2009 advertising forecast by magnaglobal
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2009 advertising forecast by magnaglobal
- 1. MAGNA Global 2010 Advertising Forecast December 2009
- 2. WWW.MAGNAGLOBAL.COM Contact MAGNA globalforecasting@magnaglobal.com MAGNA| Mediabrands | The Interpublic Group of Companies 100 West 33rd Street, 8th Floor, New York NY 10001 P: +1 646 376 1560 | F: 917 305 4192 MAGNA’s proprietary research may not be reproduced for directly commercial activities without written authorization from MAGNA
- 3. 32010 ADVERTISING FORECAST Global Summary WWW.MAGNAGLOBAL.COM -4.8% -2.7% -10.5% 0.2% 5.7% 6.0% -2.4% -4.6% -10.6% -0.6% 5.3% 4.6% 3.4% 5.5% 4.4% -7.7% 1.7% 9.0% 11.6% 6.1% 6.5% 8.4% 1.4% -14.9% 5.9% 2.3% 5.4% 4.9% 6.3% 5.1% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Media Supplier Core Advertising Revenues (Growth) Euros Dollars 336 320 311 278 279 294 312 305 291 260 258 272 284 294 310 324 297 274 279 304 339 360 383 415 421 358 380 388 409 429 456 480 - 100.0 200.0 300.0 400.0 500.0 600.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Media Supplier Core Advertising Revenues (in Billions) Euros Dollars 336 320 311 278 279 294 312 305 291 260 258 272 284 294 310 324 297 274 279 304 339 360 383 415 421 358 380 388 409 429 456 480 - 100.0 200.0 300.0 400.0 500.0 600.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Media Supplier Core Advertising Revenues (in Billions) Euros Dollars
- 4. 2010 ADVERTISING FORECAST4 Global Summary After a period of tremendous uncertainty, the ―Great Recession‖ of 2008-2009 is at last receding in most parts of the world. But the damage wrought was deep and lasting for many. In US dollar terms, media suppliers‘ advertising revenues declined by 15% during 2009 as the economy faced near-collapse, industrial activity came to a near-halt in many sectors, consumers curtailed their spending and marketers around the world generally cut back. Declines were particularly severe for media suppliers in some countries, especially Estonia, Kazakhstan, Lithuania, Romania and Turkey. But perhaps surprisingly, pockets of growth were evident in such large markets as Brazil, China, Indonesia and India. Combined, media suppliers‘ global advertising revenues exceeded $358 billion during 2009. 2010 marks a return to growth for most – but not all – parts of the world. With this growth, the ad-supported media economy should also grow. Certainly, many areas hit worst in 2009 will rebound, others which sailed through 2009 without pause will continue, but most will resume normal rates of growth, largely driven by advertising‘s relationship with the broader economy. In many countries – especially slower-growing, developed economies – this translates into low single-digit growth. For example, over the next five years, most of the long-established large advertising economies (such as the United States, Japan and Germany) will post growth of less than 2% each year. In real, inflation-adjusted terms, this means a virtual standstill, largely due to maturing categories in established markets and the corresponding shifts these marketers make from media to marketing services as well as the rise of alternative marketing strategies pursued by smaller advertisers (some of which are free, such as online classifieds, and others which are paid such as public relations, product design or creative distribution strategies). Few of these vehicles can be captured, let alone quantified, in any study of media. From the perspective of an American marketer, media owner, agency or supplier, limited domestic expansion has favored activities abroad. Growth in emerging markets such as BRIC (Brazil, Russia, India, China) and other countries including Poland and Indonesia contribute significantly to the total size of the worldwide advertising-supported media industry, which in US dollar terms will have grown by 62% between 2000 and 2015 on a nominal basis. However, if measured in Euro terms, global advertising will actually have fallen by 4% over the same time. Put another way, currency moves will have accounted for all of the industry‘s growth during the period in question. However, this notion ignores the tremendous change that has occurred within the industry and that has yielded varying outcomes for different media sectors. Firstly, media distribution has changed significantly. Pay TV and other (often free) multichannel video services are now widespread in most countries, fragmenting audiences, but increasing consumption of Television (adding to Television‘s absolute dominance as a media vehicle in most countries). Internet access and use have widened beyond the ~400 million individuals online in 2000, to more than 2.4 billion who will be online by 2015. Mobile services will proliferate even more widely, rising from approximately 700 million subscriptions in 2000 to 6.4 billion in 2015, almost enough for one mobile subscription per person globally (although many people will have more than one – and sometimes more than two – mobile devices). Within media, rising Internet access levels and the establishment of endemic ecosystems have led to an online industry generating more than USD$59 billion in advertising revenues during 2010 – and $98 billion by 2015, up from a mere $6 billion in the year 2000. Much of this growth will clearly have come from Print, as Magazines will have fallen slightly ($39 billion in advertising revenues during 2000, and $35 billion in advertising revenues expected in 2015) and Newspapers will be down similarly (from $97 billion in 2000 to $92 billion in 2015). Television clearly retains its dominance, growing from $98 billion in advertising revenues during 2000, nearly doubling to $189 billion in 2015. Compounded Annual Growth Rate (CAGR) 2010-2015 Global Media Supplier Advertising Revenues 6.7% 2.5% -0.6% 1.9% 10.5% 8.8% 12.1% 5.0% -5.0% 0.0% 5.0% 10.0% 15.0% Outdoor Radio Magazines Newspapers Total Online Other Online Media Search Television
- 5. 52010 ADVERTISING FORECAST -1% 1% 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 2% 2% 3% 3% 3% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 5% 5% 5% 5% 6% 6% 6% 7% 7% 7% 7% 7% 8% 8% 8% 8% 8% 9% 9% 9% 9% 9% 9% 9% 10% 11% 11% 11% 12% 12% 12% 12% 14% 16% 17% 18% -5% 0% 5% 10% 15% 20% Puerto Rico Switzerland Germany Portugal Japan Italy Netherlands Ireland United States France Belgium Spain Greece Austria Canada Denmark New Zealand Latvia Mexico Hong Kong Finland Czech Republic Sweden Norway Australia Lithuania United Kingdom Chile Estonia Croatia Taiwan Hungary Serbia Slovenia South Africa Brazil Egypt Bulgaria Costa Rica Slovakia Ecuador Lebanon Philippines Turkey GCC Peru Poland Thailand Singapore Morocco Colombia Ukraine Uruguay South Korea Panama Malaysia Argentina Indonesia Russia Kazakhstan India Romania China 2010-15 Advertising CAGR in USD -1% 1% 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 2% 2% 3% 3% 4% 4% 4% 4% 4% 5% 4% 4% 3% 5% 4% 6% 5% 5% 4% 7% 7% 6% 11% 9% 7% 8% 8% 7% 8% 8% 9% 8% 9% 9% 9% 9% 8% 10% 11% 10% 11% 8% 11% 10% 16% 10% 13% 14% 14% 17% 15% -5% 0% 5% 10% 15% 20% Puerto Rico Switzerland Germany Portugal Japan Italy Netherlands Ireland United States France Belgium Spain Greece Austria Canada Denmark New Zealand Latvia Mexico Hong Kong Finland Czech Republic Sweden Norway Australia Lithuania United Kingdom Chile Estonia Croatia Taiwan Hungary Serbia Slovenia South Africa Brazil Egypt Bulgaria Costa Rica Slovakia Ecuador Lebanon Philippines Turkey GCC Peru Poland Thailand Singapore Morocco Colombia Ukraine Uruguay South Korea Panama Malaysia Argentina Indonesia Russia Kazakhstan India Romania China Advertising CAGR In Trading Currency 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% -1% 0% -1% 0% -1% 0% 0% -1% 0% 0% 1% 0% 0% -2% 0% 0% 2% -1% 0% 0% -4% -2% 0% 0% 0% 0% 0% 0% -1% 0% 0% 0% 0% 0% 1% 0% -1% 0% 0% 3% 0% 2% -4% 2% -1% 0% 1% 0% 2% -6% -4% -2% 0% 2% 4% 6% Puerto Rico Switzerland Germany Portugal Japan Italy Netherlands Ireland United States France Belgium Spain Greece Austria Canada Denmark New Zealand Latvia Mexico Hong Kong Finland Czech Republic Sweden Norway Australia Lithuania United Kingdom Chile Estonia Croatia Taiwan Hungary Serbia Slovenia South Africa Brazil Egypt Bulgaria Costa Rica Slovakia Ecuador Lebanon Philippines Turkey GCC Peru Poland Thailand Singapore Morocco Colombia Ukraine Uruguay South Korea Panama Malaysia Argentina Indonesia Russia Kazakhstan India Romania China Local CurrencyGrowth (Decline) Global Summary = +
- 6. 62010 ADVERTISING FORECAST Global Summary Total Advertising Annual Growth Search Advertising Annual Growth Other Online Advertising Annual GrowthTV Advertising Annual Growth Newspaper Advertising Annual Growth Radio Advertising Annual Growth Outdoor Advertising Annual GrowthMagazine Advertising Annual Growth -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E 0.0% 50.0% 100.0% 150.0% 200.0% 250.0% 300.0% 350.0% 400.0% 450.0% 500.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 2014E 2015E
- 7. 72010 ADVERTISING FORECAST Table of Contents INTRODUCTION ...........................................................................................................................................................................................10 SIDEBAR: ABOUT MAGNA ..........................................................................................................................................................................................................................................10 CHART: GLOBAL CORE MEDIA ADVERTISING...................................................................................................................................................................................................11 SIDEBAR: 2010 NOMINAL GDP GROWTH...................................................................................................................................................................................................................12 CHART: KEY GLOBAL MEDIA DATA POINTS......................................................................................................................................................................................................13 SIDEBAR: MAGNA’S APPROACH TO MEDIA FORECASTING.........................................................................................................................................................................................14 CHART: TELEVISION ADVERTISING..................................................................................................................................................................................................................17 SIDEBAR: E-COMMERCE AND ADVERTISING ..............................................................................................................................................................................................................18 CHART: SEARCH ADVERTISING........................................................................................................................................................................................................................19 SIDEBAR: 2010 CONSUMER PRICE INFLATION............................................................................................................................................................................................................20 CHART: OTHER ONLINE ADVERTISING.............................................................................................................................................................................................................21 SIDEBAR: GLOSSARY...................................................................................................................................................................................................................................................22 CHART: NEWSPAPER ADVERTISING ................................................................................................................................................................................................................23 CHART: MAGAZINE ADVERTISING...................................................................................................................................................................................................................25 CHART: RADIO ADVERTISING..........................................................................................................................................................................................................................27 CHART: OUTDOOR ADVERTISING....................................................................................................................................................................................................................29 CHART: OUTDOOR ADVERTISING............................................................................................................................................................................. 29 REGIONAL SUMMARY ..................................................................................................................................................................................30 LATIN AMERICA..........................................................................................................................................................................................................................................................30 EMEA .........................................................................................................................................................................................................................................................................32 APAC..........................................................................................................................................................................................................................................................................34 APAC...............................................................................................................................................................................................................................................................................34
