INSIGHTanalysis: Media Healthcheck – March 2003
While doubts over the length and nature of the war in Iraq persist, marketers are reluctant to speculate on the damage being done to the media economy. The optimism that was evident at the start of the year appears to have evaporated, but in the current climate it would be wrong to label forecasters as doom and gloom merchants.
Even so, there is little doubt that the volatile stock market, declining consumer confidence and the situation in the Middle East have slowed growth in 2003. On the eve of the war, a survey by MediaPost and InsightExpress found that 55% of media planners believed that a military conflict would negatively impact budgets this year.
Analysts at Merrill Lynch accept that advertising has been decelerating at a time when it was expected to gather upward momentum. However, until there is some idea of how long the war will last, they see no reason to adjust their 2003 US and global growth forecasts of 3.7% and 2.7% respectively. The industry was circumspect in the first few days of the war but marketers appreciate that there is need to maintain a media presence as market share is important even at the height of a crisis.
“Advertisers have learned that they need to spend during the good times and bad; having indicated that, there is still some surprise, and concern, that media is holding up as the economy weakens,” said leading media analyst, Lauren Rich Fine.
Nonetheless, some sectors have been more affected than others and Merrill has downgraded its newspaper ad revenue growth forecast for Q1 from 4% to 2-2.5%. It is also predicting that radio will only see a 3.7% rise in revenue, down from the 5.8% growth it had previously indicated.
Jack Myers sees no cause for alarm and is sticking to his full-year forecast of 2.8% growth in the advertising market. He believes that observers are inclined to exaggerate the effect of war on spending and claims that advertisers’ behaviour has not changed significantly.
He goes as far as to suggest that of the $250 million of lost TV revenues expected in the four weeks after the outbreak of war, up to 60% will be recovered and re-invested in future advertising schedules. The main issue would appear to be the response of the marketplace once the conflict is over. There is no surefire way of determining this but assuming hostilities diminish later this month, Myers is quietly optimistic.
“The most likely scenario is that the war will begin to wind down in mid to late-April, followed by a period of continued uncertainty,” he said. “The economy was strong throughout the second half of 2002, and should begin to rebound in April, May and June.”
Initiative Media‘s comprehensive 2003 forecasts, made before the war in Iraq, point to 4.5% growth in the global ad economy with television revenues set to increase by 6.1%. US advertising expenditure was expected to rise by 3.5% this year.
Magazine revenues are yet to be affected by uncertainty in the markets, largely because of the long selling lead time. US B2B adspend increased by 2.9% year on year in January, according to American Business Media while the Publishers Information Bureau reports that total magazine advertising revenue was up by 10.2% in February.
UK data The month began with a grim warning from the Chartered Institute of Marketing which suggested that confidence amongst senior marketers in the UK had hit ‘rock bottom’. The Marketing Trends Survey showed that firms are planning a 1.7% rise in total sales resource this year, down from the 2.4% increase reported in winter 2002.
This cast something of a cloud over fourth quarter advertising figures which showed revenues to be up 4.9% year on year. According to the Advertising Association, overall expenditure came to £3.7 billion bringing the total for 2002 to £13.9 billion, an increase of 0.8% on the previous year.
Outdoor advertising is the fastest growing sector with adspend up by 15.5% in the last three months of 2003. A new study from Concord shows that entertainment and media companies accounted for 20% of the £690 million worth of revenue generated by the outdoor industry last year.
Things are less rosy for print with the Telegraph Group reporting a 5% decrease in revenues for 2002. DMGT says that growth of 2.4% was achieved in the five months to February but the company remains cautious given the political and economic climate.
Elsewhere, Carlton and Granada expect ITV advertising revenues to be more or less flat compared to 2002 in the first half of the financial year. Across at Emap, revenues were up 2% in 2002 as an upsurge in consumer magazine adspend made up for weakness in the radio division. Capital and GWR both reported a fall in income but revenues rose by 5% at Scottish Radio Holdings in the six months to March.
Despite the mixed message of these results, a new study from OMD France and Interdeco asserts that the UK is likely to lead any European advertising recovery in 2003. The Ad Barometer report predicts growth of 2.3% in this country while spend across the seven major markets is predicted to rise by 1.7% to ₏150 billion.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index fell by 10.5% during March as shown.
