If the Worst Is Over, When Does It Get Better?
Now that the second half of 2009 is underway, industry leaders and forecasters appear united in the belief that the worst is over. That’s a relief, but what everyone really wants to know is when we get back to growth. On that point few are clear.Last week, NBC Universal President and CEO Jeff Zucker told CNBC, “It’s still tough out there, but I think we have seen a bottom.” Those comments echoed previous statements by News Corp. CEO Rupert Murdoch, who said on first quarter calls in May, that the outlook was much better. “It’s increasingly clear that the worst is over,” he told analysts, adding, “The days of precipitous declines are done.”
Coming out of the Allen & Co. Sun Valley retreat for industry leaders, Murdoch described the mood as decidedly bearish. “I’m shocked at the business mood, which is talking about either that we’re at the bottom of the recession or we’re going lower, but that it’s going to take years and years, like five years at least, before we see any real growth coming out of this,” Murdoch told Fox Business News. “I don’t see an end to the downturn, and I can’t predict when we’ll start to see a rebound,” he said.
Indeed, as the recession first hit, predictions were for an improving picture in the second half of 2009, a critical component of upfront sales pitches. Things won’t likely be as bleakas first half but there are still declines to come.
The latest forecast comes from Interpublic Group’s research unit Magna which suggests media companies will take in $161 billion, a 14% drop from $189 billion last year, excluding political and Olympic dollars. “The first half of 2009 will likely turn out to be the worst period of the recession,” notes a Magna press release. The author, global forecasting director Brian Wieser, predicts a 2% decline in 2010, and an anemic compound annual growth rate of 1% between 2009 and 2014. Wieser, who picked up the forecasting mantle from veteran analyst Robert Cohen earlier this year, says that things won’t pick-up until the second half of next year.
Magna has instituted a new methodology for calculating the health of the advertising environment by looking at media company ad revenue rather than what advertisers say they spend. The report defines media as including television, radio, print, outdoor, direct and online.
Magna did have some positive break-out for the television business. Population growth and increased TV consumption will more than offset the affect of DVRs by 2014. Total TV will grow by 3.2% over the next five years, but will be down 14.4% this year. As ever the picture for local TV looks worse than for national. The national market is pegged at $32.2 billion for 2009, but will shrink by 6.3%, local is pegged at $14.8 billion, declining by 18.8%. Over the next five years, the compound annual growth rate will be 2.2% for national and 1.3% for local.
Magna’s report followed that of ZenithOptimedia, which revised its outlook for global advertising last week saying its estimates for ad spending in the first quarter were too high. Zenith also predicts that 2010 will be another year of declines in ad spending in North America. Zenith, part of Publicis Groupe, suggests that the back half of 2010 will see a mild upturn–thanks to Winter Olympics, FIFA World Cup and mid-term elections.
If you’re looking for a growth number, better push out a little further than planned.