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Magna Global: US Update Jan 2013
 

Magna Global: US Update Jan 2013

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MAGNA GLOBAL US Update: TV Advertising Market Will Struggle in Post-Election & Olympics Year

MAGNA GLOBAL US Update: TV Advertising Market Will Struggle in Post-Election & Olympics Year

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    Magna Global: US Update Jan 2013 Magna Global: US Update Jan 2013 Document Transcript

    • ------------------------- PRESS RELEASE Contact: Belle Lenz Belle.lenz@mbww.com 212-883-4791 Friday 18 January 2013 MAGNA GLOBAL US Update: TV Advertising Market Will Struggle in Post-Election & Olympics Year Core Media Owners Advertising Revenues are Expected to Grow by +0.6% (+2.7% ex-P&O) Growth in Digital Media and Mobile Advertising Predicted to Offset Revenue Declines in Television, Print and Radio Key points US core media owners advertising revenues grew +4.7% in 2012 to $153.4bn. Excluding record levels of incremental revenues generated by non-recurring events - Olympics ($640m) and Political ($2.8bn) (P&O) – the underlying growth was a more modest +2.7%. Digital media grew by +14.4% with online video reaching $2bn in advertising revenue and mobile advertising doubling in size to $3bn. For 2013, amidst slow economic recovery and a tough comparison, core media owners advertising revenues are expected to grow by +0.6% (still +2.7% ex-P&O). Television revenues will decline by -3.0% (compared to -1.4% previously forecast). Growth in digital media (+14.2%) and mobile advertising (+55.0%) will offset revenue declines in television, print and radio. 2012: record Political spending drove market growth to +4.7% (+2.7% without P&O)
    • MAGNA GLOBAL has adjusted its 2012 estimates and revised its 2013 forecasts for the US advertisingmarket. Excluding the incremental revenues derived from Political and Olympic ad spending, core mediaowners ad revenues grew by +2.7% in 2012.Digital media remained strong (+14.4% to $36.3bn) driven by mobile advertising (up more than 80% tonearly $3bn) and search (+18.4% excluding mobile, to $17.5bn). Traditional banner display formats hadminimal growth (+1.5% to $13.7bn) due to price declines. Online video also experienced price decreases in2012 as the difference between online video (e.g. Hulu) and broadcast TV costs narrowed significantly; acontinued increase of supply and consumption of online video content led, however, to another year ofdouble-digit growth (+15.0% to $2.1bn). Overall, digital media represents 23.7% of core media advertisingin the US, which is now bigger than newspapers and magazines combined. However, in some of the mostadvanced European markets (e.g. UK) digital media already controls more than 30% of total advertising,suggesting there is still room for growth in the US too.The various segments of television experienced widely contrasted trends in 2012. English-speaking nationalTV networks advertising revenues decreased -2.6% to $13.1bn on a normalized basis, but increased +2.2%if factoring in $640m of non-recurring Olympic ad spend. National cable television keeps gaining audienceshare and advertising revenues from broadcast networks, as it grew by +5.1% to $23.1bn. National cablerepresents 59% of total national television, compared to 40% in 2001, against 33% for English-Speakingnational broadcast networks, 3% for Spanish-speaking broadcast networks and 5% for syndication. Totalnational television advertising (cable and broadcast, ex-P&O) increased +2.4%. Local TV media ownerrevenues increased +1.5% (ex-P&O) to $19.8bn as the media benefited from a healthy automotive market.Print advertising was challenged throughout the year. Ad pages were down almost 8% in magazines. On afull-year basis we estimate revenues to have dropped by -6.8% for magazines and -6.5% for newspapers.Outdoor advertising grew by +4.6%, in line with expectations, driven by the rise of digital inventory andhelped by political advertising in 3Q and 4Q. Broadcast and satellite radio (excluding digital) grewmodestly +0.6% to $15.3bn with satellite advertising growing faster than local and network radio. Inaddition, radio media owners derived half a billion dollars of ad revenues from online activities (+7%) butthat only represents 3% of their total advertising revenues.As anticipated by MAGNA GLOBAL, the cyclical Political and Olympics (P&O) spending hit record levelsand generated incremental advertising revenues of $2.8bn and $640m, respectively. The political spendingwas 32% higher than in the last political cycle (2010, the first year affected by the Citizen United decision)and 62% higher than in the previous Presidential election year (2008). Including these non-recurringincremental revenues, local TV was up +13.4% to $22.6bn, total television was up +7.2% to $62.7bn andtotal core media advertising was up +4.7% to $153.4bn. This is an average performance for a quadrennialyear: four years ago in 2008, the quadrennial boost was not nearly enough to offset the impact of economicrecession (-5.2%) but 2000 and 2004 were up by 11% and 7% respectively.2013: healthy corporations will keep investing intheir brands despite slow economic growth (+0.6%growth for core media, +2.7% without P&O)Consistent with our previous update in October, the economic prospects for 2013 continue to point to a slowrecovery. The latest economic indicators have been mixed. Real GDP is now expected by the Survey of
