Katrina Will Cause Media Spending Decline of $1.13 Billion in 2005-06

Share Article

Costliest storm ever will carve 2.2% from media spending in 20 DMAs. Other five storms push total losses up to $1.59 billion.

Hurricane Katrina will cause total media spending to fall by $1.13 billion from August 2005 to September 2006, making it the costliest natural disaster on record to hit the media industry, according to exclusive data released today by PQ Media. The loss is estimated to account for 2.2% of media spending in the 20 affected designated market areas (DMAs) in the 12-month period. Of these 20 DMAs, New Orleans accounts for 64.8% of the total loss, or $732.5 million, a staggering 14.3% decline in the city’s projected annual media spending. From a broader industry perspective, the total represents a decline of only 0.2% of the $887.37 billion in media spending expected in the next year.

Katrina’s impact on media spending will be greater then that of hurricane Andrew, which hit south Florida in 1992 and caused between $350 million and $450 million in losses, according to the report, PQ Media’s Impact of Hurricane Katrina and Other Storms on Media Spending. “The only catastrophic event to have a greater impact on media spending than Katrina was the September 11, 2001 terrorist attacks, which were man-made and affected media spending nationwide,” said Patrick Quinn, president of PQ Media, a custom media research and consulting firm.

Katrina, however, was one of only six storms that battered the U.S. in 2005, causing major interruptions in media spending in numerous DMAs outside of New Orleans. For example, Beaumont, TX and Lakes Charles, LA were impacted during Rita, and Miami and Fort Myers, FL, were affected during Wilma.

When the additional storms are included - Rita, Wilma, Dennis, Ophelia and tropical storm Cindy – the media spending decline reaches $1.59 billion, impacting an additional 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 losses estimated to reach $210.3 million over the next year, followed closely by Wilma at $206.5 million. The other three storms, Dennis, Cindy and Ophelia, 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 two other storms – Rita and Cindy – accounting for an additional $31.5 million decline in media spending for the period to $764.0 million, or 48.2% of all media spending losses attributed to the six storms.

See the attached chart, linked to the right of this press release, for a graphical representation of declines in spending.

Additionally, PQ Media’s storm analysis differs from other examinations that have focused primarily on lost television and newspapers advertising. PQ Media’s report includes all forms of local advertising, such as yellow pages; marketing services like in-store promotions; consumer media, such as box office; and institutional or business information, including trade shows. Overall, 26 different media were impacted to some degree by the storms.

Local advertising is expected to see the largest decline of $470.3 million, representing a 29.7% share of the spending loss, followed closely by consumer media, down $452.6 million (28.6% share). The decline in local advertising represents a 2.4% decrease from the annual $19.73 billion in spending in the affected DMAs, while the drop in consumer media represents a 1.4% decline from $32.16 billion. Spending on local marketing is expected to drop $331.8 million (20.9%), and institutional expenditures are projected to fall $248.1 million (15.6%), representing a 1.3% and 1.1% decline, respectively.

Newspapers, television, consumer promotions, direct marketing and professional & business information services were the hardest hit segments of the media industry. Some of the media spending declines are already documented. For example, public media companies, such as Gannett and Lamar, have acknowledged lower-than-expected profits due to Katrina and Rita, respectively. The impact 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.

Meanwhile, 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 those contracts are renewed, if at all. Finally, many business information providers were not as severely impacted due to the low number of large corporations in these DMAs, except for industry-specific markets, such as tourism and oil.

Some of the hardest hit media ($40 million +) include:

¨     Advertising: Newspapers ($190.6 million), Television ($108.2 million), Radio ($66.0 million), and Yellow Pages ($45.0 million)

¨     Marketing Services: Consumer Promotions ($91.0 million), Direct Marketing ($87.6 million), Custom Publishing ($84.0 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)

The impact on media spending varies widely dependent upon the location of the DMA in relationship to the path of a hurricane. For example, DMAs suffering the most damage were mainly located near a storm’s eye while in the Gulf of Mexico, such as New Orleans during Katrina, Lake Charles during Rita, and Naples during Wilma. Except for Wilma, south Florida DMAs, such as Miami, had less impact because they were hit when the hurricanes were less lethal.

Finally, the impact to media spending could have been much worse had it not been for high percentage of small DMAs that were affected, many of whom took the brunt of the damage. Analysis shows that of the 210 DMAs in the United States, only two were in the top-10 markets, Dallas (7) and Houston (10), both of which saw less damage than first expected. Expanding to the top-25 DMAs adds only three other markets, Tampa (12), Miami (17), and Orlando (20). New Orleans, the hardest hit DMA, is ranked 43.

Other than New Orleans, only seven other DMAs are expected to suffer media spending losses between $50 million and $110 million – Baton Rouge, Biloxi, Fort Myers, Houston, Jackson, Miami, and Mobile. Most of these DMAs were close to the eyes of Katrina or Wilma. Another eight DMAs are projected to see declines between $10 million and $35 million.

About PQ Media

PQ Media is a custom media research firm, specializing in alternative advertising and marketing analytics. PQ Media delivers custom data and analysis to brand marketers, marketing services agencies, media companies and financial institutions to help them more effectively plan, execute and profit from alternative media and marketing initiatives. A copy of the PQ Media’s Impact of Katrina and Other Storms on Media Spending is available at the following link: http://www.pqmedia.com/research-publications.html. PQ Media is located at Two Stamford Landing, Suite 100, Stamford, CT 06902. Phone is 203-921-0368; Fax, 203- 921-0367.


Wendy Marx



Share article on social media or email:

View article via:

Pdf Print

Contact Author

Wendy Marx
Visit website