Monday, January 22, 2007

American Automakers Cut Ad Spending

January 22, 2006

GM and Chrysler have slashed ad spending in print media. The story, covered in AdAge, centers around the advertising aspect of the issue. We thought we would look at other ramifications as they relate to satellite radio.

One item to note is who is decreasing print ad spending, who is increasing spending, and where the averages now lay. Detroit companies seem to have been behind the curve with regards to advertising in a digital world, just shifting major dollars to the medium in the last year. With automakers considering new strategies, can satellite radio benefit? The answer is that Sirius and XM can benefit, but they have tied their hands a bit in the process with exclusive deals?

How likely is GM to advertise heavily on Sirius, or Chrysler on XM, particularly if the ad includes satellite radio spots? If satellite radio exclusivity did not exist, one advertisement could be used by a auto manufacturer on both carriers, reaching a growing and loyal audience.

Satellite Radio should make efforts to grab advertising dollars that are falling away from the newstand media.

Looking deeper, how do the advertising habits and budgets of OEM's impact satellite radio in general. Is it coincidence that the companies losing the most share are the ones cutting budgets? Can some meaningful information relative to production and sales rates be extrapolated from this? Can that information then be transcribed into installations of satellite radio? The simple answer is that most satellite radio installations are not standard equipment, and the numbers of installs tie to specific numbers rather than to a percentage of production. However, it begins to appear more likely that satellite radio could become more of a standardized feature. At that point, production matters a lot to SDARS.

The information in the AdAge piece does not really change the landscape for SDARS, but it is interesting to see which companies are doing what in the OEM market place, and which satellite radio manufacturer those OEM's are aligned with.

ADAge Excerpt:

Time Inc. Bleeds as Detroit Automakers Gut Magazine Ad Spending
GM, Chrysler Lopped $100 Million Off Budgets; Pain Spreading to Publisher

By Nat Ives

Published: January 22, 2007

NEW YORK (AdAge.com) -- Blame it on Detroit. While many are looking to the digital future to explain why Time Inc. fired 289 people last week, they'd do just as well to look at the present -- particularly at the changing marketing habits of the domestic auto industry.

Shifting out of print
While the story of magazines' ongoing battle to adapt to the web world is well-documented, the untold story is of Detroit's beleaguered carmakers, long pillars of print advertising, which are cutting their costs and, when they are spending, often seek more direct and interactive connections with their customers.

Detroit automakers slashed spending with Time Inc. a total of more than $100 million last year. General Motors, formerly Time Inc.'s biggest advertiser, cut its spending by 29%, or $47.8 million, according to estimates by TNS Media Intelligence. GM added no new Time Inc. magazines to its media plan and completely dropped All You, Baby Talk, Motorboating and Salt Water Sportsman.

Massive Chrysler cuts
DaimlerChrysler, while not quite as big an advertiser, was equally aggressive, slashing its spending with Time Inc. from $93.5 million in 2005 to just $39.7 million last year. Ford Motor Co. also reduced spending, albeit much less dramatically, trimming its Time Inc. outlay from $106.7 million to $101 million.

But there were some auto-marketing success stories for Time Inc. Fast-growing Toyota increased its Time Inc. spending to $87.9 million last year from $80.1 million in 2005, and Honda grew its spending to $62.9 million from $58.1 million. However, these increases clearly do not offset the cuts from the domestic players.

Detroit is shifting some money to the web, but even if Time Inc. owned lots of internet properties considered perfect vehicles for the carmakers, ad rates there remain too low to make up for the magazines' losses, which goes a long way toward explaining why the publisher is still talking about the promise of a digital "future.".........READ MORE HERE

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1/22/2007 12:37:00 PM

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