- 8. 8 2010 ADVERTISING FORECAST Table of Contents WWW.MAGNAGLOBAL.COM COUNTRY PROFILES .....................................................................................................................................................................................36 ARGENTINA................................................................................................................................................................................................................................................................36 AUSTRALIA.................................................................................................................................................................................................................................................................38 AUSTRIA.....................................................................................................................................................................................................................................................................42 AZERBAIJAN...............................................................................................................................................................................................................................................................44 BELGIUM....................................................................................................................................................................................................................................................................46 BOSNIA & HERZEGOVINA...........................................................................................................................................................................................................................................48 BRAZIL........................................................................................................................................................................................................................................................................50 BULGARIA ..................................................................................................................................................................................................................................................................54 CANADA.....................................................................................................................................................................................................................................................................56 CHILE..........................................................................................................................................................................................................................................................................58 CHINA ........................................................................................................................................................................................................................................................................60 COLOMBIA.................................................................................................................................................................................................................................................................64 COSTA RICA................................................................................................................................................................................................................................................................66 CROATIA ....................................................................................................................................................................................................................................................................68 CZECH REPUBLIC........................................................................................................................................................................................................................................................70 DENMARK..................................................................................................................................................................................................................................................................72 ECUADOR...................................................................................................................................................................................................................................................................74 EGYPT ........................................................................................................................................................................................................................................................................76 ESTONIA.....................................................................................................................................................................................................................................................................78 FINLAND.....................................................................................................................................................................................................................................................................80 FRANCE......................................................................................................................................................................................................................................................................82 GERMANY ..................................................................................................................................................................................................................................................................86 GREECE ......................................................................................................................................................................................................................................................................90 GULF COOPERATION COUNCIL (GCC) ........................................................................................................................................................................................................................92 HONG KONG ..............................................................................................................................................................................................................................................................94 HUNGARY ..................................................................................................................................................................................................................................................................96 INDIA..........................................................................................................................................................................................................................................................................98 INDONESIA...............................................................................................................................................................................................................................................................102 IRELAND...................................................................................................................................................................................................................................................................104 ITALY........................................................................................................................................................................................................................................................................106 JAPAN ......................................................................................................................................................................................................................................................................110 KAZAKHSTAN ...........................................................................................................................................................................................................................................................114 KAZAKHSTAN ..................................................................................................................................................................................................................................................114
- 9. 92010 ADVERTISING FORECAST Table of Contents LATVIA .....................................................................................................................................................................................................................................................................116 LEBANON.................................................................................................................................................................................................................................................................118 LITHUANIA...............................................................................................................................................................................................................................................................120 MALAYSIA ................................................................................................................................................................................................................................................................122 MEXICO....................................................................................................................................................................................................................................................................124 MOROCCO ...............................................................................................................................................................................................................................................................128 NETHERLANDS .........................................................................................................................................................................................................................................................130 NEW ZEALAND .........................................................................................................................................................................................................................................................132 NORWAY..................................................................................................................................................................................................................................................................134 PANAMA..................................................................................................................................................................................................................................................................136 PERU........................................................................................................................................................................................................................................................................138 PHILIPPINES .............................................................................................................................................................................................................................................................140 POLAND ...................................................................................................................................................................................................................................................................142 PORTUGAL...............................................................................................................................................................................................................................................................144 PUERTO RICO...........................................................................................................................................................................................................................................................146 ROMANIA.................................................................................................................................................................................................................................................................148 RUSSIA .....................................................................................................................................................................................................................................................................150 SERBIA .....................................................................................................................................................................................................................................................................154 SINGAPORE..............................................................................................................................................................................................................................................................156 SLOVAKIA.................................................................................................................................................................................................................................................................158 SLOVENIA.................................................................................................................................................................................................................................................................160 SOUTH AFRICA .........................................................................................................................................................................................................................................................162 SOUTH KOREA..........................................................................................................................................................................................................................................................164 SPAIN .......................................................................................................................................................................................................................................................................166 