Next week I will publish my economic forecast for media and marketing, including updated data for 2008 and projections for 2009 and 2010. The picture is not a pretty one. As Congress struggles with its rescue plan, as the Fed tries to stave off a recession that is already crashing down upon us, as consumers wary of political debate and discontent, and as media companies and agencies gather at annual conferences and conventions to publically worry about their future, there is no positive news on the horizon to discuss.
Typically, as we enter the fourth quarter, I have a clear perspective on total annual media spending for the 24 marketing categories on which I report. This year, visibility is far more challenging. Fourth quarter data could be aberrational and depress results more than expected. Coming into this year, I was relatively bullish and held onto my positive outlook through mid-year. A positive Upfront and strong first and second scatter marketers bolstered prospects for national television. To his credit, Universal-McCann’s long-time forecaster Robert Coen became a market bear before I did. (Mea culpa.) However, my 2009 spending forecasts, also issued last December, were the most bearish of all forecasters and my original concerns about the 2009 economy have, unfortunately, proven to be well-founded. Keep in mind though, as you review 2008 and 2009 spending data from multiple sources, it’s vital to extract newspaper spending in order to gain a clear perspective.
In 2008, newspaper advertising will represent 16.0% to 17.0% of total adverting, down from 21.4% in 2006 and more than 25.0% as recently as 2002. The cataclysmic double digit drop in newspaper ad revenues drives total ad spending for the 12 traditional media categories to a negative 2.0% to 3.0% overall. Take newspapers out of the equation and traditional media growth in 2008 increases slightly. Add back in the six additional emerging media categories I cover, including mobile, branded entertainment and videogames (and again extract newspaper declines), and overall ad spending growth for 2008 moves onto the positive side by 3.0% to 4.0%. Newspapers and yellow pages are dramatically depressing the ad market in 2008, but all media are performing below expectations.
As I have been reporting, the advertising and media business is in the midst of a dramatic transformation. The danger of ascribing downward spiraling economics of ad spending to the economy alone is that it camouflages several more endemic causes for ad spending declines. The media marketplace is transitioning from one in which demand has exceeded supply (even as supply has grown exponentially)… to a marketplace in which the availability of supply is outpacing demand. For the past several decades, media pricing has progressively moved upward. Today and into the foreseeable future, there is downward pressure on media pricing. And marketers have historically accepted the old John Wanamaker anecdote that “only 50% of my advertising works but I don’t know which 50%.” Today, marketers sense that less than 30% of their advertising works, and they are increasingly intent on identifying and eliminating the wasteful 70%.
Media sellers and media agencies cannot simply sit out the coming recession as they have in the past, with an optimistic expectation that all will be okay on the other side. They cannot assume marketers will follow the pattern of past recessions and increase their budgets in hopes of gaining market share. The media downturn is a long-term reality and all those companies that depend on advertising for their living will need to be as diligent today in analyzing their future as those in leadership positions at financial services firms.
There will be no rescue or bail out for failing media companies and agencies. But in the next 36-months we can be certain that names in our business as legendary as Lehman Brothers was in the financial industry will be declaring bankruptcy and closing their doors. There is little good news on the horizon.
About Jack Myers : For more than two decades, Jack Myers has been the media industry's leading analyst, researcher and advisor on relationships among marketers, agencies and media sellers, providing business development services and custom insights on relationship best practices to more than 200 marketers, agencies, media companies and industry service providers. Jack can be reached at email@example.com.