Zenith Warns Of No Real Recovery Until 2004 In Global Ad Forecasts

An analysis of the world’s seven largest markets, which comprise 73% of the total global expenditure, shows that any significant growth is not likely until 2004 in constant currencies, rather than the 2003 pick-up that many commentators have been anticipating.

The US will lead any recovery, with a weak first half prompting some minor downgrades in the European figures. Full year 2002 global growth, on the other hand, has been slightly upgraded from -0.5% to -0.3%.

Major Media Advertising Expenditure (Top 7 Markets, $m)
		2000	2001	2002	2003	2004
Five-country, of which:	Europe	53,908	51,319	49,795	50,686	52,811
	France	9,056	8,609	8,481	8,693	9,015
	Germany	17,676	16,712	15,821	15,960	16,932
	Italy	7,097	6,884	6,694	6,881	7,125
	Spain	5,013	4,725	4,587	4,649	4,835
	UK	15,066	14,390	14,211	14,503	14,904
	Japan	37,248	36,500	35,094	35,547	36,057
	USA	144,389	135,585	135,465	137,482	142,816
Seven-country total		235,545	223,404	220,354	223,715	231,684
Zenith Optimedia, September 2002

UK Television got a boost in Q2, largely from World Cup spend (see Outlook Improves For ITV Advertising) and since then continuing and broader demand has brought a 5.0% increase in Q2 (as against -11.0% in Q2 2001). It is the best indication of recovery so far, says Zenith, although it does not expect TV to make substantial progress in the forecast period.

Press was later into recession than TV but fell 9.0% in Q2. The forecasts expect it to level out to -3.5% for the year.

A Q4 pick-up in outdoor is looking likely, at least compensating for weakness earlier in the year, says the report. Radio is expected to show -2.7% growth this year.

US Zenith has added $1.6 billion to its forecast for US major media spend in 2002, which brings the year almost in line with 2001 in terms of gross spend. This increase is mainly fuelled by heavy spending in local markets by political candidates, auto, retail, telecoms and movie studios, says the report.

Local TV, local radio and outdoor inventory is well-demanded in H2, so prices are remaining firm (see TV In Americas Outlook To 2007 From Zenith Optimedia). Newspapers’ fall in demand is stabilising quicker than expected and Zenith estimates a 2.5% decline in this sector in 2002 (as against 4.0% predicted in July).

Current strength in the US TV scatter market is making up for the ‘dismal’ 2001-2002 upfront, says Zenith. The network, cable and syndication TV forecasts remain are unchanged.

“The 2002-3 upfront has attracted widespread coverage for its apparent strength [see US Upfronts Outpace Even Most Bullish Expectations, Says Myers] but even in a good year it accounts for only 25% of all TV and 10% of all media and a large proportion of future bookings are cancellable,” says the report. Nevertheless, the indications are currently that cancellation rates are very low (see US Advertising Update From Merrill Lynch).

Continental Europe Germany’s January-July adspend fell by 6.1%, causing Zenith to downgrade 2002 to -5.3% (-3.7% previously). TV investment rose 2.4% during the World Cup, but is likely to fall 6.1% in the full year. RTL’s results recently indicated a weak TV advertising market in Germany (see RTL Sees No Ad Improvement As Earnings Tumble).

Forecasts for France remain unchanged and there is not much optimism for H2 2002; real growth is not expected to return until 2003.

In Italy advertising contracted 4.2% in the first half. The World Cup did not produce the expected boost to TV, which had already endured a tough Q2. A slight TV revenue downgrade brings the full-year prediction down to -2.8%, from -2.3% previously. “Even this may be a lot to demand of a market which seems determined to remain linear in the second half, with weakness in auto, finance, and postponed telecoms activity,” says Zenith.

Spain, meanwhile, gets a minor upgrade to -2.9% for 2002, from -3.8% in Zenith’s mid-year forecast.

Major Media Advertising Growth (Top 7 Markets, $m)
		2001 v 2000		2002 v 2001		2003 v 2002		2004 v 2003
		Constant	Current	Constant	Current	Constant	Current	Constant	Current
Five-country:	Europe	-4.8	-6.9	-3.0	-4.6	1.8	0.0	4.2	2.3
	France	-4.9	-6.4	-1.5	-3.0	2.5	1.1	3.7	2.3
	Germany	-5.5	-7.7	-5.3	-6.6	0.9	0.0	6.1	4.8
	Italy	-3.0	-5.6	-2.8	-4.5	2.8	1.4	3.5	1.9
	Spain	-5.8	-9.0	-2.9	-5.8	1.3	-1.2	4.0	1.6
	UK	-4.5	-6.2	-1.2	-3.0	2.1	-0.9	2.8	0.0
	Japan	-2.0	-1.3	-3.9	-3.0	1.3	1.9	1.4	1.4
	USA	-6.1	-8.7	-0.1	-1.7	1.5	-0.1	3.9	1.8
7 country total		-5.2	-7.1	-1.4	-2.6	1.5	0.2	3.6	1.9
Source: Zenith Optimedia, September 2002