UK Media Inflation Forecasts From Mediaedge:cia

Taking ‘life in one hand and a cup of tea leaves in the other’, Fletcher predicts that total advertising will grow in line with GDP in 2004, representing a modest recovery against recent trends. During this year, advertising has declined from 1.38% to 1.19% of GDP, according to the report.

Total adspend is set to rise 5% next year, whilst media supply will rise by only 3%, it says. This gives a cost inflation of 2%. Inflation is expected to fall by 1% this year, as supply rises faster than expenditure.

Television is expected show deflation this year, as supply growth outpaces spend. Moving into 2004, TV spend is forecast to rise 3% whilst supply rises just 2%, giving a small 1% inflation. MediaLab predicts that TV will continue to lose share of total advertising each year, although the rate of decline with slow to around 0.5% points per year.

It is direct marketing that is the main beneficiary of television’s loss. The DM sector has benefitted from an explosion in consumer service businesses, particularly finance, and an increasing ability to use customer data for customer relationship management (CRM), says MediaLab. DM’s share of spend has grown by around 1.5% points per year in 2002 and 2003; MediaLab expects this rate to fall to 0.9% points in 2004 and 2005.

National newspapers have also been hit by DM’s gain and this decline is expected to continue. “Whereas the Newspaper Marketing Association (NMA) represents a significant positive step in marketing the medium, we believe that in the short term the best that the NMA will help achieve will be a reduction in the rate of share decline, which we have forecast at around half the current rate,” says Fletcher.

Consumer press is expected to benefit from modest, innovation-driven circulation gains, whilst business press will continue to lose expenditure to DM and the internet. Consumer mags are forecast to see revenue growth of 6% next year and 8% in 2005; business press will decline by 4% and 3% on the same basis.

The report says that outdoor will continue to find favour, particularly as global brands look to exploit Olympic-related themes. “Marketers increasingly think of outdoor as a born-again broadcast medium,” says Fletcher.

Radio’s growth rate is expected to slow but remain positive and cinema will grow as audience numbers continue to rise.

As far as the internet is concerned, MediaLab says that there is much more revenue to be had, but as this is off a low base with an ‘indefinitely elastic’ supply, the opportunity to increase yields will be limited.

Media Inflation Forecasts
	Spend YoY % Change*				Supply YoY % Change*			Inflation
	2002	2003	2004	2005	2003	2004	2005	2003	2004	2005
National newspapers (inc. supplements)	-6	-1	3	4	0	1	2	0	1	2
Regional newspapers	2	2	5	7	1	2	3	1	2	3
Consumer magazines	0	3	6	8	2	3	4	2	3	4
Business & professional magazines	-11	-5	-4	-3	-2	-2	-1	-2	-2	-1
Television	4	1	3	4	7	2	2	-6	1	2
Direct marketing	7	7	10	11	4	7	8	3	2	2
Outdoor	2	8	7	6	9	2	1	-1	5	5
Radio	1	4	7	9	2	4	4	2	4	4
Cinema	10	2	5	6	2	5	6	0	0	0
Internet	19	9	11	12	8	8	10	1	3	2
Total display, direct marketing, internet	2	3	5	6	4	3	4	-1	2	2
* Current prices, display; all bar DM excluding production
Source: Mediaedge:cia, October 2003