By Sue Zeidler
LOS ANGELES, Oct 30 (Reuters) - Even with consumer confidence sinking, job prospects darkening and the threat of war looming, television and radio companies are luxuriating in an ad-driven rebound some expect to run through next year.
In the past few days, industry titans like Viacom Inc., Clear Channel Communications Inc and Cox Radio Inc. have posted solid quarterly results, citing improved advertising conditions.
The stronger results come as worries about jobs and a possible U.S. attack on Iraq have pummeled consumer confidence, which dropped to its lowest level in nine years in October -- a grim omen for the holiday shopping season.
Analysts and media executives offered several theories to explain the apparent disconnect between the dire consumer confidence picture and the improving ad market.
One explanation is that television and radio broadcasters are benefiting from easy comparisons with a year ago when ad spending had all but dried up in the wake of the Sept. 11 attacks and the dot-com bust.
Political advertising for this year's Congressional elections has also helped. Radio stations, in particular, have seen an uptick in national advertising due in large part to advertisers being crowded out of a strong TV market given the return of political dollars.
Others say that when times are tough, the tough sell advertising. Some in the industry even argue the better ad spending foreshadows a recovery not shown yet in other data.
"In hard times, often ad budgets become discretionary, but you can only do that for so long. In order to maintain your market share, you have to advertise," said Diane Warren, a spokeswoman for Clear Channel, the nation's leading radio broadcaster with over 1,200 stations.
BROAD RECOVERY IN AD SPENDING
Mainstay advertisers in a broad range of industries, including autos, consumer services, retail, entertainment, beverages and fast food have all returned, she said.
"They may be leaner businesses, but we're seeing such a wide breadth of industries it seems like its a stable recovery that will sustain itself," said Warren.
Robert Neil, chief executive officer of Cox Radio, the No. 3 U.S. radio broadcaster in terms of revenue, also said companies were spending more ad dollars to maintain market share, even if the industries themselves were shrinking.
"You have a lot of share-grabbing going on. General Motors and other automakers are trying to increase share and they have to advertise to do that," Neil said.
Some industry experts said radio -- which can turn an ad out on a day's notice -- is a more reliable economic indicator than other data, which often lags real time.
"I don't quite sense the (consumer) numbers are as low as those levels would suggest," Neil told analysts on a conference call. "People are out there willing to buy things. This might be a little bit of a hangover from the stock market a month or so ago. People are nervous, but I don't sense the pessimism that the media reports."
Others agreed. "Radio tends to be an early indicator on how the economy is going," said Warren of Clear Channel.
"We are a medium where advertisers can react so quickly, that it is often considered an indicator of a turnaround before folks think things have turned around," she said.
SOME CAUTION ABOUT 2003 OUTLOOK
While many cheered the advertising uptick, which has gathered steam in the third quarter, few were willing to predict its staying power or strength in the coming year.
Analysts who questioned Cox and Viacom deemed their projections conservative.
Cox shares fell on Wednesday after it reported better-than-expected third-quarter results, but provided a fourth-quarter outlook analysts considered overly cautious.
"Cox was just leaving room for uncertainty in case of a backlash from retailers in response to consumer confidence deteriorating, or the uncertainty of war, but ... clearly the outlook for radio remains very strong and Cox should perform well," said Frederick Moran, an analyst at Jefferies.
Analysts also questioned Viacom president Mel Karmazin on whether his company was setting its 2003 goals too low, after it saw strong advance advertising sales ahead of the fall season -- known as the upfront.
"We're a conservative company," said Karmazin. "We don't want to put a number out there and not be able to deliver it."
The jury is split on whether or not marketers will follow through with increased advertising next year. James Marsh, analyst with SG Cowen, believes the recovery will continue.
"There are things other than macroeconomic factors that drive ad spending. Competition is a very important factor," he said."These companies are fighting for share."