Although the advertising slump is forecast to continue through to the end of 2002, media analysts are confident that spending will return in 2003 and investors need not worry. “Advertising isn’t an investment priority. We assume it will come back, we assume it will be feeble in 2002 but will come back in 2003,” said Matthew Owen, an analyst with Morgan Stanley, speaking to the World Association of Newspapers annual Newspaper Advertising Conference.
Owen said that the downturn in the advertising market, particularly in North America and Western Europe, was exaggerated by the huge advertising boom in 2000 and early 2001.
“Over the last two years, we’ve gone through a phenomenon in terms of advertising that we will never see again in our lifetimes,” he said. “We saw an extraordinary bulge in advertising expenditures in 2000 which led to a sharp decline in 2001. The absolute level of advertising this year and in the first two quarters of 2003 won’t be so impressive.”
Of greater concern to newspaper investors, according to a recent Morgan Stanley study, are:
- Circulation declines while readership stagnates.
- Women under 30, who are big spenders on fast moving consumer goods, are getting harder to reach.
- “Commoditised content” is undermining reader loyalty (the practice of copying competitors new products eliminates the competitive advantages of the products).
- Consumers are less interested in politics.
- Traditional newspapers have high exit costs as they are labour and capital-intense, making it difficult to leave the business if things go wrong.
