September 10, 2008 / 10:18 PM / 10 years ago

Television finds unlikely ally in troubled economy

NEW YORK (Reuters) - It’s been a tough run for the television business, with all the buzz around new media and those killer devices that let audiences skip right through commercials.

But fortunes may be turning for the TV industry, at least for the moment. A number of media executives have indicated this week that TV advertising sales are weathering the current economic storm better than media categories like radio and publishing, and perhaps even the Internet.

Media conglomerate Time Warner Inc became the latest to tout the strength of its television business on Wednesday, telling investors at a Merrill Lynch conference that its cable advertising sales were sailing along.

When asked about the state of the company’s cable TV business, which includes HBO, CNN and TBS, Chief Financial Officer John Martin said sales were “very strong” and told the audience that “we’re not yet feeling any negative impacts from the economy.”

By contrast, Martin issued cautious comments about the company’s AOL online division, saying sales of third-party advertising — working as a broker of ads for other sites — had slowed. AOL has been a concern among Time Warner investors as it lags behind Internet rivals like Google Inc and Yahoo Inc.

“Since August, there has been some softening in some pretty big advertising categories,” Martin said, pointing to automotives and financials in particular and saying the majority of the softening was on the third-party network.

How much advertising growth is slowing — and what outlets are being hardest hit — has become the central issue for media companies today, with indications that corporate marketing budgets have been curtailed alongside the shaky economy.

CBS Corp Chief Executive Les Moonves, speaking at the same conference on Tuesday, offered his own upbeat view of the national TV market, describing it as “strong.”

Another media executive — Ken Lowe, CEO of Scripps Networks Interactive — suggested that advertisers may be moving money into TV and out of digital because of tightening budgets. Scripps Networks brands include FLN, Food Network and HGTV.

Lowe said most marketers are taking a “cautious” approach to the rest of the year while “redirecting dollars from interactive to TV.”

For advertisers, the big advantage that TV holds over other media is that it still allows them to reach the biggest audiences at any given moment in time. It’s also familiar to advertisers, who have decades of experience with 30-second spots and vast research about audience behavior.

Other traditional media have not held up as well, with radio and publishing both hard hit by the downturn, continuing trends that were evident even in a healthier economy. Local advertising has been the culprit, deteriorating faster than national advertising across media, even TV.

Time Warner’s Martin acknowledged the recent struggles of its publishing division, which owns Fortune, Time and People, among other titles. Time Warner previously warned about publishing sales, but Martin said the business was “maybe a little more soft” than previously thought.

Even with publishing’s struggles, Martin said there were no plans to put it up for sale, although he said some of the magazines generating the least revenue could be shut down.

“It would be very difficult to assess the true profitability of publishing today in the midst of a cyclical downturn,” he said. “But we think the publishing business is a terrific business.”

Shares of Scripps Networks rose 22 cents to $39.70, while shares of Time Warner dropped 33 cents to $14.85. CBS shares rose 27 cents to $16.87.

Editing by Gary Hill

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