    • Professional Forecasters (SPF) to increase by +2.0% (i.e. the same rate as 2012, a decrease of -0.1%compared to summer expectations). Nominal GDP is expected to increase +4.0%. Of the two economicindicators that we find more directly influential in our modeling of media owners advertising revenue levels,real Personal Consumer Expenditure (PCE) is forecast to grow +2.1% (in line with previous forecasts) butIndustrial Production is expected to grow by only +2.4%, -0.5% slower than expected previously (+2.9%),and slowing down from +3.7% growth in 2012.Consumer confidence dipped in December to 72.9 (down from 82.7 in November) but most of the decreasewas likely due to the anxiety surrounding the “fiscal cliff”, so we expect the index to gradually return to the80s if the debt ceiling deadline is met in February and the uncertainty created by the “fiscal cliff”discussions are finally put behind us. Employment is still slowly improving as 155,000 new jobs werecreated in December, in line with the average monthly gain of 2012, but that was not enough to change the7.8% unemployment rate. More than twelve million Americans are still without a job.On the bright side, most US companies are financially healthy and have the capability to keep investing inmarketing and communication. Corporate profitability after tax is expected to grow by +5.7% in 2013,which is less than previously expected by the SPF (+6.9%) but still accelerating from +2.9% in 2012.Under these conditions, MAGNA GLOBAL has reduced its top line 2013 growth forecast – for totalnormalized media spend (excluding P&O, including direct marketing) - from +1.3% to +1.0%. Thisassumes that the debt ceiling discussion in February will be successful, and that economic prospects remainon track, so that marketers will feel confident enough to plan some increase of their marketing budgets in thespring. Direct marketing categories are expected to decline again, but core media advertising (TV, Print,Internet, OOH, radio) will outperform the trend at +2.7% (October forecast: +2.8%) and thus continueto grow at a similar underlying rate as in 2012.National television is the category we have revised most significantly, down to +2.1% from +4.8% inOctober. Since the beginning of the broadcast season in September, the scatter market prices have showedvery little “premium” over the upfront CPM inflation despite the fact that primetime ratings have beenweaker than expected (-5% for broadcast networks, -2% for cable networks, on adults 18-49, includingsports) and broadcasters had to serve extra spots to meet their guaranteed impact. That unusual patternreveals weak demand. As a result, national broadcast revenues (ex P&O) were down by -5.5% in the secondhalf of 2012 and we expect a similar softness throughout the first part of 2013. English-speaking nationalnetwork TV will be impacted the most from this trend, with revenues decreasing by -6.4% (or -1.8% ex-P&O) in 2013. National cable will continue to benefit from better ratings and gain market share frombroadcast: revenues will thus grow +4.0%. Local TV is forecast to grow +1.4% on a normalized basis anddrop -9.1% when including (the lack of) Political advertising. Overall, television media owners ad revenuesare now expected to decrease by -3.0% in 2013 (local and national, broadcast and cable, incl. P&O).Digital media is largely unaffected by cyclical spending and will continue to grow double-digits in 2013(+14.2% to $41.5bn) with mobile advertising alone growing +55% to $4.5bn.Vincent Letang, EVP, Director of Global Forecasting said: “The concept of mobile advertising startedwith smartphones but tablets are changing everything, rapidly establishing themselves as universal mediaplayers (TV programmes, movies, radio, news, magazines) in a way never achieved through “personal”
