Insight Analysis: Media Healthcheck – December 2002

The general outlook for the ad industry is that a gentle upswing that began in the latter half of 2002 will continue into this year. This, according to Zenith Optimedia, is the start of long, slow emergence from the decline of the last two years and not a rapid recovery as some had previously hoped. “The muted macroeconomic background certainly does not warrant irrational exuberance,” Zenith soberly intoned.

US spend is largely expected to lead the way and improving growth in radio, magazines and online spend, as well as impressive TV bookings, are all helping to lift the media economy on the other side of the Atlantic. US growth is expected to be 3.6% this year, after a 1.6% rise in 2002, according to the consensus data (see Insight Analysis: US Advertising Forecast Comparisons).

Jack Myers reported that 2002 US growth will be 2.5% in 2002, boosted by broad-ranging recoveries in spend, with a notable upturn in the previously ailing press sector. Robert Cohen at Universal McCann was even more optimistic; he predicted that US growth would be 5.3% in 2003.

“Except for the uncertainties over Iraq, we would expect a much improved rate of growth for US advertising next year,” said Coen in his Insider’s Report. “The shakeout in high-tech, financial and dotcom spending has been a drag on ad growth in 2001 and 2002, but the worst appears to be over. Most of the biggest users of advertising are returning to higher ad budget levels. If this trend continues well into the new year, it could stimulate good ad growth in 2003.”

This US upturn is likely to have a knock-on effect in international markets, with Europe tending to mirror the conditions in the States following a lag period.

UK data A consensus of the most recent UK advertising growth forecasts puts 2002 at 0.4%, rising to 4.4% in this year.

Initiative Media, itself predicting 4.6% growth this year, warns that these optimistic forecasts are at risk from an uncertain economy. This is because the UK economy has been propped up by resilient consumer spending in the face of economic downturn. However, debt-to-disposable income ratios are now at a high and the ‘unsustainable’ increase in house prices is likely to put a stop on continued consumer borrowing. This, in turn, will curb consumer spend and so, in the absence of another driver, the economy could weaken again and advertising spend may also slip.

The third quarter saw growth of 3.6%, or 2.0% after adjusting for inflation, according to the latest figures from the Advertising Association. The upswing was led mainly by the UK’s television sector, which rose by 7.7% in constant currencies.

On the downside, Pearson, publisher of the Financial Times, in December said that it does not expect to witness an upturn in ad sales at the newspaper in 2003. This follows news that advertising revenues at the FT were down 11% in the second half of 2002.

Meanwhile, regional publisher, Johnston Press, said that second half advertising levels were showing continued modest growth, up 2.8% in the five months to November 2002. Nevertheless, the group said that it does not expect a change in market conditions for the regional sector this year.

The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index fell by 12.0% during December as shown.