SWEDEN...................................................................................................................................................................................................................................................................168 SWITZERLAND..........................................................................................................................................................................................................................................................172 SYRIA........................................................................................................................................................................................................................................................................174 TAIWAN ...................................................................................................................................................................................................................................................................176 THAILAND ................................................................................................................................................................................................................................................................178 TURKEY ....................................................................................................................................................................................................................................................................180 UKRAINE ..................................................................................................................................................................................................................................................................182 UNITED KINGDOM ...................................................................................................................................................................................................................................................184 UNITED STATES........................................................................................................................................................................................................................................................188 URUGUAY ................................................................................................................................................................................................................................................................196 VENEZUELA..............................................................................................................................................................................................................................................................198 ..............................................................................................................................................................................................................................................................................198
- 10. 2010 ADVERTISING FORECAST10 Introduction ―The future is already here – it‘s just not evenly distributed,‖ according to renowned science fiction author William Gibson. Since Gibson‘s pronouncement in 1993, the degree to which the future has arrived for more and more citizens of the world is profound. For any industry (and any society) the foundations of the future lie in the often-expensive infrastructure around which it is built, from the first train tracks laid in the 19th century to the American inter-state highway system of the mid-20th century. The foundations of the future for media were put in place as fixed-location and wireless data networks were built out over the past several decades, and this infrastructure has become almost ubiquitous in recent years: on a global basis, by the end of 2010 there will be almost 2 billion active internet users and more than 4 billion active mobile subscriptions, up from approximately 400 million internet users and approximately 700 mobile subscriptions 10 years earlier. Around the world, the percentage of the population accessing fee-based new media platforms and related services and free platforms alike (such as FTA DTT) likely grew in all markets during 2009. As a result, in the aftermath of an economic downturn of near-catastrophic proportions, the pace at which people everywhere adopt new technologies strongly suggests that most of us have already seen the future, because we are presently living in it. The weak economy may have actually contributed to growth of media services, perhaps in part because they provide information which enable consumers to save money or find new opportunities. Mobile devices save costs when gathering information – with no need to take time to go somewhere to speak to someone about a job or selling something. Internet access allows a small business or an entrepreneur to connect with markets around the world and sell wares – avoiding legacy retail distribution channels in some cases. Pay TV provides relatively inexpensive entertainment – and helps avoid paying for other often more expensive out-of-home entertainment options. The increasing pervasiveness of new media distribution platforms media makes them increasingly viable for advertisers to develop them. Marketers care about how a platform will evolve to allow them to buy, lease, earn or manage their relationship with a consumer. And that means understanding how media distribution technologies evolve and how individual sellers of advertising – or media suppliers as we refer to them – use those platforms to drive growth or fall behind through their actively designed or implicitly realized strategies. A detailed understanding of media distribution is therefore critical in forecasting long-term expectations of how a media economy will develop over time. But in the short-term, we make no mistake ignoring the impact of the Great Recession of 2008-09, as this invariably sets the tone for how advertisers will behave in the near term. Around the world, credit evaporated, corporate investment was cut back, unemployment rose, confidence about the future worsened, consumer spending fell, and production and output dropped. Exports – and export-dependent economies – were hit particularly hard as supply chains ground to a halt in some instances, with the greatest fall in global trade since World War II. Economic stimulus packages and concrete proof that governments would rescue entities ―too big to fail‖ curbed economic decline and prevented the situation from worsening early in 2009: most global economies hit ―bottom‖ during the second quarter. Confidence gradually returned while credit and liquidity flowed, leading to a turnaround in many markets, and setting the stage for growth elsewhere in 2010. In order to negate the accompanying moral hazard risks associated with bail-outs, governments have had to take a more active role in regulating – or in the case of many institutions which were directly bailed out – dictating terms under which a company may continue to operate. WWW.MAGNAGLOBAL.COM About MAGNA MAGNA is the strategic global media unit responsible for forecasts, insights and negotiation strategy across all media channels on behalf of Mediabrands, part of Interpublic Group (NYSE: IPG). With $32 billion in global media billings according to RECMA, MAGNA exercises serious clout. But MAGNA’s clout is driven by much more than simply buying power. Our sophisticated approach to managing data and insights delivers actionable intelligence to our affiliated planning and buying teams around the world. More importantly, our ability to be nimble provides us with flexible scale: through a client-centric approach our negotiations are led by individual client needs, and the highest degree of confidentiality is always maintained. We do not sacrifice individual client objectives for the sake of a consolidated negotiation, but instead negotiate collectively when it is in the interests of each individual client to do so. This enables us to offer each client maximum value and cost-effectiveness, with local, regional and global media owners. MAGNA also provides strategic advisory services and analytical tools for assessing the media industry. We specialize in analysis of advertising-supported media sectors, including distribution services (such as cable, satellite and telecom services) as well as related technologies which impact the media economy. For more information, please contact us at: globalforecasting@magnaglobal.com
- 11. 112010 ADVERTISING FORECAST 0 10,000 20,000 30,000 40,000 50,000 60,000 Estonia Latvia Lithuania Lebanon Panama Serbia Slovenia Kazakhstan Croatia Bulgaria Costa Rica Uruguay Ecuador Peru Slovakia Puerto Rico Morocco Portugal Romania Chile Denmark Ukraine New Zealand Philippines Hungary Colombia Czech Republic Taiwan Singapore Ireland Finland Greece Turkey Belgium Malaysia Austria Egypt Norway Switzerland Argentina Sweden Mexico Netherlands South Africa Thailand Poland Indonesia GCC Spain India South Korea Canada Italy Russia Brazil France Australia United Kingdom Germany Japan China United States Total Advertising Revenues ($000s USD) 2015 2010 86 55 35 35 55 35 135 0 72 43 67 84 26 15 83 194 17 94 24 56 192 19 279 10 115 22 141 60 254 409 308 207 25 224 53 308 26 512 467 52 327 28 251 67 46 93 17 128 175 4 116 259 173 49 51 209 561 296 288 223 16 429 0 100 200 300 400 500 600 Estonia Latvia Lithuania Lebanon Panama Serbia Slovenia Kazakhstan Croatia Bulgaria Costa Rica Uruguay Ecuador Peru Slovakia Puerto Rico Morocco Portugal Romania Chile Denmark Ukraine New Zealand Philippines Hungary Colombia Czech Republic Taiwan Singapore Ireland Finland Greece Turkey Belgium Malaysia Austria Egypt Norway Switzerland Argentina Sweden Mexico Netherlands South Africa Thailand Poland Indonesia GCC Spain India South Korea Canada Italy Russia Brazil France Australia United Kingdom Germany Japan China United States 2010 Advertising Revenue Per Person($USD) Global Core Media Advertising WWW.MAGNAGLOBAL.COM US 2010: $133 bn US 2015: $147 bn Global Total 2010: $380 bn Global Total 2015: $480 bn
- 12. 2010 ADVERTISING FORECAST12 Introduction As the hardest-hit economies assess how to avoid future calamities affecting entire financial systems, endless studies on countries which emerged relatively unscathed (such as Brazil, Canada and Australia) will start referencing best practices governments are likely to mandate for their banking sectors. Such an activist approach reflects a view of the financial system as vital infrastructure, no different (perhaps more important) than roads or ports, and therefore no more immune from government intervention as long as system-wide risks are posed by the collapse of any one market participant. For similar reasons, the view that government must have an active role in industry pervades beyond financial services in countries around the world. Virtually every element of the media industry touches government – for example through radio spectrum for television, radio and mobile communications, local governments for fixed telecommunications equipment and billboards – and so a view of government policies is critical to understanding the trajectory of any given medium in any given country. Information is a source of power, and as a primary means by which information is disseminated, virtually every government continues to oversee at least some elements of media content and media ownership, either on the grounds of encouraging multiple voices or in order to limit them. Liberalization of this oversight in the past has facilitated innovation by enabling new voices – individuals or corporations not allied to a country‘s political establishment – to enter a market. The innovation which follows may result in overall market growth. For example, India is gradually opening up to foreign capital in the media sector, and these investments – such as the American company Viacom‘s funding of Colors (a joint venture with Network 18 which has grown to become one of the most popular TV channels in India during 2009) – bring new capital and new ideas. Conversely, some governments continue to police the Internet for opposing voices. Non-governmental organization Reporters Sans Frontières lists 94 ―cyber-dissidents‖ in nine countries as of late 2009. Such restrictions likely constrain the growth of services featuring user-generated content. Standard-setting is another area in which governments have an active interest, because common standards facilitate development of products and services around them. Europeans might argue that the 3G GSM standard supported by the European Union for mobile operators allowed EU members to take an early leadership position on mobile hardware, services and consumer experiences because the common standard allowed vendors of equipment to reduce underlying costs and proliferate. But Americans might respond that allowing for competition in standards increases the chances that better solutions emerge through innovation, which is best facilitated with minimal standardization. China‘s launch of 3G mobile services during 2009 was in large part delayed until a home-grown standard was ready for market, based on the notion that China should have its own home-grown standard as well as related hardware, software and services (a potential core of the country‘s mobile telephony industry in the future). Spectrum auctions operated by governments also have a significant effect on the pace of development and structure of a media sector. For example, India‘s Telecommunications Ministry has delayed auctions to license spectrum for 3G and 4G services (virtually all of India remains on older standards today) and is currently scheduled to auction the spectrum during 2010, after many earlier delays. By the time the auctions ultimately do happen, a range of outcomes could be possible: if the auction is designed to end with too many successful winners, the licensed spectrum may prove to be unprofitable and remain underdeveloped. With too few winners there may not be enough innovation or enough services provided to consumers in marginal areas. Success could mean more competition between mobile services and other media types; failure could result in a status quo for mobile services. WWW.MAGNAGLOBAL.COM Source: IMF -8% -5% -3% -3% -1% 0% 0% 0% 0% 1% 1% 1% 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 2% 2% 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% 4% 4% 4% 4% 4% 5% 5% 5% 6% 6% 6% 6% 6% 7% 7% 7% 7% 7% 8% 8% 8% 9% 9% 9% 10% 11% 11% 11% 13% 13% 13% 13% 15% -10% -5% 0% 5% 10% 15% 20% Latvia Lithuania Estonia Ireland Bulgaria Turkey Spain Germany Czech Republic Japan Switzerland Australia Austria Italy Portugal Slovenia Belgium France Greece New Zealand Netherlands Finland Canada United Kingdom Hungary United States Croatia Puerto Rico Chile Bosnia Denmark Sweden Romania Ukraine Peru Georgia Poland Malaysia Israel South Korea Moldova Ecuador Singapore Hong Kong Thailand Morocco Slovakia Taiwan Norway Colombia Panama Philippines Mexico Lebanon Costa Rica Serbia Brazil South Africa China Egypt Indonesia Uruguay India Syria Kazakhstan Argentina Russia 2010 Nominal GDP Growth
