times, changes in TV advertising generally lag an economic downturn and are slower than other media to recover. Thus, we expect television advertising to see steep declines in the second and third quarters, with some improvements only in the fourth quarter. While we currently are not rating to this scenario, television may potentially perform better than our base case. If the economic recession is relatively short and the economy begins to recover in 2H20, advertisers, while pulling back on transactional advertising (which would hurt short cycle advertising), may retain more of their budgets that are committed to brand building, which is overwhelmingly spent on network television. Furthermore, given the limited advertising inventory available on television, companies may continue to advertise so they do not lose those valuable ad spots. In addition, as consumers watch more television while they are confined to their homes, stronger audience ratings may also moderate advertising declines for the TV networks. As ratings improve, the networks will achieve more of their audience guarantees (networks generally make up for missed guarantees by giving advertisers additional scatter inventory--so called "make goods"). Fewer make goods will mean more available scatter inventory to sell later in the year and improve monetization. Any benefits from this development could be tempered by a reallocation of advertising from cancelled sports programming and by potentially lower CPM pricing as the recession resets what advertisers are willing to pay.

Any chances of a sports ad recovery in 2H depend on the NFL

As the number of postponed or cancelled sporting events grows, the impact on our advertising forecast could be profound. Currently, as these events are postponed or cancelled, we believe advertisers and the TV broadcast networks are discussing options for those ad dollars. Advertisers are being given the option to 1) cancel their ad commitment and get a refund (if they've already paid), 2) maintain the commitment to that specific event (such as the Olympics, which were postponed to 2021), or 3) redeploy those ad dollars to other programming offered by that network. Our forecast for television advertising, especially for the second half of 2020 and 2021, could change depending on these negotiations. We believe the most important sports event for television is the upcoming 2020/2021 NFL season, which is scheduled to kick off on Sept. 10. If the NFL postpones or cancels its upcoming season, our ad forecast expectations would be severely affected.

Already steep declines get steeper for magazines and newspapers.

We now forecast print advertising will drop by over 25% in 2020, versus our previous forecast of a decline of about 13%. While the impact has already been felt on their digital platforms, the impact to the print editions of the magazines will take another month. Like some other channels, magazines and newspapers may see more newsstand sales at grocery stores and greater readership, but local advertising will likely decline due to significant store closures for non-essential services during state shutdowns to prevent the spread of the virus and a generally slow economic environment.

Longer Term Impact Of This Crisis

One of the consequences of the 2008 financial crisis was that ad spending on out-of-favor sectors had a difficult time recovering. In particular, advertising on print media never recovered and, instead, the sector began its secular decline, which continues through today. Radio, on the other hand, experienced a near-term spike in advertising (7.8% in 2010) but then never fully recovered to pre-2008 levels. Since 2009, radio advertising has been treading water, declining at a 1%-2% annual rate. It remains to be seen whether this phenomenon repeats itself through this downturn and for what media sectors. For example, will this crisis accelerate the decline for general entertainment networks such as Turner's TNT and TBS and NBCU's USA Networks? Alternatively, given the ongoing declines in television audience ratings, will advertisers finally push back against the premium CPMs that they have been paying for television?

Table 3

Ratings Actions Driven By Advertising Recession
Company Current Rating Current Outlook Prior Rating Prior Outlook
March 12, 2020

The Walt Disney Co.

A Negative A Stable
March 19, 2020

ITV plc

BBB- Negative BBB- Stable
March 19, 2020

National CineMedia Inc.

B+ CW Neg B+ Stable
March 19, 2020

Screenvision, LLC

B CW Neg B Stable
March 19, 2020

Sinclair Broadcast Group Inc.

BB- Negative BB Positive
March 24, 2020


BB- Negative BB Stable
March 26, 2020

Interpublic Group of Cos. Inc.

BBB Negative BBB Negative
March 27, 2020

Bertelsmann SE & Co. KGaA

BBB+ Negative BBB+ Stable
March 31, 2020

JCDecaux S.A.

BBB CW Neg BBB Stable
April 1, 2020

iHeartMedia Inc.

B Negative B+ Stable
April 1, 2020

WPP plc

BBB Negative BBB Negative
April 2, 2020

Entercom Communications Corp.

B Negative B+ Stable
April 2, 2020

Lamar Advertising Co.

BB- Negative BB Stable
April 2, 2020

Outfront Media Inc.

B+ Negative BB- Stable
Note: WPP and IPG ratings affirmed and negative outlooks maintained. Source: S&P Global Ratings

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: As the situation evolves, we will update our assumptions and estimates accordingly.

Related Research

  • It's Game Over For The Record U.S. Run; The Timing Of A Restart Remains Uncertain, March 27, 2020
  • COVID-19 Increases Pressure On Global Media & Entertainment Ratings, March 26, 2020
  • Outlook For U.S. Media And Entertainment Sector Remains Stable Despite Secular Pressures, Jan. 21, 2020

This report does not constitute a rating action.

Primary Credit Analyst:Naveen Sarma, New York (1) 212-438-7833;
Secondary Contacts:Alexandra Balod, London (44) 20-7176-3891;
Natalia Goncharova, London + 44 20 7176 3018;
Thomas J Hartman, CFA, Chicago (1) 312-233-7057;
Jawad Hussain, Chicago + 1 (312) 233 7045;
Vishal H Merani, CFA, New York (1) 212-438-2679;
Rose Oberman, CFA, New York 212-438-0354;
Scott E Zari, CFA, Chicago + 1 (312) 233 7079;

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