Teetering On The Economic Cliff Edge

You could have heard a pin drop last week when Heather Goodchild spoke before a group of media executives in New York. Goodchild is managing director of media and entertainment debt ratings at Standard & Poor. And she was delivering a very grave assessment of where the economy is headed, and the media business in general, at the Media Financial Management Association's Outlook 2011 conference.

She had the demeanor of Bette Davis in her bright red dress, big pearl necklace and conservative hairdo. And Davis could have hardly done better in conveying a tone so very similar to a doctor telling a patient about a very serious ailment with the utmost tact.

Goodchild noted that the gross domestic product (GDP) outlook is worsening. S&P has lowered its GDP forecast for full-year 2011 to 1.6% from 2.4%. A 2.5% GDP is considered normal, and S&P doesn't expect it to rise above 2% for the next two years.

Consumer confidence is at a 31 year low. The unemployment rate isn't expected to drop below 8% until 2014. And S&P now expects that there's a 35% chance we'll sink into a double-dip recession. That's considerably above S&P's initial forecast of 25% earlier this year.

She also indicated that several media companies are going to be scurrying to restructure their debt and dancing on the thin line between solvency and Chapter 11 if things head south.

Goodchild's assessment was particularly interesting to me because I recently conducted an informal survey on behalf of the portal TVNewsCheck to figure out what TV station groups are expecting to reap from advertising revenue this year and next.

It's clear that the political dollar bonanza that's about to kick in couldn't have come at a more opportune time. My sources reported an average 10.2% uptick in revenue next year, but less than 3% growth when you subtract out the political ad spend. Clearly, the election year couldn't be better timed for broadcasters -- unless it happened yesterday.

By way of comparison, S&P is forecasting a 3.6% rise in ad spend for all of media next year.

I also found it interesting, later in the MFM Outlook conference, to learn from some media financial executives that they were caught by surprise by how much of a game changer the tablet has become. I recently wrote an article for MFM's magazine, The Financial Manager, about just that -- and how 2011 has come to be thought of as the Year of the Tablet.

It's fascinating to me that the tablet is likely to change the fortunes for the magazine industry, in particular. And boy, could it ever use a revitalizing lift.

Below are a couple of links to my TFM and TVNewsCheck stories.

Download TFM - Tablet Feature 0911

Download TVN Spot Forecast 0911