European Advertising Forecasts From Zenith Optimedia

The group says that UK growth will be 2.1% next year in current currency, outperforming a 1.8% European average, but this falls to -0.4% in constant currencies, as against a flat European average. Through to 2005, the UK will then be the weakest country of the top-five European markets in constant currency.

Zenith says that whilst the UK economy is in relatively good shape, television is expected to grow 4% in current prices in 2002, well ahead of the market average, but this rate is not expected to vary much out to 2005. This is half the typical growth rate of the 1990s, but echoes the redistribution of TV ad budgets and audiences towards smaller channels with cheaper airtime, says the report.

In addition, Zenith is not expecting real growth in the print sector before 2006. Combined, these things will mute growth in the UK whilst other European markets move ahead.

Top-Five European Ad Markets Year On Year Growth
	2002 v 2001		2003 v 2002		2004 v 2003		2005 v 2004
	Current	Constant	Current	Constant	Current	Constant	Current	Constant
Five-country Europe	-2.8	-4.7	1.8	0.0	4.2	2.3	4.3	2.2
within which:
France	-1.2	-3.0	1.6	0.3	3.5	2.2	3.5	1.9
Germany	-5.2	-6.5	1.0	-0.1	6.1	4.5	5.5	3.6
Italy	-3.2	-5.4	2.8	1.1	3.6	1.9	4.1	2.5
Spain	-2.2	-5.6	2.1	-0.9	3.8	0.8	4.5	1.5
UK	-0.9	-2.9	2.1	-0.4	3.1	0.5	3.4	0.9
Source: Zenith Optimedia, December 2002

The report says that television and radio in France have returned real rates of growth in 2002 against a dismal background of advertising recession in which the print sector is suffering badly; newspapers are not forecast to join the recovery until 2004.

French consumer spending growth is expected to pick up from 1.8% in 2002 to 2.0% in 2003 in line with a moderate improvement in GDP growth, which will still lag the EU average.

Consumer demand in Germany is expected to shrink 0.5% in 2002 and recover 1.4% in 2003. The forecasts suggest this will not be enough to produce real advertising growth in 2003, but the worst appears to be over in Germany, which has been hit very hard by the downturn.

Germany’s print sector takes 67% of all advertising and so has a great influence on recovery speeds. Zenith does not expect it to lag the recovery like print sectors in most markets.

Top-Five European Ad Markets Expenditure Forecasts (US$ million)
	2001	2002	2003	2004	2005
Five-country Europe	51,972	50,531	51,432	53,614	55,914
within which:
France	8,800	8,696	8,837	9,145	9,462
Germany	16,833	15,955	16,121	17,111	18,052
Italy	6,976	6,756	6,944	7,192	7,487
Spain	4,771	4,664	4,761	4,944	5,168
UK	14,593	14,460	14,770	15,222	15,745
Source: Zenith Optimedia, December 2002

Zenith notes that the recent advertising recession has correlated closely with falling corporate profitability, rather than declining consumer demand, which has remained fairly positive throughout. This analysis concurs with those from OMD UK (see OMD Sees Advertising And Media Turnaround In 2003) and Merrill Lynch (see Insight Analysis: Will A Consumer Spending Dip Bring Down Ad Revenues?).

Declining corporate profits lead to falling share prices; stock currently remains depressed and volatile, suggesting corporate recovery will be moderate. “The ad recovery in prospect therefore relies less on profits and more on consumer demand. Indeed, sustained consumer demand is vital to the advertising recovery,” says the report.