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Economists predict modest growth in advertising spending

By Meg James

4:22 PM EDT, May 3, 2013

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Economists are forecasting slow growth in advertising spending for the remainder of 2013 amid encouraging signs from the U.S. labor market.

Media companies are doing their best to grab a bigger slice of the pie.

This week, Wall Street cheered Viacom Inc.'s ability to raise television ad rates during the first three months of the year because of a ratings rebound at children's channel Nickelodeon. Nickelodeon's ratings were up roughly 9% this year compared with the network's lackluster January-March quarter in 2012.

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CBS Corp. Chief Executive Leslie Moonves told analysts Wednesday that demand has been strong for any available commercial time on the No. 1-ranked CBS network. That bodes well for CBS as the television networks this month enter the all-important advertising sales season called the "upfront," which is where the networks sell the bulk of their commercial inventory for the fall TV season.

Other broadcast networks, experiencing sharp prime-time ratings declines, will probably have a tougher time increasing their haul.

Overall, economists are seeing signs of improvement. On Friday, advertising giant Magna Global released an update to its forecast under the heading: "Light at the end of the tunnel."

"Four months into 2013, there are clearer signs that this year will show moderate economic growth, despite the fiscal austerity and uncertainty that plagued the beginning of the year," Magna Global said in the report.

The agency is maintaining its prediction of 1% growth for advertising revenue this year. Media companies have tough comparisons with 2012 because last year was awash in cash because of record political spending and the Summer Olympics in London, which generated more than $1.2 billion in advertising revenue for NBCUniversal.

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"We anticipate national television advertising to grow modestly, while local TV will be down and television ad revenues as a whole will decrease by -2.8%," Magna Global said. "Digital media will be the only category to show significant growth this year (+11.5%)."

Magna is forecasting more robust growth next year.

“The latest economic forecasts for 2014 may sound like a modest acceleration, but it should be enough to raise confidence," Vincent Letang, director of global forecasting for Magna, said in a statement. "For media owners, especially traditional mass media categories, this means that there is light at the end of the tunnel.”

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