- 13. 132010 ADVERTISING FORECAST Key Global Media Data Points Source: MAGNA, United Nations 36.8 57.8 39.4 54.4 36.5 33.9 N/A 54.9 32.1 48.1 49.6 44.0 41.5 31.5 28.2 43.4 N/A 42.5 47.2 37.5 55.0 29.2 40.9 N/A N/A 58.5 35.8 N/A 46.2 34.3 50.0 34.9 52.0 25.8 43.2 35.8 31.2 29.0 30.0 38.5 36.0 35.7 34.7 37.9 36.0 34.3 25.8 43.4 33.0 N/A 29.1 42.5 35.2 32.7 32.6 24.9 40.8 28.3 33.7 31.6 36.2 25.0 26.9 36.0 24.7 25.8 30.9 0 10 20 30 40 50 60 70 India South Africa Indonesia Ecuador Azerbaijan Kazakhstan Syria Panama Egypt Mexico Peru Philippines China Romania Ukraine Venezuela Serbia Thailand Costa Rica Russia Brazil Bulgaria Morocco Puerto Rico GCC Colombia Bosnia Lebanon Uruguay Greece Argentina Poland Chile Slovakia Turkey Lithuania Slovenia Croatia Hungary Portugal Italy Latvia Spain Malaysia Estonia Ireland Czech Republic Hong Kong Belgium Taiwan Austria Singapore Australia France Canada Japan United States Germany Switzerland South Korea New Zealand Sweden Finland United Kingdom Denmark Norway Netherlands Gini Coefficient 50% 98% 86% 109% 99% 113% 37% 156% 72% 83% 83% 88% 62% 136% 124% 117% 111% 121% 58% 153% 94% 152% 88% 88% 175% 104% 101% 41% 134% 151% 131% 113% 97% 125% 102% 158% 113% 140% 136% 145% 160% 98% 116% 108% 206% 119% 151% 190% 130% 115% 152% 146% 111% 101% 70% 92% 95% 156% 130% 103% 121% 131% 144% 133% 131% 118% 127% 0% 50% 100% 150% 200% 250% India South Africa Indonesia Ecuador Azerbaijan Kazakhstan Syria Panama Egypt Mexico Peru Philippines China Romania Ukraine Venezuela Serbia Thailand Costa Rica Russia Brazil Bulgaria Morocco Puerto Rico GCC Colombia Bosnia Lebanon Uruguay Greece Argentina Poland Chile Slovakia Turkey Lithuania Slovenia Croatia Hungary Portugal Italy Latvia Spain Malaysia Estonia Ireland Czech Republic Hong Kong Belgium Taiwan Austria Singapore Australia France Canada Japan United States Germany Switzerland South Korea New Zealand Sweden Finland United Kingdom Denmark Norway Netherlands 2010 Mobile Teledensity 11% 15% 15% 16% 16% 16% 19% 23% 24% 25% 27% 27% 28% 28% 29% 29% 30% 30% 34% 35% 36% 37% 39% 39% 40% 40% 41% 43% 44% 44% 48% 51% 52% 55% 56% 56% 56% 56% 57% 58% 60% 61% 61% 65% 65% 66% 67% 67% 68% 68% 70% 72% 72% 72% 75% 75% 76% 77% 79% 81% 82% 82% 82% 82% 85% 86% 88% 0% 20% 40% 60% 80% 100% India South Africa Indonesia Ecuador Azerbaijan Kazakhstan Syria Panama Egypt Mexico Peru Philippines China Romania Ukraine Venezuela Serbia Thailand Costa Rica Russia Brazil Bulgaria Morocco Puerto Rico GCC Colombia Bosnia Lebanon Uruguay Greece Argentina Poland Chile Slovakia Turkey Lithuania Slovenia Croatia Hungary Portugal Italy Latvia Spain Malaysia Estonia Ireland Czech Republic Hong Kong Belgium Taiwan Austria Singapore Australia France Canada Japan United States Germany Switzerland South Korea New Zealand Sweden Finland United Kingdom Denmark Norway Netherlands 2010 Internet Users of Population
- 14. 2010 ADVERTISING FORECAST14 Introduction Historically, radio spectrum has been used for broadcast television, broadcast radio and a range of mobile communications, whether for data or content in analog or digital forms. This spectrum was necessarily auctioned or allocated by governments given the inherent scarcity of spectrum, and choices made in these allocations have generally framed the development of media industries within specific countries. Similarly, media industry infrastructure often originates as a natural monopoly (in the economic sense of the word). For example, fixed-line telecommunications networks often require billions of dollars of upfront investment to build out infrastructure, but relatively little to ―light up‖ additional homes or businesses. Given the nature of these markets, economic returns are typically poor for new entrants, and incumbents will often have de facto monopolies in their service regions. So the questions for government are often centered around how to ensure basic standards of service, how to foster innovation and how to maximize operational efficiency. Managing the degree of competition an incumbent will face is often part of the answer. Many governments around the world restrict certain companies from entering new sectors if such actions might stifle competition in the new market, or if incumbents in new markets successfully argue the benefits of a status quo industry structure. In many countries, local exchange carriers have been prevented from offering video services by law for fear – on the part of video service providers – that the local exchange carrier‘s dominance in one field of telecommunications would extend to another. Depending on a country‘s laws and preferences, actions taken by media suppliers are sometimes deemed anti- competitive. In the United Kingdom, we have seen preventative efforts to implicitly limit market control on the part of News Corp‘s Sky DTH Pay TV service. To point, the government maintains a list of events which must be available through FTA broadcasters, which means an upstart platform (such as Sky) would not be able to secure rights to broadcasting those events exclusively, and helps sustain what might otherwise be a weaker broadcast industry. Most recently, in late 2009, a consultation was initiated to add certain cricket matches to this list, depriving Sky of the opportunity to offer the events exclusively, and the rights-holders from maximizing their revenues. Governments have also taken actions recently which more directly impact the advertising sales market. For example, regulations to affect the amount of media inventory available for sale have been brought forward by governments in France and Spain recently. Under these rules, public broadcasters eliminate advertising inventory for certain dayparts and incumbent broadcasters become better positioned to capture incremental growth in the television sector. As another approach of government involvement in the sales process, in South Korea, the government has historically controlled advertising sales on television through an entity called KOBACO (Korea Broadcasting Advertising Corporation), although this structure was ruled to be unconstitutional in late 2008 and is now being dismantled. Cross-media ownership rules are another policy tool which have the impact of pre-defining industry structures. A good example of such rules lie in India: during 2009, the country‘s media and telecommunications regulator TRAI set limits that would restrict a programmer from owning more than of 20% of a distributor (a Pay TV service, whether cable or DTH) and vice versa. Presently the Essel Group controls both Zee Entertainment and DTH service Dish TV as well as cable service Wire & Wireless. Under these rules, the controlling entities would need to divest stakes in their subsidiaries, potentially limiting scope for collaboration, and restricting the manner in which the industry will ultimately evolve with respect to multi-media integration. MAGNA’s Approach to Media Forecasting Beginning with our forecasts published during 2009, MAGNA has redefined how to measure the advertising-supported media economy. Historical approaches focused on benchmarking changes in marketing expenditures in order for marketers t assessed how much money marketers were spending in order to benchmark marketers against one another. Although a valuable endeavor, this approach lacks verifiable data (relatively few marketers publish the size of their marketing expenditures in their annual accounts, and third party “rate card” monitoring services include figures which vary significantly from observed outcomes) it is also subject to a higher degree of guesswork than an approach which focuses on media suppliers’ advertising revenues. In many countries, suppliers which have publicly listed securities publish detailed figures on their advertising revenues, often broken out by medium. Trade associations often aggregate true revenues for benchmarking purposes, and by virtue of the small number of individual members, it is relatively easy to ensure that actual revenues or estimates for all players in a market are included. Further, our approach is designed to study media suppliers’ behaviors as they follow real revenue growth opportunities. We believe this is the most “correct” way to view the media industry’s advertising activities because a deeper understanding of suppliers’ businesses allows us to foster better business relationships with them on behalf of marketers. This approach is also more consistent with the figures that investors need to benchmark, and insights we derive from this vantage point helps us anticipate suppliers’ potential corporate strategies and
- 15. 152010 ADVERTISING FORECAST Introduction Cross-media ownership restrictions may also hinder the development of competing distribution platforms. Rescinding those restrictions may lead to investment, competition, fragmentation and more consumer usage of media. In many countries, local exchange carriers have been restricted from offering full broadcast and Pay TV replacement services via IPTV in competition with satellite and cable providers. Indonesia only allowed these services as of 2009; South Korea only allowed them as of 2008. In countries which remain under-developed with respect to Pay TV, a different industry would likely emerge if only cable and DTH Pay TV platforms were present: consumers may experience only minimal features and services, and many parts of the country might go un-serviced if a monopoly or duopoly is present. A new provider‘s launch can cause product improvement and expand multichannel viewing. Governments have supported the creation of new distribution networks as well. For example, during 2009 the Australian Federal Government announced the establishment of a high-speed Internet access network. The new network should modestly broaden the reach of online content, and will undoubtedly make richer experiences more pervasive. This in turn should accelerate growth of new media in the country in the second half of the coming decade. Digital Terrestrial Television has also emerged around the world through government policies. DTT represents a modest technological change with a significant industry impact in some countries. Over the past decade, almost every country has initiated a transition from analog to digital broadcasting, for public policy reasons which could be based on simple economics (re-assigning broadcasters‘ over-the-air spectrum to less valuable ―real estate‖ and selling the ―beachfront‖ property that stations were assigned many years ago, often at no cost), public safety (whereby the best quality spectrum goes to emergency services) or quality-of-life (expanding consumer choice). Rarely is DTT about digital ―quality‖ video (although a broadcaster often has flexibility to deliver content with higher resolution if desired). Because of compression technologies associated with DTT, more discrete ―channels‖ can be broadcast than through analog signals using similar amounts of bandwidth. In many markets – especially those with low Pay TV subscription levels – the shift to DTT is synonymous with a fragmenting market (because viewership on the new channels tends to take away viewing from incumbent broadcast stations). But FTA DTT will generally grow the industry because an improved range of content increases consumer time with TV. DTT is sometimes doubly impactful on a market when it s paired with IPTV-based services to become an inexpensive cable/DTH replacement service, where the set top receives over-the-air broadcast signals and connects to the network for Pay TV channels, VOD, etc. IPTV is often associated with advanced advertising solutions because of the one-to-one architecture of these networks. Whether delivered by IPTV, cable or DTH, advanced TV advertising services are challenged in most markets around the world. Lacking ubiquity, advanced advertising capabilities are typically only enabled within a small subset of homes in total target markets featuring differing and incompatible technologies which can require advertisers to develop the same application many times. Where applications are dependent upon active involvement on the part of individual viewers, use may decline after an application‘s novelty wears off, making it difficult to secure enough activity to tell whether a campaign works. Sustainable growth is challenged for such services. Passive applications (such as creative versioning or advanced targeting techniques) hold more promise, but depend upon the ease with which technologies are enabled across all similar media inventory within a marketer‘s geographic footprint. Business models between programmers (or their advertising sales houses) and all distributors must enable ubiquitous availability for a marketer to identify the impact of a campaign in the context of other marketing activities. MAGNA’s Approach to Media Forecasting (Continued) long-term capital allocation choices – again, helping us to better understand the future of the industry on behalf of all of its participants. Two important methodological choices are contained throughout our forecast, one regarding the use of nominal figures and a second regarding currency changes. Unless stated otherwise, all figures in this document are stated in nominal amounts rather than real (inflation-adjusted) amounts. This allows us to better explain market sizes and growth rates in a manner which is consistent with the way that most marketers report and plan their budgets. It is also the way that most suppliers and their investors look at the sizes of markets in which they participate (the cashflows which result from these revenues are then discounted at a rate which reflects the riskiness of specific investments, and this rate may have little to do with underlying inflation). Significant differences in inflation between countries are implicitly accounted for by our currency conversions: to a global marketer or global supplier, what matters is not the rate of inflation in a given market, but the value in a home currency. As a result of this, expectations about currencies have a significant impact on our forecasts of media suppliers’ global advertising revenues. We have used historical exchange rates based upon data provided by the International Monetary Fund (IMF). While forecasts anticipate very gradual shifts over time, in reality they can be very volatile. This is well illustrated by shifts between US dollars and Euros. In the 15 years between 2000 and 2015, global advertising will have fallen slightly in Euro- terms, but will have grown by more than 60% in US dollar terms.
