Lauren Rich Fine: Hard To Find The Silver Lining; Possibilities Include Bankruptcies, Funding Woes

imageThe recent turmoil in the financial markets would not appear to have any particular silver lining for the media industry. While local newspapers might be experiencing an uptick in local bank ads touting their safety and CD rates, there is not much else about which to feel good. Consolidation of financial brands will hurt most media as the industry has been among the more aggressive spenders over the last number of years, online and off. As the consumer seems to finally be getting that we are in a financial crisis, the pullback in spending could be both quick and dramatic. Most media outlets are struggling to some extent as many ad categories have been deteriorating for some time. One could imagine that the downtown, while likely severe, could make way sooner rather than later for a recovery, albeit a modest one by historic standards. If a financial bailout agreement is reached, it will likely lead to some advertising to let institutions/consumers know how to participate.

In talking to a partner at a large law firm, with a specialty in private equity, he commented that it was becoming impossible to get financing for deals; this could really put the brakes on start-up activity. Given how many start-ups were chasing an ad supported model, this might be a positive for the companies that have secured financing over the last few years as they might be able to catch their breath and build a business with a sustainable model. The firms that find a way to measure and deliver a solid ROI for marketers should still grow despite the downturn as marketers rarely stop spending, they just get choosier.

A final thought: Watch the media companies that financed recent acquisitions with debt, in particular the newspaper companies. In this environment, the banks are less able to be flexible on covenants and some companies could get forced into bankruptcy. A weak ad market and tougher credit conditions could punish those that attempted to benefit from leverage a bit late in the cycle.

Lauren Rich Fine will be moderating a panel at our Future of Business Media conference on Oct. 28 in NYC