Paul Thomasch

Over the last few days executives at Goldman Sachs' Communicopia have talked about a stabilizing -- or even improving -- advertising market.

It's not the only time they've talked about stabilization. It was the watchword of investors calls as far back as last spring. And it appears they were right. New figures out from TNS Media Intelligence show the advertising market wasn't any worse in the second quarter than it was in the first.

That's cold comfort considering the data show that advertising spending in the second quarter sank 13.9 percent from a year ago. For the first six months of 2009, spending is down some 14.3 percent from a year ago, or more than $10 billion in lost TV spots, print ads and radio jingles.

Here's how TNS research guru Jon Swallen described it in a prepared statement:

While it's tempting to interpret this as a positive indicator that things aren't getting worse, the fact remains that the market has been steadily tracking at around 14 percent declines for several consecutive months and this represents billions of lost revenue. Early data from third quarter hint at possible improvements for some media due to easy comparisons against distressed levels of year ago expenditures.

The worst hit category for the first six months was automotive, with spending down 31 percent. Others that fared poorly (to nobody's surprise) included financial services, down 24 percent; miscellaneous retail, down 18 percent; and travel & tourism, down 15 percent. Housing related advertising, which covers several categories, tumbled 29 percent.

And the prize for the worst media sector over the first six months goes to... radio. Spending on those pesky radio ads fell 24.6 percent, a touch more than newspapers at 24.2 percent.

But hey, at least the market isn't getting worse.

What's that? Jay Leno is moving to prime-time? You don't say!

Frankly, it's hard to remember the last time there was such hubbub about a TV show. It was, after all, the cover story in Time magazine. Not to be outdone, The New York Times, The Wall Street Journal, Reuters, AP, and probably every local news outlet between New York and Hollywood had a story about the talk show host -- more often than not raising the question of whether he's going to save network TV.

(You've got to give it to the public-relations machine on this one. They really worked the story. Of course, their spinning was augmented by a huge marketing effort. Stuart Elliott of the New York Times today estimated that NBC put out more than $10 million in promoting the show).

But there is more to the fall TV season than Jay Leno. The media buyers and planners over at  RPA offer a useful road map to the season in a recent report.

Their take on the fall season is fairly upbeat (maybe network TV doesn't really need Leno to save it).

"For the first time in two years, network fortunes will not be held hostage to the industry's labor problems, but will be determined, as they used to be, by content quality and scheduling... Based on what we've seen, the overall quality of that content looks better than it has in the past two seasons," the report says.

Here, according to RPA, are some things to keep in mind heading into the season:

• The five broadcast networks will debut 21 shows, accounting for 22 percent of scheduling hours.

• Dramas and dramedies (a mix of comedy and drama) will increase from 43 percent to 48 percent of the schedule's hours. Comedies will rise from 10 percent to 17 percent.

• Not a single new fall show is a foreign co-production (which had been looking like a trend until now).

• Medicine is hot, with three hospital dramas debuting this fall and a fourth starting midseason ("Trauma," "Mercy", "Three Rivers," and "Miami Trauma").

• Paranormal is big, too. Four new shows built around that theme will land this fall ("V," "Eastwick," "Flash Forward," and "Vampire Diaries").

Oh, and Jay Leno is moving to prime-time.

New colors, video camera, price cuts. Whatever. The Apple show belonged to Steve Jobs.

So how did he look? Rail thin, as you can see from this picture (see below or click here for a bunch more shots of the 54-year old chief executive). That shouldn't come as a surprise, given he's recovering from a liver transplant.

Even looking frail, however, his presence pumped up the crowd. "Steve Jobs making an appearance was definitely a pleasant surprise," said Shaw Wu, an analyst with Kaufman Brothers. Another analyst, Brian Marshall of Broadpoint AmTech added, "I was surprised to see Steve. It's great to see that he's doing well."

Here is a chronology of Jobs' health issues:

2004:

August: Jobs announces he underwent successful surgery to remove a cancerous tumor from his pancreas. He says it was a rare form of pancreatic cancer called an islet cell neuroendocrine tumor.

2005:

June: Jobs mentions the cancer in a commencement address at Stanford University. "This was the closest I've been to facing death, and I hope it's the closest I get for a few more decades," he says.
Read the whole speech and see the video here.

2008:

June 9: Jobs appears dramatically thinner at an Apple iPhone event, touching off speculation that the cancer has returned. The company said later he was fighting a "common bug" and taking antibiotics. Apple called Jobs' health a "private matter".

July 26: The New York Times journalist Joe Nocera wrote in a column that he had spoken to Jobs about his health but that because the conversation was off record, he could not disclose what was said. "While his health problems amounted to a good deal more than 'a common bug,' they weren't life-threatening and he doesn't have a recurrence of cancer," Nocera wrote.