- 16. 2010 ADVERTISING FORECAST16 Introduction So the primary impact of IPTV, as with DTT, is that more content choices contribute to greater consumer interest in and use of the medium of television. In many markets the wider availability of TV will be the primary source of ongoing growth in consumption, and will support television‘s continued dominance as a reach and frequency medium. None of this is to deny that radical change is possible in the long-term Web-to-TV integration (accessing content from over the Internet via personal computer, then sending that content along to a television set) is widely seen as a future alternative to today‘s cable, DTH and IPTV services. But many obstacles need to be overcome for such a model to truly replace today‘s services, including the reliability of wireless networks inside consumer homes (hardly a given, even ten years out), the connectivity of a home‘s primary television set (as TV sets can have an extended lifetime, it will be many years before today‘s non-connected sets are replaced), the absence of customer service when problems occur (unless web TV publishers choose to enter into the customer service business and/or cut deals with today‘s ISPs to ensure quality of service), and the lack of reliable content delivery at peak times, when shared networks – such as those which are cable-based rather than DSL-based – are at their busiest. Unless piracy becomes more rampant in established markets, download or local-storage models are also challenged because the likely absence of infrastructure to support advertising (which requires connectivity in order to avoid use of ―evergreen‖ commercials) would require consumers to pay more for their media than if the content were sponsored, offsetting any savings from cheaper hardware. In the near-term, the primary driver of television advertising in markets around the world relates to advertisers‘ continued focus on media vehicles which reach a large share of the population many times. This generally holds true because of advertisers‘ organizational design choices and where a given brand falls within its life cycle. Marketers‘ organizational design choices impact advertising in many ways, as illustrated by the following example: a marketer‘s media management group and their trade/distribution sales groups may have separate reporting lines and may not have coordinating mechanisms to align their tasks. If so, the independently defined objectives of media management are more likely to focus on goals centered around awareness or other measures of perception rather than direct sales, because the centralized marketing group couldn‘t be held accountable for a sales channel strategy or product development choices. Consequently, those goals become defined in terms of reach and frequency, which tends to serve as a proxy for drivers of ―real‖ marketing objectives (such as share of voice or net promoter scores). This has the effect of pushing budgets into national mass media channels, because they are the media types which frequently satisfy those goals in the most cost-effective manner, even if the relationship with sales outcomes becomes intangible. As the most heavily consumed, wide-reaching medium – dwarfing all others – television becomes the de facto go-to place for allocating media budgets. And as large marketers become larger, and centralize more of their functions – further separating media budgets from trade functions and product development – this scenario becomes amplified. Where a brand falls in its life cycle is important, too. Advertisers are organized as they are and make media decisions in part because of this factor. As a marketer‘s brands mature, they may find they no longer need to focus on mass awareness objectives, naturally leading them to use other marketing services to support growth. The corollary to this is the importance of new brand creation and the impact of new brands on the structure of the advertiser universe – more new brands with mass awareness-seeking characteristics means more mass media advertising. Even in an era where media content is fragmented, TV remains the single best means of driving brand awareness. Fragmentation still enables mass brands to achieve mass reach given the volume of the medium consumed, but because it effectively creates a greater variety of inventory – much of it in smaller increments – it supports smaller advertisers‘ use of the medium, as the minimum cost of entry falls. This phenomena will be another source of growth within many markets in the future. WWW.MAGNAGLOBAL.COM MAGNA’s Approach to Media Forecasting (Continued) Our top-line forecast growth rates within countries are generally based upon regression models which correlate economic variables with media supplier advertising revenues. We begin with estimates of actual revenues generated by different advertising media – the same media types in each market to foster comparability. These estimates are derived from financial analyses of suppliers’ public filings, governments, trade associations and Mediabrands agencies’ local market experts. This allows us to develop statistically robust data- sets and overcome limitations with analyzing markets in periods prior to 2000, when many countries around the world were just beginning to liberalize their media industry (supporting advertising growth that would well exceed economic growth in most countries). We next compare the changes in total market advertising revenues with changes in various economic variables and perform multivariable regression analyses to identify the optimal prediction formula for countries which are part of the regression. Local market expertise informs us of expectations regarding how different media are gaining or losing share of the total market. From this we develop a forecast which can be applied to many markets. Mediabrands’ agencies’ local market experts review numbers for applicability to their country and revise where there are mitigating circumstances rendering the model as inappropriate for use.
- 17. 172010 ADVERTISING FORECAST 30% 39% 45% 42% 38% 39% 39% 50% 46% 55% 63% 52% 44% 63% 36% 27% 18% 57% 48% 27% 22% 44% 36% 32% 21% 53% 36% 24% 41% 62% 40% 52% 58% 24% 26% 41% 25% 45% 51% 55% 45% 32% 63% 41% 38% 69% 56% 28% 38% 41% 54% 50% 42% 30% 35% 24% 56% 50% 30% 60% 49% 36% 39% 0% 20% 40% 60% 80% Estonia Latvia Lithuania Lebanon Panama Slovenia Costa Rica Serbia Croatia Bulgaria Kazakhstan Ecuador Slovakia Uruguay Morocco Denmark Finland Peru Puerto Rico New Zealand Ireland Portugal Hungary Singapore Norway Chile Taiwan Austria Colombia Romania Czech Republic Ukraine Philippines Switzerland Sweden Malaysia Netherlands Belgium Turkey Greece Argentina Hong Kong Egypt South Africa Poland Mexico Thailand Canada South Korea India Indonesia GCC Spain France Australia Germany Italy Russia United Kingdom Brazil Japan China United States Share of 2015 Core Media Advertising 5% 3% 3% 8% 8% 6% 7% 4% 4% 4% 14% 8% 6% 11% 7% 0% 2% 10% 0% 2% 4% -2% 6% 10% 3% 5% 4% 3% 8% 15% 4% 10% 6% 0% 5% 15% 2% 3% 9% 5% 12% 2% 8% 7% 8% 2% 9% -1% 15% 15% 12% 9% 2% 2% 6% 1% 0% 10% 8% 7% 1% 16% 3% -5% 0% 5% 10% 15% 20% Estonia Latvia Lithuania Lebanon Panama Slovenia Costa Rica Serbia Croatia Bulgaria Kazakhstan Ecuador Slovakia Uruguay Morocco Denmark Finland Peru Puerto Rico New Zealand Ireland Portugal Hungary Singapore Norway Chile Taiwan Austria Colombia Romania Czech Republic Ukraine Philippines Switzerland Sweden Malaysia Netherlands Belgium Turkey Greece Argentina Hong Kong Egypt South Africa Poland Mexico Thailand Canada South Korea India Indonesia GCC Spain France Australia Germany Italy Russia United Kingdom Brazil Japan China United States 2010-15 Advertising CAGR in USD 0 5,000 10,000 15,000 20,000 25,000 Estonia Latvia Lithuania Lebanon Panama Slovenia Costa Rica Serbia Croatia Bulgaria Kazakhstan Ecuador Slovakia Uruguay Morocco Denmark Finland Peru Puerto Rico New Zealand Ireland Portugal Hungary Singapore Norway Chile Taiwan Austria Colombia Romania Czech Republic Ukraine Philippines Switzerland Sweden Malaysia Netherlands Belgium Turkey Greece Argentina Hong Kong Egypt South Africa Poland Mexico Thailand Canada South Korea India Indonesia GCC Spain France Australia Germany Italy Russia United Kingdom Brazil Japan China United States Advertising Revenues ($000s USD) 2015 2010 Television Advertising US 2010: $51 bn US 2015: $57 bn Global Total 2010: $148 bn Global Total 2015: $189 bn
