INSIGHTanalysis: Media Healthcheck – November 2003
There were further signs of an upturn in the advertising market during November as industry bodies reported increased revenues and media bosses pronounced themselves content with the pace of growth. 2003 has been a mixed year but it is ending on a high note and indications for the next twelve months are broadly positive.
Merrill Lynch is slightly more cautious on 2003, predicting a 1.9% rise, but is more optimistic about next year, forecasting 4.7% global growth. Most commentators are sceptical of a more aggressive recovery in 2004, given continued attention to costs by the corporate sector and a possible weakness in consumer spending.
A number of leading agencies released third quarter results last month. Publicis saw revenues climb by 2.0% on an organic basis, up from a 1.6% rise in Q2 and -1.2% in Q1. Over at Havas revenues are still in the red, but the trends are improving. The third quarter showed a dip of 5.5%, up from -6.8% in Q1 and -7.8% in Q2. The firm said that there were positive trends in Asia-Pacific and the US, in contrast to Europe, where the market remains difficult.
Grey Global announced pre-tax profits of $12.5 million for the third quarter but Interpublic continues to suffer more than most with losses amounting to $327.1 million, as it moves into the early stages of its ‘turnaround programme’.
US analysis US advertising spend increased by 5.7% year on year in the three months to the end of September, with ten out of twelve media categories reporting growth, according to figures from Nielsen Media Research. This latest increase takes the year-to-date growth rate to 3.3%.
The recovery in press advertising has been trailing the overall market but the revival is now in full swing. US newspaper advertising expenditure rose by 1.5% to $10.9 billion in Q3, according to the NAA while the Publishers Information Bureau reports that magazine revenues were up 6.8% in October.
Broadcast advertising is sluggish by comparison. RAB figures show that US radio ad revenues declined by 1% in October, following a 4% rise the previous month, and TV adspend rose by just 0.8% in the third quarter of the year, down from 5.1% in Q2, according to the Television Bureau of Advertising (TVB).
Radio and television are both weak in the final quarter and newspaper and magazine publishers are not out of the woods, according to Merrill Lynch. However, the broker emphasises that the present slowdown is just a blip in the advertising recovery, an indication that some clients are holding back spend in order to meet their own Q4 targets.
“We still get the strong sense that advertisers are intent on growing their top line in 2004 and that they will need to invest in marketing to achieve their goals,” said principal media analyst Lauren Rich Fine.
UK indicators In terms of trading volume, the UK has been lagging the US and Continental Europe and display advertising will grow by just 0.5% this year, according to the latest figures from the Advertising Association. Next year is forecast to be much healthier though, with the rate of growth expected to reach 6.3%.
TV executives are now counting down the days to the long awaited merger of Carlton and Granada, which is due to be completed in February. A single ITV cannot come quickly enough for the two companies who both announced a growth in profits for the third quarter and hope to realise cost savings of £100 million from their forthcoming tie-up.
ITV’s advertising revenues will slide by 2.5% in the final quarter of the year, giving a full year decline of 4.1%, according to Merrill Lynch. Lehman Brothers says that the UK television airtime market will see flat advertising growth for 2003 with ITV (excluding ITV2) down by 3.9%. ITV advertising has continued to underperform the market but Lehman says that the ‘dark days’ of the summer appear to be over and the network should see 3.5% growth in 2004, for the twelve months to September.
Cross-media group Emap released a confident set of first half financial results, with pre-tax profits up by 9%, but sees no ‘material change’ in trading conditions for the remainder of this financial year. The difficult advertising market has left its mark at DMGT but the media group reported a 1.6% increase in profits for the year to September and foresees a brighter 2004.
The UK radio market is picking up with Chrysalis, GWR and Scottish Radio all posting strong results. Weak advertising conditions were blamed for an 18% fall in profits at Capital Radio but the company is encouraged by recent signs of optimism in the media marketplace and believes that radio will continue to outperform the display advertising market.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index rose by 0.8% during November as shown.
