TV Seen Among Biggest Gainers in Ad Outlooks

Olympics, elections, Obama Care generate spending
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Leading media buying groups are expecting advertising spending to rise solidly, with television among the best performing media.

The new forecasts are being presented at the 41st Annual UBS Global Media and Communications Conference, which begins Monday.

Interpublic Group's Magna Global forecasts an 8.6% growth for TV spending in the U.S., with national TV up 4.3%. Magna said the increases are similar to the last even-numbered year, when the Olympics and national elections pumped advertising money into national and local outlets.

"On top of those usual cyclical drivers, the implementation of the Affordable Care Act will create one-off incremental spend from federal and state government, as well as insurance and health care companies throughout 2014, with the bulk of it in local television," Magna stated.

Total U.S. TV spending is seen rising to nearly $67 billion in 2014, $68.6 billion in 2015 and $70.2 billion in 2016, according to ZenithOptimedia, a media buying unit of Publicis. Spending on broadcast network TV is expected to rise 1% in 2014, thanks to the Olympics and World Cup, the agency said. But in 2015 and 2016, broadcast ad revenue is forecast to decline 3%, and then 1%, despite the emergence of dynamic ad insertion and other technologies aimed at recapturing delayed and mobile viewing.

Cable TV spending is expected to grow 7% in 2014, 6% in 2015 and 5% in 2016, according to Zenith. The forecast for syndication is 2% gains in 2014 and 2015 and a 1% lift in 2016.

WPP's GroupM unit expects TV spending in the U.S. to rise 2.6% to $78.8 billion in 2014, with its share of all media spending dipping slightly to 49% from 49.1% in 2013, when TV spending rose 1% $76.8 billion.

Overall U.S. ad spending is expected to rise 5.5% by Magna Global, which calls that level of growth "a modest performance" given the Olympic and election boost. That forecast is less robust than the 5.9% increase the agency said it expected in June. The lowered forecast was the result of a slower than expected economic recovery.

Zenith expects U.S. ad spending to increase 4.7% in 2014, 4.6% in 2015 and 4.1% in 2016. "While we are well past the worst of the economic downturn, economic growth remains slow," according to Zenith’s forecast. "We continue to see TV dollars moving from network to cable, and this trend will likely continue as cable networks continue to add quality programming to their lineups."

Over all, GroupM forecasts ad spending in the U.S. to grow 2.9% to $161 billion in 2014. That would follow a 1.8% gain in 2013 to $156.3 billion.

"Ad spending in 2014 will enjoy a slight bump thanks to the Winter Olympics in Sochi, with spending coming mostly from existing budgets," GroupM Chief Investment Officer Rino Scanzoni said in a statement. "But overall we estimate only marginal U.S. growth on a comparable component basis."

Because of what it called economic gridlock in the U.S. and a persistent financial crisis in the Eurozone, GroupM revised its forecast for worldwide advertising spending growth downward to 4.6% from the 5.1% lift it predicted earlier this year.

GroupM pegs worldwide ad spending at $492 billion in 2012, $508 billion in 2013 and $531 billion in 2014.

Adam Smith, director of GroupM's Futures unit, said a big part of the worldwide increase is coming from China, which accounted for 37% of new ad dollars in 2013 and is projected to be responsible for 31% of the growth in 2014.

GroupM predicts that investment in digital media will grow at a percentage rate in the mid-teens and account for 19% of measured ad spending globally this year and 21 percent in 2014.

Zenith is more optimistic on the global level, saying that advertising is set to see the strongest sustained period of growth in 10 years. The agency says spending will rose 5.3% in 2014 and 5.8% in 2015 and 2016.

Zenith is counting on improvements in Europe, as well as the Winter Olympics, World Cup and U.S. elections to goose spending.

Mobile will also be an important driver for ad spending growth, Zenith says. "This is the first time in the past 20 years that a new platform is expanding overall media consumption without cannibalizing any of the other media platforms," according to Zenith's report.  

Zenith forecasts that mobile will contribute 36% of incremental ad spending between 2013 and 2016. Mobile is small now, accounting for 2.7% of global spending on advertising in 2013, but will represent a 7.7% share in 2016, the agency said.

Television will be the second-largest contributor generating 34% of media growth, Zenith said.

Magna was even more optimistic about global ad spending, predicting that media owner revenues will grow by 6.5% to $521.6 billion in 2014. Earlier in the year, Magna predicted a 6.1 rise. The 6.5% gain would be the biggest since the post-recession 8.4% bounce in 2010.

Worldwide TV spending will be up 7.7% as the recovery returns some pricing power to media owners.

"The combination of an improved economic environment and stronger-than-usual cyclical drivers is bound to unlock marketing and branding budgets in 2014," said Vincent Letang, executive VP, director of global forecasting for Magna. "This will primarily benefit television and digital media where new formats and opportunities are being explored for activation and branding campaigns."

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