- 18. 2010 ADVERTISING FORECAST18 Introduction Internet access has grown rapidly over the past decade, and now almost 2 billion consumers use the medium, the bulk of them through broadband connections. The rising speed of those broadband connections fosters more immersive experiences, a wider range of activities conducted online and, ultimately, more time with online content and brands. With hundreds of millions of people going online each year, the medium has become a critical one for many of the world‘s largest advertisers whose brand objectives would otherwise cause them to prioritize television. For most of these advertisers, online has become a clear number two in terms of budget importance, typically at the expense of print and radio. Brand-focused advertisers are critical for online advertising, supporting much of the format innovation causing growth in the years ahead. Conventional banner advertisements are generally commoditized, as marketers focus more on audiences rather than message context, and the presence of vast quantities of display inventory – sold more efficiently by ad networks – contribute to ongoing price pressures for publishers. But advertisers seeking to engage target audiences through immersive experiences will require continuously improving types of advertising units in order to meet brand goals. This is a key element behind the evolution of online video and rich media around the world. Beyond Google‘s YouTube, YouKu (based in China) and other sites which primarily feature user-generated content, professionally produced, legally licensed content has become widely disseminated and widely consumed in the past couple of years. Epitomized by Hulu of the United States, the stillborn Project Kangaroo in the UK and GyaO! in Japan (acquired in 2009 by Yahoo Japan) these platforms generate significant interest from advertisers, although consumption remains relatively small. Total online video consumption – including user generated content – is likely less than 2% of the equivalent of offline video consumption in most countries around the world. Rates of increase are generally limited by challenges previously mentioned with respect to delivering online video content to a home‘s primary TV set, as well as limitations on consumer interest in passively vs. pro-actively watching video content. We suspect most consumers would find it challenging to be ―on‖ enough to be in an active mode for 20 to 40 hours per week of consuming online video (whereas background or passive television consumption is somewhat easier to manage for most). The heart of online advertising lies in a different segment: marketers who are endemic to the Internet. This group includes e-commerce players such as Amazon, eBay, Rakuten (based in Japan) and Taobao (based in China), and any other entity with an online storefront. With near-perfect end-to-end feedback loops, commercial exposures can be tracked and associated with actions to optimize marketing efforts. Virtually all potential customers can be reached online, making the Internet the primary medium for these marketers, and for some the only medium which matters. Small and medium-sized enterprises represent what we believe to be the other large, identifiable segment of online advertisers. With smaller media budgets and fewer total campaigns (and fewer people to coordinate), this segment can more easily identify the impact of any given media campaign. Because smaller companies necessarily have more highly targeted consumer bases – for reasons of competition and efficiency – relative to larger companies, digital media supports the highly targeted marketing choices these advertisers require. Smaller companies are also more likely to manage their budgeting against business objectives (rather than marketing objectives) given that the individuals making the media choices are personally involved with or directly aware of most marketing expenditures. Search engine marketing is intimately tied to this group of advertisers, as its presence has actually grown the market for advertising as a result. In total, search is growing at a much faster pace than the rest of online media, rising by 17% during 2010, and likely to grow by 11% for each following year through 2015. E-Commerce and Advertising In little over a decade, e-commerce has become a massive industry in its own right, accounting for billions of dollars of sales in major markets. Some examples from around the world during 2009 illustrate this scale: • In the United States, e-commerce will likely total more than USD$120 billion, slightly more than 3% of total retail sales • Japan should generate well over 6 trillion yen (more than USD$70 billion) of retail sales online more than 4% of the country’s total offline sales • The United Kingdom’s online turnover is now approaching 10 billion pounds (USD$16 billion) • In China, Taobao alone claims its transaction volume alone accounted for 1.4% of total Chinese retail sales during the first half of the year E-commerce matters because it is one of the primary drivers of online advertising. E-commerce undoubtedly accounts for a significant share – perhaps a plurality – of digital media advertising, and has arguably been a greater catalyst for digital media than straightforward shifts of budgets from “offline” advertisers (who otherwise focus their media activities in traditional channels). The presence of an endemic eco-system makes viable so much of digital media because it benefits from feedback loops of what works and what doesn’t The absolute scale of e-commerce is difficult to quantify, but any list of top online advertisers provided by monitoring services is likely to include companies such as Amazon, eBay, Rakuten or others (which will vary by country). Looking into the future, one of the primary questions involved in assessing growth of online advertising is how many new product categories can be profitably transitioned to online environments? The answer will in no small part help explain growth beyond the next five years.
- 19. 192010 ADVERTISING FORECAST 2% 1% 2% 2% 2% 6% 6% 7% 3% 3% 3% 2% 3% 5% 2% 4% 9% 5% 3% 2% 4% 3% 2% 3% 1% 4% 3% 5% 6% 7% 5% 1% 10% 2% 3% 3% 6% 9% 6% 5% 2% 6% 9% 21% 15% 10% 6% 8% 13% 16% 8% 10% 8% 12% 8% 15% 12% 15% 13% 11% 23% 11% 13% 0% 5% 10% 15% 20% 25% Lebanon Ecuador Kazakhstan Panama Uruguay Estonia Lithuania Latvia Serbia Bulgaria Costa Rica Morocco Peru Croatia Philippines Puerto Rico Slovenia Slovakia Chile Singapore Romania Czech Republic Egypt Greece Thailand Colombia Malaysia Hungary Ukraine New Zealand Ireland Indonesia Portugal GCC Mexico South Africa Turkey Taiwan Austria Switzerland India Argentina Belgium Denmark Finland Norway Hong Kong Poland Sweden Netherlands Italy Spain Russia Canada France South Korea Brazil Australia Germany Japan United Kingdom China United States Share of 2015 Core Media Advertising 27% 15% 30% 29% 42% 16% 28% 18% 49% 29% 19% 49% 17% 50% 11% 8% 18% 30% 24% 16% 65% 23% 48% 22% 60% 14% 16% 25% 26% 13% 11% 42% 13% 47% 15% 18% 16% 14% 12% 19% 22% 18% 9% 7% 15% 14% 18% 22% 11% 7% 12% 11% 25% 12% 8% 15% 8% 16% 9% 6% 9% 30% 10% 0% 10% 20% 30% 40% 50% 60% 70% Lebanon Ecuador Kazakhstan Panama Uruguay Estonia Lithuania Latvia Serbia Bulgaria Costa Rica Morocco Peru Croatia Philippines Puerto Rico Slovenia Slovakia Chile Singapore Romania Czech Republic Egypt Greece Thailand Colombia Malaysia Hungary Ukraine New Zealand Ireland Indonesia Portugal GCC Mexico South Africa Turkey Taiwan Austria Switzerland India Argentina Belgium Denmark Finland Norway Hong Kong Poland Sweden Netherlands Italy Spain Russia Canada France South Korea Brazil Australia Germany Japan United Kingdom China United States 2010-15 Advertising CAGR in USD 0 1,000 2,000 3,000 4,000 5,000 6,000 Lebanon Ecuador Kazakhstan Panama Uruguay Estonia Lithuania Latvia Serbia Bulgaria Costa Rica Morocco Peru Croatia Philippines Puerto Rico Slovenia Slovakia Chile Singapore Romania Czech Republic Egypt Greece Thailand Colombia Malaysia Hungary Ukraine New Zealand Ireland Indonesia Portugal GCC Mexico South Africa Turkey Taiwan Austria Switzerland India Argentina Belgium Denmark Finland Norway Hong Kong Poland Sweden Netherlands Italy Spain Russia Canada France South Korea Brazil Australia Germany Japan United Kingdom China United States Advertising Revenues ($mm USD) 2015 2010 Search Advertising US 2010: $12 bn US 2015: $20 bn Global Total 2010: $30 bn Global Total 2015: $53 bn
- 20. 2010 ADVERTISING FORECAST20 Introduction Other online inventory is often under-sold, especially that which is associated with user-generated content, given advertisers‘ concerns about appropriateness of content and potential negative brand associations. Social network inventory has a similar challenge. Now accounting for a significant share of consumer time and pageviews online, leading social networking services such as Facebook, MySpace, Orkut, Friendster and others generate relatively little in conventional advertising revenues. In the eyes of many marketers, social networks are not an appealing environment for most brands to run conventional advertisements, especially if messages are viewed as interruptive. But creative uses of social activities – from sponsoring events offline (tied into a social network profile), running word-of-mouth campaigns, or monitoring consumer perceptions of a brand – make social media valuable to advertisers nonetheless. Conventional fixed-location access points are the dominant means of accessing the Internet, but far from the only means. Billions of individuals around the world use mobile devices, primarily for voice services and increasingly for basic data (such as text messages) or more advanced data services (such as mobile internet access). Although we estimate more than 4 billion active subscriptions to mobile services around the world, this measures unique SIM cards that are actively used (and many individuals – even in emerging markets – have multiple SIM cards). Still, more than half the population on earth likely connects to a mobile network, and the number of individuals with access continues to rise at a robust pace. However, mobile advertising has been challenged by an array of obstacles over the years, limited by widely varying device interfaces and capabilities (and thus consumer experiences). Mobile networks are typically hampered in their capacity to offer rich media experiences to a broad set of the population given limited access to fast data services, which further narrows the audience which might