INSIGHTanalysis: Media Healthcheck – January 2003
It seems that the most common phrase emanating from advertising prognosticators at present is ‘cautious optimism’. This could be a brave euphemism for hoping for the best in continuing weak conditions, or it could be a reluctance to get excited about the fact that figures are looking up (just in case they start to fall back down).
Will a war quash the ad upturn? Jack Myers reckons not; at least not in the short-term. In two separate reports Myers presents evidence for a relatively strong and confident marketing industry holding up for the next 18 months or so; a short war will not really dampen this, he predicts.
However, a drawn-out ground war more will have much more serious ramifications, as it will impact on consumer spending behaviour (already considered to be fairly shaky). If people stay indoors more and spend less, marketing budgets will be cut, says Myers. And even war notwithstanding, he predicts that the current growth ‘bubble’ may well burst towards the end of 2004. “Let me be the first to publish a concern for the media economy in the second half of 2004 and into 2005. Media companies should begin now to prepare for the possibility of a market slowdown, if not a collapse, in the fourth quarter of 2004,” is Myers’ grim intimation.
Clearly, depending on the circumstances and prognosis of the confrontations in Iraq, such a ‘collapse’ may come even sooner than 2005. This threatening forecast comes as Myers’ own survey shows that 80% of advertising executives believe that the media industry has now at least partially recovered from the ad downturn. Another survey by the Patrick Marketing Group found that half of US marketers expect their budgets to be larger this year, whilst 31% expect no change. The remaining 19% predict a decline.
However, Sir Martin Sorrell, venerable advertising surveyor and chief executive of WPP, partially agrees with Myers. He says that there will be a substantial recovery in advertising in 2004, even if there is a war with Iraq. Sorrell maintains, though, that the recovery will not really emerge until 2004 and so he is presumably optimistic even in the face of a drawn-out military campaign, assuming that it would begin at some point this year.
In terms of 2003 forecasts, Publicis predicts a 1% global growth, whilst CMR forecasts 3.3% for US spend. A consensus of US forecasts compiled by eMarketer puts growth at 4.7%.
In a pan-European outlook, Merrill Lynch noted that corporate profitability is improving, whilst consumer spending is increasingly under threat. This combination of factors will lead to a muted growth of 0% to 3%, with consumer spending being the key variable.
UK data The same worry about consumer spending is hanging over the UK economy at present too. A report from Deloitte & Touche warns that the economy is now dangerously over-reliant on household spending as the sole source of upward momentum. “Yet there is a clear limit to how much longer consumer spending can continue to outpace the overall economy,” says the report.
Again, if consumer spend fails, marketing and advertising will follow: There is no point trying to sell goods to people who are not willing to fork out any money.
Alongside this, a report from the Chartered Institute of Marketing (CIM) claimed that 2003 marketing budgets are some of the most cautious ever. Once again, though, there was talk of optimism, with the CIM’s confidence index reaching a seven-year high of 98.5. Marketers are therefore both cautious and confident, it seems.
Another survey of UK marketers – the IPA‘s Bellwether report – found little evidence to support the notion that marketing and advertising sectors are on the road to recovery. Whilst twice as many firms were planning to increase 2003 budgets as decrease them, Q4 2002 figures showed that in fact a greater percentage cut budgets (23%) than increased them (18%). This is despite optimism for upward revisions claimed in the earlier part of 2002.
A trading statement from outdoor contractor, Maiden Group, talked of a slow improvement in sales, but with inconsistent demand. Scottish Radio Holdings, meanwhile, has had a strong start to its year (revenues up 6.5% in the quarter to December), although the same strength is not being experienced at Capital Radio or GWR Group.
Media audit company, Billetts, forecasts that television revenues will rise by 4.0% this year in a total ad market up 4.0% to 5.0%. Merrill Lynch expects TV to grow by 2.2%, with radio rising by 2.0% to 3.0%.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index fell by 11.8% during January as shown.