Sept. 9: At an iPod product launch, Jobs jokes about his health by walking on stage in front of a giant screen that flashed "The reports of my death are greatly exaggerated" -- a quotation borrowed from Mark Twain.

Oct. 3: A false Internet report that Jobs had suffered a heart attack briefly pushes Apple shares down 2 percent to a 17-month low. Apple quickly denied the report on iReport.com, a citizen journalist site owned by CNN.

Oct. 14: At a Mac product launch event, Jobs jokes again about his health. His blood pressure was 110 over 70 and he said, "And that's all we're going to be talking about Steve's health today."

Dec. 16: Apple said Jobs won't deliver the keynote address at the Macworld trade show in January, reviving concerns about his health. Asked to explain the decision, spokesman Steve Dowling said it would be the last time Apple takes part in Macworld so "it doesn't make sense for us to make a major investment in a trade show we'll no longer be attending."

Dec. 30: Apple shares fall as much as 2 percent after Gizmodo reported that Jobs health was "rapidly declining" and that was the reason why he canceled the Macworld keynote.

2009:

Jan. 5: Jobs says he has been losing weight throughout 2008 and his doctors think a hormone imbalance was "robbing" him of proteins. He says he has begun a "relatively simple and straightforward" treatment for his nutritional problem and that he will continue as CEO during recovery. "I will be the first one to step up and tell our board of directors if I can no longer continue to fulfill my duties as Apple's CEO," he says. Apple shares rise 5 percent.

Jan. 14: Jobs announces medical leave until the end of June, saying his health issues are "more complex" than originally thought. He hands day-to-day operations to Chief Operating Officer Tim Cook and says he plans to remain involved in major strategic decisions. Apple shares fall 10 percent in after-hours trading. Read his email to employees here.

Jan. 21: The U.S. Securities and Exchange Commission is examining Apple's disclosures about Jobs to ensure investors were not mislead, Bloomberg reports.

June 8: Apple unveils new iPhone 3GS at its annual Worldwide Developer's Conference but Jobs does not make an appearance.

June 20: The Wall Street Journal reports that Jobs had a liver transplant in Memphis, Tennessee about two months ago and he is expected to return to work later in June. Apple declines comment except to say it expects Jobs back at the end of the month.

June 22: Jobs is spotted at the Apple campus in Cupertino, California, underscoring expectations that he is either back at work or will return soon.

June 23: The Methodist University Hospital Transplant Institute confirms it performed a liver transplant on Jobs and says he is "recovering well and has an excellent prognosis." The hospital does not give more details, saying the confirmation had come with Jobs' permission.

June 29: Jobs returns from medical leave. An Apple spokesman says Jobs will be in the office a few days a week, and work from home the rest of the time.

Are the Winter Olympics getting frozen out? Not exactly, but drumming up advertising and sponsorship dollars isn't as easy as it used to be. Here's how Andrew Benett, the global chief strategy officer of Euro RSCG, described what's happening:  "You have a confluence of many factors happening here. One, winter versus summer. Two, a hangover from Beijing. And three, the economic times."

Of those, the economic situation is the one that's drawing away most of the money. Bank of America, General Motors, and Home Depot are just some of the big names that have dropped their sponsorship of the U.S. team.

But experts we spoke to also pointed to some broader problems facing the Winter Games. For one thing, behind the scenes, they say the IOC and USOC haven't always been accommodating with the advertising community. For another, younger audiences (and thus advertisers) just aren't that into some of the classic winter sports. It's not that they don't want to see athletes competing on the mountain -- they would just prefer to watch them competing in newer, thrill sports like those of the X Games.

So, while the ugly economy -- and Beijing hangover -- may only be temporary problems, there are longer terms issues that must be tackled. And the stakes are high. Recall the International Olympic Committee, alone raises an estimated $4.5 billion from the combined sponsorship and global TV rights deals for every four-year period.

Keep an eye on:

• The Beatles take a step closer to selling their music online on Wednesday with the simultaneous release of the band's re-mastered catalog and the MTV video game The Beatles: Rock Band (Reuters)
• Hollywood may have seen near record revenue from the box office this summer, but attendance was down and there were as many notable flops as hits (NY Times)
• AOL has appointed former Yahoo executive Brad Garlinghouse as president of its Web and mobile communications group (Reuters)

Suddenly, after limited news over the past year, Epix has been very much the talk of the town in recent days. A number of publications, including Reuters, have picked up on some announcements out of the pay TV site jointly owned by Paramount, Lions Gate, and MGM.

The key bit of news, of course, was the announcement that it had reached its first distribution deal, with Verizon. Chief Executive Mark Greenberg suggested to us that other deals should be coming soon -- that he is talking to everybody and "some are further along than others."