view certain types of mobile advertisements. In most markets, this has meant that mobile media is synonymous with SMS campaigns (as virtually any phone can handle SMS). The wide range of experiences available prevents mobile media from ever truly becoming ―mass‖ (not that it ever needs to be). Apple‘s successful iPhone and the associated launches of competing smart phones means that in many markets around the world, consumers are increasingly accessing either the mobile web or dedicated applications (―apps‖) which may become consistently ad-supported across platforms. Even if no more than a third of the population in any given market ultimately owns a smart phone device and pairs it with a sufficiently robust and reliable data service from their mobile carrier, mass media – if not advertising – will have a solid foundation. However, development of the sector is potentially strained by limited radio frequency spectrum availability, which would be needed to expand services or increase speeds. Further, economics of heavy-data consuming devices are poor with the rise of flat-rate pricing, and eventually either user experiences will suffer or prices will have to increase(limiting the number of individuals accessing these services). But it seems likely the audience base will be large enough for advertisers to have an interest in mobile consumers. However, it is most likely that with a web-like experience on web pages optimized for mobile platforms, mobile ―advertising‖ may become little more than a subset for conventional online advertising. With similar metrics, similar workflow and (eventually) similar suppliers selling inventory across platforms, the two will be synonymous. Mobile marketing – well beyond advertising – will likely hold the most promise for the commercial activation, although scale is difficult to quantify given that applications of mobile marketing are in their infancy. Consumers with higher- end devices will have endless opportunities to engage with brands, especially while shopping, but also in the course of a day running errands, managing a household or planning weekend entertainment. WWW.MAGNAGLOBAL.COM Source: IMF -3% -3% -1% 0% 0% 0% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% 4% 4% 4% 4% 4% 4% 4% 5% 5% 5% 6% 6% 6% 7% 7% 7% 7% 8% 8% 8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Latvia Lithuania Japan Ireland Estonia Germany Hong Kong Switzerland China Spain Italy Netherlands Portugal Belgium Austria New Zealand Czech Republic Finland France Malaysia Canada Australia United Kingdom Slovenia Taiwan Singapore Bosnia Bulgaria Greece Puerto Rico United States Norway Peru Israel Denmark Thailand Chile Slovakia Sweden South Korea Panama Poland Croatia Morocco Ecuador Georgia Lebanon Mexico Romania Colombia GCC Philippines Brazil Hungary Argentina Costa Rica Azerbaijan Syria Indonesia South Africa Kazakhstan Turkey Serbia Uruguay Moldova India Egypt 2010 Consumer Price Inflation
- 21. 212010 ADVERTISING FORECAST 0% 1% 1% 3% 2% 3% 2% 10% 4% 12% 2% 0% 5% 16% 7% 7% 0% 1% 4% 9% 3% 3% 2% 4% 11% 4% 8% 5% 4% 3% 3% 11% 9% 11% 4% 3% 10% 5% 8% 12% 7% 2% 3% 10% 15% 29% 15% 11% 10% 6% 7% 8% 22% 7% 8% 8% 9% 23% 11% 13% 7% 14% 12% 0% 5% 10% 15% 20% 25% 30% 35% Uruguay Ecuador Panama Lebanon Peru Costa Rica Puerto Rico Lithuania Kazakhstan Latvia Chile Thailand Croatia Estonia Serbia Bulgaria Indonesia Malaysia Morocco Slovenia Philippines Singapore Egypt Ukraine Slovakia Ireland Portugal Colombia Greece Mexico Argentina Romania New Zealand Hungary South Africa Hong Kong Finland Switzerland Turkey Taiwan Austria India GCC Belgium Czech Republic Denmark Norway Netherlands Poland Italy South Korea Spain Sweden Brazil Russia France Australia Canada Germany United Kingdom China Japan United States Share of 2015 Core Media Advertising 39% 38% 43% 30% 16% 17% 20% 10% 31% 7% 1% 29% 25% 10% 38% 18% 34% 24% 33% 13% 10% 8% 28% 24% 13% 6% 12% 24% 21% 13% 14% 40% 10% 10% 22% 1% 11% 9% 20% 10% 6% 22% 30% 6% 8% 5% 7% 4% 15% 9% 21% 10% 7% 10% 24% 7% 7% 13% 8% 8% 22% 3% 7% 0% 10% 20% 30% 40% 50% Uruguay Ecuador Panama Lebanon Peru Costa Rica Puerto Rico Lithuania Kazakhstan Latvia Chile Thailand Croatia Estonia Serbia Bulgaria Indonesia Malaysia Morocco Slovenia Philippines Singapore Egypt Ukraine Slovakia Ireland Portugal Colombia Greece Mexico Argentina Romania New Zealand Hungary South Africa Hong Kong Finland Switzerland Turkey Taiwan Austria India GCC Belgium Czech Republic Denmark Norway Netherlands Poland Italy South Korea Spain Sweden Brazil Russia France Australia Canada Germany United Kingdom China Japan United States 2010-15 Advertising CAGR in USD 0.0 800.0 1,600.0 2,400.0 3,200.0 4,000.0 Uruguay Ecuador Panama Lebanon Peru Costa Rica Puerto Rico Lithuania Kazakhstan Latvia Chile Thailand Croatia Estonia Serbia Bulgaria Indonesia Malaysia Morocco Slovenia Philippines Singapore Egypt Ukraine Slovakia Ireland Portugal Colombia Greece Mexico Argentina Romania New Zealand Hungary South Africa Hong Kong Finland Switzerland Turkey Taiwan Austria India GCC Belgium Czech Republic Denmark Norway Netherlands Poland Italy South Korea Spain Sweden Brazil Russia France Australia Canada Germany United Kingdom China Japan United States Advertising Revenues ($mm USD) 2015 2010 Other Online Advertising US 2010: $12 bn US 2015: $18 bn Global Total 2010: $30 bn Global Total 2015: $46 bn
- 22. 2010 ADVERTISING FORECAST22 Introduction In an era before electronic media became widespread, Print was the primary means for advertisers to reach consumers. Electronic media proliferated through the 20th century, first with Radio, then Television and finally the Internet. Although efforts to turn Print into a unique electronic medium (distinct from the Internet or mobile web) exist (for example through initiatives to make newspapers available on electronic reading devices), print still serves a significant role for many consumers given its tactile and highly portable nature. However, trends for consumption vary widely depending on the nature of the content. Newspaper circulation is faring poorly in many countries (as a source of immediate news, a key reason many read newspapers, it is outdone by information disseminated online.) One trend mitigating the decline of newspaper readership comes in the form of free newspapers. These titles have typically concentrated distribution at points where large numbers of commuters can be found and are completely supported by advertising. Operating in countries around the world, either directly owned by the format creators or licensed to local publishers (often the dominant paid newspaper publisher in a market), so-called ―freesheets‖ have emerged from Scandinavia to become global brands, typified by publications from Sweden‘s Metro International and Norway‘s Schibsted (whose flagship free newspaper brand is called 20 Minutes). Freesheets will generally represent a market expansion by finding audiences who would not otherwise read newspapers. However, underlying weakness in advertising for print media is widespread, and the freesheet titles have not been exempt from closures or otherwise weak results recently. However, this does not make up for declines in the rest of the newspaper sector, which we estimate totaled 22% globally in 2009. Advertising revenue declines in classifieds are universally collapsing as free or low-cost options online proliferate. And although readers are still consuming news online, worse yet for publishers of print assets, the shift by consumers to online consumption will not necessarily map with shifts in advertisers‘ budgets. The reason for this is that different segments of advertisers use print media for different reasons. Many of today‘s offline advertisers use print for purposes which may not be satisfied by digital media. For example, retailers have tended to use newspapers as part of their value chain, as newspaper advertising was historically viewed as a primary source of the foot traffic which can drive a retailer‘s sales. Conversely, many of the advertisers using print media‘s digital extensions are buying online traffic wherever they can find suitable online inventory. These advertisers will not value physical media. This means that budgets are not necessarily fluid between the two platforms. Newspapers have far to fall, because in many countries they are the medium which captures the largest share of advertising revenues. Declining consumption causes display advertising volumes to fall and leads retailers to seek alternative means for reaching consumers in order to drive traffic into stores. Because this limits advertising revenues, publishers reduce their investment in the medium, leading to a nominally worse product, which in turn leads to further reductions in consumption. Even more critically, not only is classified advertising facing cyclical trends (as falling house prices and weak employment markets limit potential demand), but profound secular trends are leading to the long-term decline of this type of advertising, as free or less expensive online means of connecting buyers and sellers have developed over the past decade. Whether job boards or sites specializing in real estate, online classified publishers enable advertisers to better accomplish direct sales goals for relatively little expense. What options will newspaper publishers have left? In the weakest markets – such as the United States – cities with multiple newspapers will see fewer titles; in cities with one daily newspaper, print