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The Honolulu Advertiser
Posted on: Sunday, June 25, 2006

Despite dire talk, TV ad dollars expected to grow

By DAVID LIEBERMAN
USA Today

NEW YORK — Forget all the talk about advertisers fleeing broadcast and cable TV networks as consumers turn to ad-skipping gadgets such as digital video recorders and new media including Internet video.

Industry consultant PricewaterhouseCoopers — encouraged by the spread of digital and high-definition TV sets — is boosting its forecast for TV ad sales in the new edition out today of its annual, widely cited five-year "Global Entertainment and Media Outlook."

The firm sees ad spending at the tried-and-true networks growing at an average of 7.1 percent per year to $48.8 billion in 2009 and nearly $52 billion in 2010. That's up from last year's forecast of 5.9 percent annual growth to $43.2 billion in 2009.

"The quality expansion is going to draw people into TV viewing," says Mike Kelley, a partner at the consultant's entertainment and media practice.

That's reflected in PricewaterhouseCoopers' HDTV forecast. The firm now says 20 million homes will have high-definition sets, with their top-quality video and sound, in 2009 — up from last year's estimate of 15 million. It says 25 million homes will have high-definition sets in 2010.

By contrast, the prognosticators have a mixed view about DVRs. PricewaterhouseCoopers trimmed expectations for this year: It says DVRs will be in 13 million homes by year's end, down from 15 million forecast earlier. But it says the total will be 35 million in 2010.

That's far below an upbeat forecast from Forrester Research last week that 59.3 million homes will have a DVR in 2010.

But Kelley says that no matter how fast these ad-skipping machines spread, they don't have to poison the ad marketplace.

"We do consumer focus groups (among 18- to 34-year-olds), and they're saying, 'If the advertisement is relevant to my lifestyle and who I am, I'm going to engage,' " he says.

He adds that even if some people zap commercials, advertisers may pay higher rates than they do now to networks that can target homes most likely to be interested in the product.

"I'm bullish we'll see better and broader relationships between distributors and content providers," he says.

That gives cable networks a big reason to smile. Most already appeal to niche audiences and work with cable operators who are deploying technology to show different ads to different homes.

Cable networks passed broadcast networks in the competition for ad dollars last year for the first time, and PricewaterhouseCoopers expects the gap to grow. Cable network ad sales could rise an average of 8.7 percent a year to $28.7 billion in 2010, while broadcasters' could grow 5.2 percent a year to $23.3 billion.

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