Insight Analysis: Media Healthcheck – June 2002

A US mid-year media conference last month heard key players talk about the bottom of the recession, rather than the beginning of a period of genuinely strong growth. This assessment arises from the fact that media companies are beginning to report a marked improvement in the degree to which their ad revenues are showing decline; this represents a ‘bottoming out’ of the period of poor trading, rather than a burgeoning market.

Figures released last week by Zenith Optimedia offered little encouragement to the contrary. US advertising is expected to fall by 2.7% in real terms in 2002, with the UK down 3.1%, Europe down 2.7% and the global ad market also falling by 2.7%. Growth is now not expected until next year, at least six months later than had previously been anticipated. Furthermore, the Zenith report predicts that it will be 2004 before the key European ad markets have been restored to full growth.

During 2001 and 2002, the US and European ad markets have been ‘stabilising’ to levels seen before the media and telecoms boom of the late ’90s, says Zenith.

Global Despite the ‘near-catastrophic’ year for the global advertising industry in 2001, the forecast is for a gradual rebound, with the ad market beginning to become more solid during 2002, according to PricewaterhouseCoopers.

The advertising recovery will be shallow and gradual, said WPP after issuing a profits warning. The global advertising and communications group said that trading is difficult with ‘few, if any, signs of recovery in the advertising and marketing services industry’.

Meanwhile, Cordiant Communications said that it does not expect its markets to return to growth until 2003 and Interpublic Group said that revenues remain substantially down and that there is no obvious end to the decline.

UK Total UK advertising expenditure fell 6% year on year for the first quarter of 2002 according to the latest data released by the Advertising Association. National newspapers spend slumped 17.4%; business magazines fared even worse with expenditure declining by 21.5%; consumer magazines saw a smaller fall of 2.1%, whilst regional newspapers bucked the trend with an increase of 0.7%.

Spend on television advertising declined by 6.8% although the fall was not as pronounced as previous quarters and radio adspend was down just 0.7% to £120 million; outdoor fell 10.8%.

Taking a look at company statements, Granada in early June said that it has begun to see some forward visibility in the UK advertising market, something which has so far eluded most media groups. ITV began to show signs of a more sustained recovery during the World Cup period and Q3 and Q4 are now looking stronger than had been expected. Lehman Brothers predicts a Q4 growth of 4%.

EMAP meanwhile said that recovery in advertising is still not expected until Q4 2002 at the earliest. Consumer mags are looking okay, B2B remains flat and radio is ‘poor’, the group said.

At newspaper publisher Trinity Media visibility remains very poor and the group is planning on conditions remaining weak throughout the remainder of the year. Local press trading in London and the south east is very weak, as are national papers’ figures.

US A stronger than expected television upfront spend has boosted confidence a little in the state of the US media economy. Jack Myers has upwardly revised his forecasts for the coming year in the light of this increased confidence in broadcast and cable media. However, growth is hampered by the grim prognosis for newspapers and magazines; accordingly, the overall media market is expected to be flat in 2002.

Certainly, the stronger than expected TV upfronts in the US indicate an improving climate, although some commentators note that this is more due to declining audiences and the accompanying rise in costs per thousand, than it is to do with a genuinely strengthening market.

CMR reckons there will be a 2.5% growth in US spend this year, in forecasts which include Spanish language TV, B2B magazines and local radio.

“We are off to a good start this year, which suggests a rebound over last year. All and all, we can expect three factors to boost the market this year: the impact of the upfront on the broadcast season, the upcoming elections in November and the continued growth of Spanish Language television. Nonetheless, despite the improvement over 2001, full year 2002 will be down 6.7 percent when compared to the high-water mark of 2000,” said CMR’s chief executive David Peeler.