editions may shift to a few days per week. To the extent that newspapers have represented important voices in local media – and thus served as a trustworthy environment for advertisers to convey their messages – one hope may lie in cross-media combinations. WWW.MAGNAGLOBAL.COM Glossary The following acronyms and terms are used in this document. Where a meaning or use may differ by country, we use one term for consistency B2B: Business to Business Refers to media and marketing targeting businesses rather than consumers. CPP: Cost Per Point (or CRP - Cost per Rating Point) A standard metric for assessing media cost on some media in some countries. Refers to the cost for buying 1 percent of a given audience. CPM: Cost Per Mille (Thousand) (also CPT) A standard way for assessing media cost on some media in some countries. Refers to the cost for buying 1000 impressions. CPC: Cost Per Click (also CPA – Cost Per Action) A standard way for assessing media cost for media with direct response-like characteristics. DAB: Digital Audio Broadcast A specific technology standard for the delivery of digital broadcast radio content. Other standards include HD Radio and . DSL: Digital Subscriber Line ILECs and CLECs deliver broadband services over lines originally developed for telephones through these services. DSL’s primary competition for broadband provision comes from Pay TV cable operators. DTH: Direct to home Refers to satellite-delivered Pay TV services, also known as DBS (Direct Broadcast Satellite) DTT: Digital Terrestrial Television Governments around the world have started shifting the radio-frequency spectrum TV broadcasters use, and in the process requiring broadcasters to use digital standards. Use of digital…(cont’d)
- 23. 232010 ADVERTISING FORECAST 10% 5% 17% 6% 28% 21% 15% 5% 15% 16% 10% 7% 5% 18% 6% 28% 16% 27% 18% 4% 13% 31% 12% 29% 15% 12% 19% 26% 12% 19% 16% 33% 23% 13% 39% 18% 45% 18% 33% 51% 9% 29% 9% 24% 43% 34% 8% 33% 40% 14% 16% 18% 30% 34% 34% 20% 39% 12% 25% 19% 30% 30% 13% 0% 10% 20% 30% 40% 50% 60% Latvia Bulgaria Lithuania Kazakhstan Estonia Lebanon Serbia Romania Croatia Slovenia Slovakia Portugal Philippines Uruguay Ukraine Panama Peru Costa Rica Morocco Mexico Denmark Ecuador Hungary Puerto Rico Czech Republic Greece Colombia Chile Belgium Taiwan Egypt New Zealand Turkey Poland Finland Netherlands Singapore Thailand Austria Ireland Italy Switzerland Russia South Africa Malaysia Sweden Brazil Argentina Norway Canada South Korea Spain Hong Kong Indonesia GCC France India Japan Australia United Kingdom Germany China United States Share of 2015 Core Media Advertising 0% 2% 2% 13% 2% 6% 6% 15% 2% 4% 5% -3% 2% 8% 6% 11% 5% 7% 9% 1% -1% 7% 0% -2% 1% -3% 9% 4% -3% 3% 1% 3% 4% 6% 2% -2% 9% 6% 0% 1% -1% -1% 11% 5% 8% 1% 3% 12% 2% -4% -5% -1% 3% 12% 7% 0% 15% -1% -1% 0% -3% 17% -4% -10% -5% 0% 5% 10% 15% 20% Latvia Bulgaria Lithuania Kazakhstan Estonia Lebanon Serbia Romania Croatia Slovenia Slovakia Portugal Philippines Uruguay Ukraine Panama Peru Costa Rica Morocco Mexico Denmark Ecuador Hungary Puerto Rico Czech Republic Greece Colombia Chile Belgium Taiwan Egypt New Zealand Turkey Poland Finland Netherlands Singapore Thailand Austria Ireland Italy Switzerland Russia South Africa Malaysia Sweden Brazil Argentina Norway Canada South Korea Spain Hong Kong Indonesia GCC France India Japan Australia United Kingdom Germany China United States 2010-15 CAGR in USD 0 5,000 10,000 15,000 Latvia Bulgaria Lithuania Kazakhstan Estonia Lebanon Serbia Romania Croatia Slovenia Slovakia Portugal Philippines Uruguay Ukraine Panama Peru Costa Rica Morocco Mexico Denmark Ecuador Hungary Puerto Rico Czech Republic Greece Colombia Chile Belgium Taiwan Egypt New Zealand Turkey Poland Finland Netherlands Singapore Thailand Austria Ireland Italy Switzerland Russia South Africa Malaysia Sweden Brazil Argentina Norway Canada South Korea Spain Hong Kong Indonesia GCC France India Japan Australia United Kingdom Germany China United States Advertising Revenues ($mm USD) 2015 2010 Newspaper Advertising US 2010: $23 bn US 2015: $19 bn Global Total 2010: $84 bn Global Total 2015: $92 bn
- 24. 2010 ADVERTISING FORECAST24 Introduction However, most cross-media combinations in local markets are not allowed by the primary regulator, the FCC. This has been the case since the early 1970s, aside from companies which were already operating in a joint manner prior to the rules coming into force. But weakness in both sectors may contribute to an overturning of the rules at some point in the near future. A successful lobbying effort could serve as catalyst of growth (or restrain decline). Current rules neither create economically optimal outcomes and may not necessarily support diversity of voices if go-alone strategies mean that no entity can invest in a sufficient amount of news-gathering. The use of wire-feeds – a relatively inexpensive solution compared to having more reporters on staff – allow for broad coverage, but may offer less depth than past solutions. Newspapers and magazines have cost inputs in common as print-based media, but trends mostly diverge from there. And within magazines, circulation of B2B titles has been hurt much more than circulation of consumer-focused titles. Consumers of B2B information use the medium primarily for news, while consumer title readers are looking for either glossy pictures, long-form content or some other tactile element. Advertisers historically usedB2B as a superior alternative to reaching narrowly defined buyers of goods and services through direct means. The lead-generation model associated with much of B2B advertising online will support further shifts away from print titles as advertisers become increasingly sophisticated and focused on the narrow targeting afforded online, as costs per leads acquired are sufficiently cheap and/or measurable that they are strongly preferred by advertisers. This means that advertisers should at least transition with publishers – leveraging existing sales force efforts – as their content assets move (rapidly) online. But consumer magazine advertisers buy magazines for the sake of brand-building and mass awareness within a niche. When this objective is sought online, top publishers within an online category – often not the dominant publisher in print – will be the first place an advertiser will look to execute a campaign. Most advertisers will continue to do well in absolute terms with their print investments. In many markets and for many titles, circulation and readership is flat or up. And regardless of direction, print campaigns may still be appropriate given their highly targeted audiences. But poor sentiment among advertisers towards the medium based on flawed presumptions that ―all‖ print consumption is shifting online and historical dissatisfaction with measurement of the medium contribute to weakness. Future prospects vary widely by market for other reasons: emerging markets will typically have rising levels of affluence and rising levels of literacy. Both factors should contribute to increased print consumption – not least because a physical newspaper represents a ―badge‖ indicating that its reader is affluent, but also because fixed broadband access will not reach the entirety of many countries, whose citizens will otherwise need to wait for deployment of next - generation mobile networks before the Internet is a credible alternative way to consume news content. But in other markets, newspapers have historically been published by arms of the government, and so may be viewed with some suspicion, even after a market liberalizes. Under such circumstances, advertising growth is unlikely to benefit the medium in the near term. It is unsurprising that print is the slowest-growing of all media. What in what might be a surprise, Newspapers will not be the slowest, as we anticipate Magazine advertising will decline slightly over the next five years (with pronounced declines in the UK, Australia and the US) while Newspaper advertising growth should average 2% annually in US dollars (led by China, India and Russia). WWW.MAGNAGLOBAL.COM Glossary (Continued) DTT: Digital Terrestrial Television (continued) …broadcasting technologies often enables more channels to fit in less spectrum, and consequently DTT can be synonymous with fragmentation, especially when DTT services are FTA. DVB: Digital Video Broadcast A standard for the delivery of digital broadcast television. DVR: Digital Video Recorder (or PVR or HDR) A hard drive integrated with a set-top box, integrated with a program guide and usually provided by a Pay TV service. FCMG: Fast Moving Consumer Goods Refers to manufacturers of food, beverages, household products and other similar items. FTA: Free to Air Refers to broadcast TV stations, distinct from those which consumers must pay a service provider to deliver into a home. Gini Coefficient The Gini Coefficient is a standardized way of measuring income inequality within a given country. 0 means that all people have the same income and figures closer to 100 illustrate the concentration of a society’s wealth among a small number of people. We include this metric because it provides a snapshot of how uniformly households can afford new media services (such as internet access, pay TV or mobile data) and whether or not marketers will typically target audiences on the basis of their socioeconomic class. HD: High Definition Refers to video content delivered in high resolution. HDR: Hard Drive Recorder See DVR.