This is key, in the eyes of Wall Street. Distribution deals are always a bit tricky, and even tougher in the current economic environment. But analysts want to see Epix sign a deal with one of the big players -- one with a ton of subscribers. We're talking about Cablevision, Comcast, Time Warner Cable, DirecTV. So far the reaction has been a little lukewarm from some of the big boys but that could just be a negotiating tactic.

That aside, there have been some other relatively significant bit of news. In case you missed...

• Epix will be launching in October, though hasn't announced an official date. Sounds like they could be planning some sort of "event" or "special" to kickstart the channel

• The epixHD.com web site, which we've seen, is going to launch earlier.  It's currently in beta, and looks good. Has some of the feel of Hulu.com

• Epix, which will be home to some 15,000 films, including titles like "Iron Man" and "Star Trek" and the James Bond movies, just signed a content deal with independently owned Samuel Goldwyn Films.

• Other content deals will likely follow, but Greenberg seemed doubtful that any full, equity partners would be brought on board.

• While most pay-TV channels air films about 12 months after the hit the theaters, Epix is planning to roll its out in 9-1/2 months (helps to be owned by the studios).

Still, none of this matters all the much without distribution. We'll keep you posted.

Keep an eye on:

• In other news on Monday, Dish Network's stock is jumping. The reason? For the first time in over a year the company added subscribers -- impressive in the current climate. (Reuters)

• Bon Voyage. As expected, Microsoft has sold the Razorfish ad agency to France's Publicis. (Reuters)

(Photo: Reuters)

By most accounts, the 88 percent revenue share Yahoo will collect from its advertising partnership with Microsoft is a pretty darn good number. Obviously, 90 percent is even better. And that's exactly the share of revenue that Microsoft will pay Yahoo in the second half of their 10-year deal, according to a regulatory filing.

The filing casts more light on the details of the partnership. It also seemed to give a lift to Yahoo, whose stock rose slightly in early trade.

Here are five other key points from the filing ...

1. At least 400 Yahoo staffers will join Microsoft. The two companies will select an extra 150 employees to help with Yahoo's transition to Microsoft's search technology.
2. A definitive agreement is due to be signed by October 27, or they head for an arbitration panel.
3. Microsoft is paying Yahoo about $50 million a year during the first three years of the deal to help with transition costs.
4. The deal is limited to web sites, applications and "other online digital properties designed for use and consumption on personal computers." But Yahoo can receive Microsoft mapping and mobile search if it wants.
5. Yahoo can kill the deal if the Yahoo and Microsoft's share of the U.S. query market falls below a certain level. Either party can terminate the deal due to repeated material breaches of the agreement.

If you want more information on these provisions, or others, have a look here.

Keep an eye on:

• What's the Wall Street Journal's policy when it comes to story embargoes? PaidContent has the latest rundown (paidContent.org)

• Google is doing a little wheeling and dealing. It is buying On2 Technologies, and has sold its Google Radio Automation business (Reuters)

• Sirius XM Radio's stock has been on a run this week. Seems that investors are looking past what will likely be quarterly loss and focussing instead on new initiatives like "cash for clunkers" (Reuters)
• Looking for a less expensive digital book reader? Sony's hoping to please (Reuters)

(Photo: Reuters)

Veronis Suhler Stevenson is offering a look into its crystal ball.

The private equity firm, a leading one in the media and communications business, came out today with its 2003-2013 forecast, which essentially says the global recession will speed up needed changes in the media world. In other words, things like branded entertainment and mobile advertising are going to get even hotter, even faster.

And things like newspapers, radio, and yellow pages? Well, don't ask.

Jim Rutherfurd, Executive Vice President and Managing Director at VSS, summed it up like this in a prepared statement: "The prolonged economic downturn has accelerated changes already underway in the communications industry. Notwithstanding significant declines in traditional media, the industry taken as a whole will continue to show relatively solid performance compared to the overall economy."

Here's a quick hit of some key takeaways from the VSS study:

• Total communications spending will decline 1 percent in 2009 to $882.6 billion.

• However, total communications spending will grow 3.6 percent per year over the next five years to $1 trillion.

• That will make communications the third fastest growing sector of the U.S. economy.

• Alternative marketing segments will grow at 12.6 percent annually from 2008-2013.

• Here's what's looking good over the coming years: Internet media, professional information, business information, education, direct marketing, event marketing, public relations, e-books, word-of-mouth marketing, subscription television, mobile advertising, video games, trade shows, digital out-of-home.
• And not so good: Newspapers, consumer magazines, broadcast television, radio, traditional out-of-home, yellow pages, home video, recorded music, traditional consumer books.

(Photo: Reuters)

Ah, the morning after.

Microsoft and Yahoo have finally come to an understanding, putting to rest what seemed like an endless back-and-forth (As Barry Diller said yesterday,  "We're not going to have to talk about whether or not it's going to happen anymore).

