The latest from DTC Perspectives

Media Spend Declines

First quarter 2009 DTC spending numbers, just released by Nielsen, show a total DTC decline of 11.5% versus year ago. These declines are large but expected and in line with the 12% decline for the total of all ad categories. No DTC media type escaped decline, also expected. Television declined less at 8.3%, with magazines taking a big hit at 16.8%. So we now have annual spending at a running rate of about $4.3 billion for 2009, down from $ 4.8 in 2008.

Media gurus who annually predict the death of network television will be surprised to hear that of all mass media types, network declined the least in 1Q at only 1.1%. It was local and syndicated television that took the biggest declines. The big problem area in magazines was in Sunday supplements down 60%.

The 11.5% decline in the height of a near depression does not look so bad. It shows that drug companies still believe in DTC and one would expect that as the recession ends ad spending should grow. The big question, unique to health care, is the effect of the Obama reform plan on promotion spending. Clearly, the reform plan is designed to cut spending on health care or at least cap growth. This will be done through more public involvement in offering insurance and more hardball tactics in controlling drug prices. Medicare price negotiation and re-importation will put pressure on drug companies to lower prices.

The advertising industry is worried about some serious discussion in Washington that would limit deductions for DTC advertising.  They are also concerned about an advertising moratorium for new drugs being proposed by leading Democrats. My prediction is that DTC will emerge intact, albeit more closely controlled by a more vigilant FDA.

This spending decline in 1Q may not be as large as it looks. If we could have access to look within drug company ad plans, it is probable that media rate declines are allowing for more bang for the buck. That 11.5% decline in dollars may mean less decline in GRPS. Clearly media bargains are there and what matters to advertisers is what consumers see not what companies pay media outlets.

I will go out on a limb and say full year 2009 will be down about 8-10%. My call for 2010 is a decline of less than 5% with 2011 being an up year in the 5% range. DTC is still being used by almost all new brands and that is a good signal that it will still be a vital part of launch plans. Of course if Congress gets a moratorium passed, then media spending will decline at a higher rate. Stay tuned this summer as the future of health care America is decided.