INSIGHTanalysis: Media Healthcheck – August 2003
Tentative optimism gave way to pronounced confidence in August as the media sector showed signs of resurgence after three difficult years. Analysis of the US market shows that there was growth across most categories in the first half of the year and although Europe remains flat at best, there is cause for hopefulness as 2004 approaches.
Like WPP, Publicis continues to perform better in North America than Europe. The latter saw organic growth of 1.6% in the second quarter, the first such increase since Q4 2001. Interpublic reported a $13.5 billion loss over the same period but, like its competitors, is anticipating better advertising conditions in the second half of 2003.
US summary There is general consensus that the US media recovery is underway but there are differences of opinion with regard to the strength of activity. Veronis Suhler Stevenson claims that communications expenditure rose by 3.3% in 2002 with television and radio the key drivers of adspend growth.
The media merchant bank plays down the impact of the Iraq war and the Sars outbreak and forecasts that US adspend will rise by 3.8% to $177.6 billion this year. The latest data from Nielsen Media Research reveals that six out of eleven media categories showed growth in the first half of 2003 with overall spend up by 2.8%.
“If second quarter increases are truly reflective of the state of the ad economy, and spending continues to climb, the year can possibly finish with advertising expenditure growth between 3%-4%,” said Jeff King, managing director of the Nielsen Monitor-Plus division.
Observers at TNS Media Intelligence/CMR are even more optimistic, raising their year-end growth estimate from 4.3% to 5%. They studied sixteen media categories and concluded that all but one (network TV) made gains in the six months to the end of June. Total adspend was up 6.8% at $61.7 billion and local newspapers, cable television and the internet all registered double digit growth.
The Television Bureau of Advertising (TVB) reports that TV ad revenues increased by 5.1% in the second quarter and by 2.1% in the first half as a whole. The radio sector is also in good heart following gains of 4% and 8% in June and July respectively, according to the RAB. Merrill Lynch predicts that full year growth will be in the region of 2.8%.
The NAA estimates that US newspaper advertising revenues rose by 1.6% to $11.1 billion in Q2, the fourth consecutive quarter of growth. Figures from the Publishers Information Bureau show that magazine advertising revenues are up 9.6% in the year to date, following an 8% rise in July.
The UK market A study of agency activity in 2003 would seem to indicate that UK trading remains slow. According to AAR information held on MediaTel Group’s NewBizMoves database, the level of new business moving through media and advertising agencies fell by 22.4% in the first six months of the year. Analysis of Nielsen Media Research billings data shows that five of the top ten ad agencies reported losses in the first half, but media agencies performed rather better.
Hopes are higher for the second half of the year and there are signs of returning confidence after the economic uncertainty that characterised the early part of the year. Recent research from the Chartered Institute of Marketing indicates that around 40% of firms are planning to increase their marketing and sales operations in the near future. A separate NOP poll found that almost a quarter of media companies expect growth in UK advertising over the next three months.
Commercial radio saw adspend increase by 3.3% year on year during the second quarter, as advertisers sought out cost-effective forms of marketing. “The influx into radio by FMCG advertisers, who are traditionally big TV spenders, is a great endorsement of radio’s ability to drive sales,” said Michael O’Brien, director of marketing operations at the Radio Advertising Bureau.
Despite increased investment in programming, ITV continues to lose revenue and its advertising market share now stands at just over 51%. Both Morgan Stanley and the management consultancy, Billetts estimate that revenues at the network will be down by more than 3% this year.
There was better news for Five which succeeded in driving its market share up to 7.9% from 7.3% a year earlier. Meanwhile, BSkyB goes from strength to strength and last month reported annual turnover of £3.2 billion. This represented an increase of 15% on last year and advertising revenues alone rose by 13% to £284 million.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index increased by 5.6% during August as shown.
