INSIGHTanalysis: Media Healthcheck – July 2003
The advertising recovery is taking longer than anticipated and analysts have been forced to revise their forecasts to reflect industry realities. Signs are that growth will be limited this year and hopes for a more significant recovery are pinned on 2004. The US continues to outpace the Eurozone but certain media sectors are performing better than others.
Accordingly, Merrill Lynch has adjusted its advertising prognosis for 2003 and 2004. Total US ad growth is now expected to be 3.2% and 5.7% for this year and next. The global forecast for 2004 has been lowered from 5.1% to 4.9% while the 2003 estimate of 2.0% is unchanged.
US recovery It has transpired that advertising and marketing conditions in the second quarter were not dissimilar to the first three months of the year. The US market is showing upward momentum while Europe remains ‘flat to slightly positive’. The media giant Viacom saw revenues increase by 10% in the second quarter with the rise attributed to the advertising climate Stateside.
Improving performance in the US helped United Business Media achieve a 12% increase in profits but the trend was bucked by Omnicom which attributed similar gains to growth in international markets.
Sector by sector analysis shows that press and radio advertising remains sluggish with first half optimism tempered by lingering economic uncertainty. Merrill Lynch has reduced its growth forecast for US radio from 4.3% for Q3 and Q4 to 3.3% and 2.7% respectively.
Figures from American Business Media reveal that US business to business (B2B) print advertising spending fell by 10% in April and 1% in May although a third quarter upturn is predicted. Magazines as a whole are performing better with ad revenues up by 8.5% in June, according to the Publishers Information Bureau (PIB).
There are also signs of improvement in the newspaper industry with turnover up by 2% in the second quarter. However, a fall off in classified advertising has prompted Merrill to cut its full year growth forecast to 2.5%.
US online advertising spend will grow by 5% to $6.3 billion this year, according to the latest forecasts from eMarketer. However, revenues are not expected to return to the boom levels of 2000 for another three years.
The UK situation The Advertising Association (AA) has now issued definitive advertising expenditure figures for 2002. These show that total adspend came to £16.73 billion last year, an increase of 1.2% on 2001 but a 0.4% decline in real terms.
More recent figures from the AA reveal that the display market remained slack in Q1 2003 as a result of the war and the weak economy. Expenditure was up by just 0.7% year on year to £2.03 billion. Growth is predicted to remain below 4% during the course of this year, with Q4 expected to show a rise of 3.8%. Moving into 2004, the first half of the year will see revenues climb by more than 5%, whilst H2 will see 6.3% display growth.
The latest Bellwether Report from the IPA would seem to indicate that marketers are not convinced of the promising outlook for 2004. In these ‘volatile times’, almost 30% of companies are revising their budgets downwards, with just 18% reporting an upward revision.
The ITV companies are yet to see any turnaround in fortunes and revenues at the network will be down 3.3% in 2003, according to analysts at Lehman Brothers. With their merger on ice and with no major football tournament to boost income, Carlton and Granada have endured a difficult summer. Audience figures are on the up but revenue growth is expected to be flat in the early part of 2004 with better trading not forthcoming until the second half.
Economic conditions are tough elsewhere with Pearson, the owner of the FT, reporting a 3% decline in first half revenues. However, Guardian Media Group posted strong financial results for the twelve months to March with growth occurring in both circulation and advertising.
The UK’s Technology, Media and Telecommunications (TMT) FTSE shares index increased by 14.1% during July as shown.
