ARBOR WEALTH: Is Super Bowl advertising recession proof?
“Here we go Steelers … here we go
Pittsburgh’s goin’ to the Super Bowl.” — from “Pittsburgh Steelers Fight Song," original version written by Roger Wood
A recession is defined as two consecutive quarters of negative economic growth as measured by gross domestic product. Let’s consider four recessions, their durations and the accompanying decline in GDP.
The downturn associated with the OPEC Oil Crisis in the early 70’s (1973-‘75) lasted 16 months and was accompanied by a GDP decline of 3.2 percent. Another recession in the early 80’s (1981-‘82 ) lasted 16 months and represented a GDP decline of 2.7 percent. The recession associated with the bursting of the dot.com bubble in the early 2000’s (2001) experienced only an eight month duration and saw a GDP decline of just 0.3%. Finally, the Great Recession (2007-‘09), partly caused by the subprime mortgage crisis, lasted 18 months and featured a peak to trough GDP decline of 4.3 percent. It was the deepest recession since the Great Depression.
Meanwhile, high end art sales are currently down and luxury summer rental and home sale prices are sliding in The Hamptons. These aren’t scientific leading indicators, but are they a harbinger? Let review how Super Bowl ad pricing fared during the above-mentioned downturns.
In 1967, a 30 second commercial cost $40,000. Earlier this year that same spot cost $4.5 million, or $75,000 per second. Ad prices inched steadily upward after ’67, until there was a $6,000 decline in prices from 1970 to 1971. But through the impending recession and the OPEC oil crisis, and even adjusted for inflation and considering the growth of television and the game’s rising popularity, ad prices continued to climb.
Similar ad cost increases occurred throughout the recession of the early 80’s. In 1980, a 30 second spot cost $275,000. By 1985, the cost had almost doubled.
Ad prices actually did slide backwards with the onset of the tech bubble recession. In 2000, an ad cost $2.1 million; in 2002, it was down to $1.9 million. But throughout the Great Recession, from 2007-2009, ad prices climbed steadily. From 2011 to this year, ad prices jumped from three million to $4.5 million.
So it’s difficult to gauge the health of the economy through homegrown methods like summer rental prices or Super Bowl ad costs. Economists utilize leading, lagging and coincident economic indicators to predict and analyze large financial downturns. For instance, corporate profits are an economic indicator, and they appear to be unsustainably high. But what if, because of outsourcing and robotics, today’s corporate profit levels are simply the new normal? Determining a country’s economic future always involves a complicated combination of factors and is probably unrelated to what Budweiser pays to lead the ad parade in next February’s big game.
I do like their commercials, though.
Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.