In case you were at the beach, on the golf course, riding your bike, or hiding out in a cave yesterday, here are the very basics: It's a 10-year Web search deal; doesn't include display; Microsoft will the guarantee revenue per search for the first 18 months; Yahoo expects deal to boost income by $500 million and save about $200 million in capex; Microsoft will pay traffic acquisition at an initial rate of 88 percent; Yahoo will act as the global sales force for both companies' premium search advertisers; etc. etc.

Just about everyone has weighed in on the deal, and more analysis is certain to come in the days ahead. In the meantime, here's what we see as a few key questions about the deal.

Will it get regulatory approval? Tough call. It certainly will get a close look, given the high-profile names of the companies involved. And, remember, it leaves really only two major search engines rather than three. On the other hand, is the market really competitive at the moment? And won't Google just keep extending its lead -- and hurting competition -- if Yahoo and Microsoft don't get together? "Without this deal, I think it would be really unlikely that you'd have a market with three robust search providers in 10 years," said Beau Buffier, an attorney with Shearman & Sterling LLP. (More here from Reuters)

What do advertisers and media buyers think? Most appear, at first blush, to be happy with the deal. Having one dominant search player -- Google -- makes it tough for the advertising community. So they seem to welcome the idea of some competition. Plus, it simplifies life for media agencies. ""This is extremely encouraging and introduces more balance into the search and display markets," said Sir Martin Sorrell, chief executive of British advertising group WPP. "It is good for our clients and our agencies and for regulators." (More here from Reuters)

Can Yahoo and Microsoft put their differences aside? This is always a major hurdle in joint-ventures, partnerships and mergers. It could be especially difficult in this case, given the fiercely competitive nature of both companies. What's more, in the case nobody is fully in control, unlike a takeover, where, it may be ugly, but one company can impose its will on another. "It ties them together but in a complicated way with no long-term certainty and limited control," said Ryan Jacob, chief investment officer of Jacob Asset Management, which owns Yahoo shares. (More here from Reuters)

Who came out on top? This will be the big one -- at least in dinner party circles.  The early opinion seems to be Mcrosoft (particularly if you want to use stock market performance as a gauge). True, Yahoo is getting a big 88 percent of revenues from sending queries to Microsoft, it will cut spending, and increase operating income. But what about the company itself? Is banking on display advertising really a smart move? Are they locked into a strategic no-man's land for the next 10 years? As BreakingViews put it, "This turns Yahoo into a company oddly reminiscent of the Internet also-ran AOL." Reuters columnist Eric Auchard offered a similar comparison, writing "For Yahoo shareholders, it's value destruction not seen since the misguided merger of America Online and Time Warner at the peak of the dot-com era." (More here from Reuters)

Keep an eye on:

• Believe it or not, there is other news in the media world. For instance, Cablevision has approved the spinoff of its Madison Squarter Garden unit (Reuters).

• Sony had a tough quarter, reporting a big loss. Again. But the company says better times may be in sight.  (Reuters)

Few in the media business know dealmaking better than Barry Diller.

So it comes as little surprise that the head of IAC/Interactive was asked about both the Microsoft-Yahoo deal and the AOL separation during an earnings conference call today. He sounded upbeat on both situations.

Here are some excepts:

Microsoft-Yahoo:

One significant thing that happened is we're not going have to talk about whether or not it's going to happen anymore [Ed -Amen to that!]. Look, Microsoft will be able to report a greater share in terms of search and get -- at least in some minds of the talkers -- into being up there in competing terms with Google. And Yahoo doesn't have to spend anymore money on search. As far as being able to execute, that is very complicated.

For us, I think that the significance is we want, need, must have at least two competitive forces, big competitive forces... I want to have two players out there wanting to get our incremental business, which is, of course, of real value to the companies.

So, I think it's good for all parties.

AOL:

On AOL, I have a lot of confidence in Tim Armstrong. I think he's coming there as a great whoosh of energy and real change, I think, for the first time, in my god, in I don't know how long.

I have high expectations for what he's going to be able to do.

As far as strategies with the spinoff company or the company's configurations in the future, we're talking with them about ideas about commercial relationships and both in the local area and search area. We'll see what happens.

There is no possibility of really speculating beyond the fact that it's obvious there are interesting relationships between what AOL does and what aspects of IAC does.

We'll have to wait and see.

Perhaps the next time we hear from Diller, he'll be talking about his own deal, maybe how he's used the near $2 billion in cash he still has on IAC's balance sheet.

(Photo: Reuters)

Well, that's one less controversy to worry about. As CrunchGear reports, Microsoft has apparently tweaked the "Laptop Hunter" commercial that ruffled feathers over at Apple. Ah peace, for now.

Here's the latest version: