Katrina Costs $1.13B in Media Spending

Hurricane Katrina will cause total media spending cuts of $1.13 billion from August 2005 to September 2006, making it the costliest natural disaster on record for the media industry, according to data released yesterday by PQ Media.

Newspapers, television, consumer promotions, direct marketing and professional and business information services were the hardest-hit segments of the media industry, according to the report, “PQ Media’s Impact of Hurricane Katrina and Other Storms on Media Spending.” PQ Media, Stamford, CT, is a custom media research and consulting firm.

The loss is estimated to account for 2.2 percent of media spending in the 20 affected designated market areas in the 12-month period. Of these 20 DMAs, New Orleans accounts for 64.8 percent of the total loss, or $732.5 million, a 14.3 percent decline in the city’s projected annual media spending.

From a broader industry perspective, the total represents a decline of only 0.2 percent of the $887.37 billion in media spending expected in the next year.

Katrina’s effect on media spending will exceed that of hurricane Andrew, which hit south Florida in 1992 and caused $350 million to $450 million in media-spending losses, the report said.

“The only catastrophic event to have a greater impact on media spending than Katrina was the September 11, 2001, terrorist attacks, which were manmade and affected media spending nationwide,” said Patrick Quinn, president of PQ Media.

However, Katrina was one of six storms that battered the United States in 2005, causing major interruptions in media spending in numerous designated market areas. Beaumont, TX, and Lake Charles, LA, were impacted by Rita, and Miami and Fort Myers, FL, were affected by Wilma.

Including those other storms — Rita, Wilma, Dennis, Ophelia and tropical storm Cindy — the media spending decline reaches $1.59 billion, affecting another 19 DMAs for a total of 39 in 2005 and 2006, according to PQ Media.

Rita was the second-costliest hurricane to the media industry in 2005, with spending losses estimated at $210.3 million over the next year, followed closely by Wilma at $206.5 million. The other three storms hit with less severity, often in smaller DMAs, resulting in combined media-spending losses of $38.1 million. In addition to Katrina, New Orleans was hit by Rita and Cindy, causing another $31.5 million decline in media spending for the period to $764.0 million, or 48.2 percent of all media-spending losses attributed to the six storms.

Local advertising is expected to see the largest decline at $470.3 million, a 29.7 percent share of the spending loss, followed by consumer media, down $452.6 million (28.6 percent). The decline in local advertising represents a 2.4 percent decrease from the annual $19.73 billion in spending in the affected DMAs, while the drop in consumer media represents a 1.4 percent decline from $32.16 billion.

Spending on local marketing is expected to drop $331.8 million, a 1.3 percent decline.

Some spending declines are already documented. Public media companies, such as Gannett and Lamar, have acknowledged lower-than-expected profits due to Katrina and Rita, respectively. The effect on various media differs based on the industry’s dynamics and infrastructures. For example, the trade show industry in New Orleans will take about a year to recover due to extensive damage at its conference centers and hotels. Of the top 200 trade shows, 11 are held in New Orleans yearly, including six that had been scheduled between September and December.

Other media, like yellow pages, do not exhibit immediate spending declines because 2005 contracts were signed months ago, but the losses will be felt by 2006 when (and if) those contracts are renewed. Some of the hardest-hit media:

* Advertising: newspapers ($190.6 million), television ($108.2 million), radio ($66 million) and yellow pages ($45 million).

* Marketing services: consumer promotions ($91 million), direct marketing ($87.6 million), custom publishing ($84 million) and event sponsorships ($53.0 million).

* Consumer media: cable access ($161.3 million), Internet access & content ($84.5 million) and home video ($83.0 million).

* Institutional communications: professional & business information ($122.2 million), outsourced training ($57.2 million) and trade shows ($41.6 million).

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