    • computers. By their versatility and user-friendliness, tablets are increasing digital media usage andredefining social media, online video and e-commerce. Their influence will be felt far beyond on-the-gomedia usage as a growing proportion of that happens in the home. Part of that usage is cannibalizing mediatime spent on desktops and laptops, but tablets bring incremental media exposure, partly throughmultitasking” . This new environment creates new opportunities as well as challenges for marketers andmedia owners. Despite the complexities in the ecosystem, the difficult upgrade of media measurement andthe painful redefinition of many business models, MAGNA GLOBAL believes we have only scratched thesurface of this new world: advertising on mobile devices is forecast to grow to $11.5bn in the next five yearsand by 2017 it will represent 18% of total digital advertising and 6% of total media advertising in the US*.Elsewhere we anticipate “paper-based” print media advertising revenues to decrease at a higher rate in 2013:-7.9% for newspapers and -7.3% for magazines. Newspaper readership decline is likely to accelerate.Magazines have more loyal readers but are struggling in the face of advertisers transferring part of theirbudgets online and on air. Core categories (fashion, beauty, pharmaceutical) remain loyal but otherimportant categories (auto, technology, travel and finance) are increasing exploring cheaper alternatives ontelevision and digital media. Meanwhile, publishers are experimenting with tablet editions without derivingany significant incremental advertising revenue yet. Radio advertising will experience a mild decline in2013 (-0.5%), while outdoor media will be the only traditional media category to show some growth(+3.6%).In terms of spending categories, MAGNA GLOBAL is expecting technology, personal care and retail to bepositive, while ad spend from pharmaceuticals and food will show little or no growth.In our long term forecast, we predict media owners ad revenues to accelerate over the next three years: 2014(+3.1% excl. P&O) 2015 (+4.2%) and 2015 (+4.6%) as the economy gradually improves.The next update of MAGNA GLOBAL’s US Advertising Forecasts will be published in April 2013.*More insights on mobile advertising in MAGNA GLOBAL’s latest Media Economy Report: “The UltimateMobile Deep Dive” published earlier in January. The full report is available for download here.
    • KEY FORECASTSUS Media Owners Advertising Revenues: growth forecasts by media category (incl.P&O) 2013E 2011A 2012E 2013E (Oct. 12)Total TV (incl. P&O) 1.3% 7.2% -3.0% -1.4%Internet 21.9% 14.4% 14.2% 11.7%Newspapers -9.2% -6.5% -7.9% -7.4%Magazines -0.5% -6.8% -7.3% -7.1%Radio -0.5% 0.6% -0.5% -0.6%OOH 4.0% 4.6% 3.6% 3.9%Total Core Media (incl. P&O) 3.2% 4.7% 0.6% 0.8%Directories -20.2% -23.5% -25.4% -25.6%Direct Mail -0.9% -5.9% -6.5% -4.3%Total Incl. DM 1.7% 2.6% -0.8% -0.4% Source: MAGNA GLOBAL, January 2013Summary of top line indicators 2012-20132012E Incl. P&O Ex P&OCore Media (ex. DM) ($bn) $153.4 $150.0 growth 4.7% 2.7% previous forecast (Oct 2012) 4.6% 2.6%Total Media (incl. DM) ($bn) $176.8 $173.4 growth 2.6% 0.8% previous forecast (Oct 2012) 2.7% 0.9%2013E Incl. P&O Ex P&OCore Media (ex. DM) ($bn) $154.4 $154.0 growth 0.6% 2.7% previous forecast (Oct 2012) 0.8% 2.8%Total Media (incl. DM) ($bn) $175.4 $175.0 growth -0.8% 1.0% previous forecast (Oct 2012) -0.4% 1.3% Source: MAGNA GLOBAL, January 2013NotesDM = Direct Marketing (traditional directories, direct mail).P&O = Incremental Political and Olympic Advertising.Long term forecasts 2004-2017Normalized ad revenues excl. DM, excl. P&O 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Total 151.6 159.9 165.0 167.5 156.8 133.3 139.3 146.1 150.0 154.0 158.8 165.5 173.1 181.0change 6.0% 5.4% 3.2% 1.5% -6.4% -15.0% 4.5% 4.9% 2.7% 2.7% 3.1% 4.2% 4.6% 4.6%
    • Source: MAGNA GLOBAL, January 2013About MAGNA GLOBAL Advertising ForecastsFor more than 40 years, MAGNA GLOBAL forecasts have been the industry’s leading source formeasuring and forecasting advertising revenues. MAGNA GLOBAL forecasts media owners’advertising revenues in the US and around the world through financial analyses of mediacompanies’ public filings, government reports, trade association data and local market expertise.MAGNA GLOBAL’s new methodology was introduced to the industry in 2009 and has redefinedmeasurement for the advertising-supported media economy, delivering unparalleled authority andaccuracy. Our US Advertising Revenue Forecast study includes detailed data for more than40 categories of media on a quarterly basis from 1990 to 2013 and on an annual basis from 1980 to2017, updated quarterly. Detailed data in excel format is available to MAGNA GLOBALsubscribers. Please contact vincent.letang@magnaglobal.com for further details.About MAGNA GLOBALMAGNA GLOBAL is the strategic global media unit of Interpublic Group, driving forecasts,insights and negotiation strategy across all media channels. The MAGNAGLOBAL IntelligenceUnit delivers the industry’s most accurate and authoritative forecast of media value. The MAGNAGLOBAL Investment Unit harnesses $30 billion of Mediabrands global media billings. Follow uson Twitter for updates @MAGNAGLOBAL.