Insight Analysis: Media Healthcheck – March 2002
As we head into Q2 2002, the extent of the economic and advertising downturn is really making itself known. UK media companies are struggling with the twin curses of heavy debt and falling ad revenues. ITV Digital is to be sent to the administrators (see End For ITV Digital Confirmed), whilst NTL is struggling to keep its head above water (see NTL May Take Temporary Bankruptcy As Refinancing Is Finalised).
A survey by Jack Myers Report found that media and advertising agencies are more optimistic on the outlook for a US media market recovery than are the advertisers themselves (see Agencies More Optimistic On US Media Recovery Than Advertisers, Finds Myers).
UK The consensus amongst media owners is that UK advertising is still generally weak, with poor visibility, particularly in the national radio market. Whilst signs of improvement are emerging, the market is still not healthy.
“In press virtually all clients don’t know what they will be spending this year and many are not spending anything at all. Only one or two have any forward plan; most are ad-hoc. Newspaper owners have decreased pagination to increase demand,” said a senior media buyer, adding that: “Outdoor companies, which normally sell only off the ratecard, are now offering many discounts.”
Analysts at ABN Amro said that it is consumer spend, rather than advertising, which is currently driving UK media growth (see Consumer Spend Drives Media Industry Growth).
Radio group GWR said that UK like for like revenues in the six months to 31 March 2002 are forecast to be down 6.0% and for the full year down 5.5% (see GWR Sees ‘Some Improvement’ In UK Radio Market). Nevertheless, the group is seeing some improvement in the radio market at present, although maintains that it is too early to be confident that this is the beginning of sustained recovery; visibility remains poor.
EMAP is taking a ‘cautious view’ of the ad market and noted that radio revenues remain weak (see EMAP Says Consumer Mags Revenue Stable, Radio Remains Weak). Nevertheless it is also experiencing some improvement in forward advertising bookings. Capital Radio, meanwhile, says that the advertising market will remain under pressure for the remainder of the year (see Capital Warns That Market Will Remain ‘Under Pressure’).
At ITV, advertising revenues for Granada fell by 12% during the six months to March 2002, with March forecast to be down by 6% and April by 13%. A return to growth, of 9%, is predicted for May, but Granada warns that whilst this is positive, it may reflect both a more generous comparable of last year and the fact that advertisers are investing in advance of the football World Cup in June this year.
Analysts at ABN Amro are leaving their full-year advertising forecasts unchanged at -8.0% growth for ITV in the year to September and -4.0% for the calendar year.
Europe The French television marketplace grew by 2.3% in February 2002, after a 1.6% growth in January, according to gross data compiled by ABN Amro. The broker expects Q1 net advertising revenues to be down by 0.2%.
The Italian advertising market declined by 7.6% during January, with all media showing negative trends, according to ACNielsen.
A recovery in European IT spending has been forecasts by IDC, which says that the decline has bottomed out (see European IT Spend Recovery Now Emerging, Says IDC).
US The apparent recovery in the US economy “looks good now, but will be short-lived,” according to a report from GartnerG2. The latest economic data reflect the “rebuilding of inventory, not renewed economic activity or an increase in fundamental demand,” it says (see Recovery ‘Isn’t Here Yet’ Says Gartner).
Better news for the ad industry though, as two analysts in the Wall Street Journal forecast a likely upturn in the market (see US Analysts See Positive Signs In Market Outlook). “The cyclical recovery appears to be under way sooner than anticipated,” said Leland Westerfield, media analyst at UBS Warburg in New York.
CIBC analyst Jason Helfstein says that US radio, being a ‘high-growth, high-return business’ is well-positioned to benefit from the ‘rebounding economy’ (see US Radio ‘Well Positioned’ To Benefit From Rebounding Economy). US radio revenue already bounced back slightly in January according to the latest totals released by the Radio Advertising Bureau. National sales were up 2% and local revenue increased by 1% year on year (see US Radio Rebounds In January).
Total US magazine advertising revenue for February, on the other hand, came in at $1.1 billion, an 8.2% decrease from year on year, according to the Publishers Information Bureau (see US Magazines Revenues Dip 8.2% In February).
In TV, ABN Amro last month alarmingly claimed that the economics of broadcast network television in the US are becoming increasingly untenable (see Economics Of US Network TV Are Becoming ‘Untenable’ As Revenues Drop, Says ABN Amro).