A Stimulus for Advertising
Bob Pittman Recommends Advertising Tax Credits to Boost the Economy?
Mar 23, 2009
Few business people would argue with the potential benefits of additional advertising in the 2009 recession, but supporting anything remotely related to an advertising bailout would probably be political suicide these days.
Congress and the Obama Administration neglected a crucial ingredient in their economic stimulus plans when they left out advertising, according to Bob Pittman, the former chief executive officer of MTV and AOL networks, Six Flags Theme Parks, Time Warner Enterprises and Century 21 Real Estate.
Pittman described the need for more advertising in a March 2009 article for Fortune Magazine. He pointed out that recent cutbacks in advertising have been accompanied by sharp declines in consumer spending.
"To get people spending again, and the economy moving, the government needs to provide help for businesses in America to advertise their products and services," Pittman wrote.
Pittman Urges Advertising Tax Credits
Rather than a bailout similar to those provided for the auto and finance industries, Pittman recommended the government provide tax credits for advertising.
"Ad spending is already tax-deductible as a business expense," he said. "A bigger help to some advertisers would be a tax credit for ad spending up to some percentage of prior-year sales."
Any advertising break would probably be a tough sell in Congress this year as voters grumble over the government’s multibillion bailouts to the auto and finance industries and reports of million dollar bonuses being paid with some of that bailout money.
The cutbacks in advertising have been significant in both 2008 and 2009. They have been felt not only in consumer marketing, but also in the advertising and media industries that depend on advertising.
Newspaper Revenue Down 23 Percent
The Newspaper Association of America (NAA) reported that advertising revenue fell 23 percent in 2008. In a March 2009 speech, Mark Fitzgerald, editor-at-large for Editor & Publisher, said "the drop in classified, especially the key categories of real estate, automotive and help-wanted or jobs, has been absolutely chilling."
Fitzgerald added that nearly every publicly traded newspaper stock "has lost more than 80% of its value." A few papers have folded. Others faced bankruptcy.
Television Stocks Down 33%
TV advertising appeared to be holding up better than newspaper advertising, thanks largely to the heavy volume of political commercials leading up to the November federal elections. For the first three quarters of 2008, the Television Bureau of Advertising (TBA) reported a 1.9% gain over the first nine months of 2007. That included a 9% gain for syndicated TV, a 3.3% increase for network TV and a 2% decline for local broadcast TV.
However, fourth quarter 2008 TV advertising was believed to have been down and the index of major TV stocks maintained by TVNewsday dropped from 600 in January to 403 in late March. That 33% drop indicated that 2009 business was also down..
Billboard Advertising Down 15%
Billboard advertising, now categorized as "out-of-home advertising," dropped 15% in the final quarter of 2008, according to the Outdoor Advertising Association of America (OAAA)
The media losses indicate that the decline in advertising has indeed been real and an increase in advertising would probably help accelerate the recovery.
However, the angry electorate mood created by the 2008-09 bailouts of the financial and auto industries did not offer much hope for assistance to other industries. That’s especially true for sectors with long term public relations problems that come naturally with the newspaper, television and billboard industries.
National Newspaper Advertising
