INSIGHTanalysis: Media Healthcheck – June 2003
The contrasting fortunes of advertising markets on either side of the Atlantic became more apparent in June with bullish mood in the US unmatched in the UK and across Europe. However, economic growth is slow in most major countries and there is little prospect of a boom to rival that of the late nineties.
Media forecasters seem united in the belief that the market has bottomed out and with a return to stability since war in Iraq and the Sars outbreak, there is potential for limited growth in the second half of the year. Marketers are pinning their hopes on a banner 2004 but have been warned that a real upsurge will not unfold until later in the decade.
US and Europe The advertising nadir hit in Q4 2002, according to analysts at Morgan Stanley and growth of 4% is expected in the US this year. Media buying is particularly dynamic, reflecting the strong upfronts in the States and fragmentation of media platforms in Europe.
This sentiment was echoed by Merrill Lynch which highlighted the optimistic utterances of American publishers and television companies. US newspaper spend is expected to grow 3% in 2003 and magazine advertising revenues continue to climb by around 10%. TV revenues remained flat in Q1 but improved results should be forthcoming given that the upfront season has generated spend in excess of £9 billion.
Figures from TNS Media Intelligence/CMR show that US adspend rose by almost 5% year on year in the first quarter of 2003. This is likely to set the trend for the year with the group anticipating total expenditure of $124.7 billion, a 4.3% rise on 2002. This is in line with the new estimate of 4.6% from Robert Coen, head of forecasting at Universal McCann.
In its latest forecasts, Zenith has upgraded its US advertising forecasts and is expecting year-end growth of 2.7% based on current prices. However like most observers, the agency remains cautious on Europe. The eurozone, which includes Germany, France, Spain and Italy, is apparently the slowest growing economic grouping in the developed world and the advertising market is contracting in real terms for the third year in a row.
The longer term outlook is more optimistic but the US will continue to drive advertising and media growth. A report by PricewaterhouseCoopers claims that US adspend will increase at a compound rate of 4.9% to 2007 while the Europe, Middle East and Africa (EMEA) region will show 4.3% growth over the same period. Growth rates across 2004-2007 will be slower then the 1998-2000 period but partly because investors are keen to “avoid the repeat of the boom-bust cycle of the last few years”.
The last word goes to WPP chief Martin Sorrell who told delegates at the company’s AGM this week that he had detected signs of stabilisation. He has constantly reiterated that 2004 will see a turnaround in the depressed advertising sector but recently warned that it could be 2008 before the real boom arrives.
The UK picture UK advertising spend posted a 1.5% nominal growth in the first quarter of the year, although after adjusting for inflation, expenditure showed a decline of 1.5%, according to the latest figures from the Advertising Association. Outdoor is still the main growth area with revenues up by 16.8% year on year but print media continues to struggle.
Nielsen Media Research offered a more optimistic analysis of the market, asserting that there has been a year on year increase in media spend every month bar one since May 2002. It calculates that total media expenditure grew by £300 in the year to April, a fact which will be “widely interpreted as a sure sign that the recovery in media has begun”.
ITV may beg to differ. Advertising revenues at the commercial broadcaster were down 5% in the second quarter and Morgan Stanley has reduced its full-year forecasts from -2.5% to -3.5%, on the assumption that Q4 is flat.
SMG blames the war for suppressing advertising markets in the early part of the year but the second half is expected to show some improvement. This is a view shared by United Business Media (UBM) which claims to be trading in the most stable conditions in two years.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index declined by 5% during May as shown.
