INSIGHTanalysis: Media Healthcheck – April 2003
The current disparity between the US and European advertising markets continued into April, with the former showing signs of improvement whilst the latter remains weak and uncertain. These conditions have been prevailing for the last few months as the US starts to pick up after the downturn, and Europe, as is expected, lags behind.
However, the war effect has been usurped by a new spectre – SARS. Merrill Lynch analysts report that SARS is presenting a new threat to the health of the advertising industry, the extent of which is not yet clear.
US and European data In the US, the latest sector data showed that magazine revenues rose by 11.6% in March, whilst radio was up by 7% in February. Merrill Lynch downgraded its US radio forecasts for the full year from 4.3% to 3.3% growth, citing a weak economy and general uncertainty.
Nevertheless, broader analyses see improvements in the US, with Q3 expected to benefit from a pent up demand from advertisers. Merrill Lynch sees the industry beginning to move again following a ‘general paralysis’ surrounding the war. JPMorgan analyst, Spencer Wang, also reckons the US has seen the bottom and is now recovering.
Wang forecasts that overall US adspend will grow 3% to 4% in 2003, which is consistent with Jack Myers Report forecasts of 2.8% growth, but is more conservative than forecasts from ZenithOptimedia and Universal McCann.
More recent US figures show a strong upfront television market, with demand exceeding supply in many areas as inventory is held back by the broadcasters. However, the impact of the SARS virus drained March of any real joy for the ad industry, according to Merrill Lynch.
Over in Europe, there is no such upturn, with the European Union expecting a sluggish economic performance well into the first half of this year. The UK is expected to show one of the strongest performances, which might help advertising optimism here.
ZenithOptimedia substantially cut back its 2003 top-five European markets advertising forecasts, from 1.8% to 0.4%. The US figures were raised slightly, from 1.9% to 2.2%. ZenithOptimedia forecasts that advertising will ‘shadow’, rather than run ahead, of economic growth.
UK data The UK’s Bellwether Report, released by the IPA last month, found the most negative advertising outlook since the survey began in July 2000. Forward-looking budgeting by UK marketers predicted that spend would remain flat in 2003; in all previous surveys budgets have been expected to rise.
However, a separate study by Black And White Public Relations somewhat contradicts the IPA’s findings, by claiming that almost three-quarters of UK businesses believe that their marketing spend will rise in the next twelve months.
A report by Merrill Lynch claimed that the outlook for the UK’s regional press is currently ‘overwhelmingly negative’. The sector’s key revenue drivers – motors, property, recruitment and display/retail – are all looking set for a fall, according to analysts. Merrill Lynch is now predicting that the regional press sector as a whole will see 2% growth this year.
In television, advance estimates for June’s trading look ‘very weak’. The overall TV market is expected to dip by around 10%, according to Merrill, although other commentators have predicted falls of up to 14%.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index increased by 15% during April as shown.
