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even with the war
Zenith bumps up 2003 U.S. #s, citing rising profits
By Heidi Dawley
There is further evidence today that the U.S. advertising economy may be able to escape the war in Iraq without serious injury.
In a report out today, Zenith Optimedia has actually upped its forecast for 2003 advertising revenue in the U.S., estimating it will hit 2.2 percent rather than the 1.9 percent it forecast for 2003 back in December.
That would mean real growth of 0.2 percent for U.S. advertising after taking inflation into account.
“The war is shifting spending around in the year, but we don’t ultimately think that it will affect spending,” says Jonathan Barnard, knowledge management manager at Zenith Optimedia, adding that this is barring an unexpected turn of events, of course.
Of all the respected media forecasters, Zenith has been the most conservative regarding the recovering ad economy, so its revision will be particularly welcomed.
The better-than-expected performance that Zenith Optimedia sees in the U.S. market will come about as a result of improved corporate profits. They are the result of the chainsaw approach to corporate finance over recent years, in which American corporations hacked back costs, reducing head counts and excess spending, in the face of an economy sliding into recession.
The result?
Corporate profitability is looking strong again. And that means advertising spending will be stronger than initially forecast, says Zenith Optimedia.
“While job cuts don’t help consumers, they do help corporate profits, and now companies can afford to spend more on advertising,” says Barnard.
This strength comes despite an unemployment rate that has topped 6 percent and consumer growth that is heading below 1 percent.
While strong consumer spending has helped prop up the advertising economy during the economic hard times, the real driver for ad spending is generally corporate profitability, not consumer spending.
National TV media is one area in particular where Zenith has revised forecasts upward. It now expects network TV will be up 3 percent this year, to $16.3 billion.
Zenith’s optimism on the TV market extends to the upfront, where so much ad inventory is sold for the coming TV season.
While the forecasts point out that a prolonged war would greatly damage advertiser confidence, the company also says that a swift conclusion would do the opposite, in particular that it would make “an already firm upfront market tighter still.”
Other factors pointing to a strong TV market are that scatter for 2003 in network remains firm, as is true with cable and syndication. This is despite consumer and stock market weakness. What’s more, the auto, retail and refinance and real estate categories stand out as strong.
Zenith Optimedia has also revised upward its national spot radio forecast for 2003 to 2 percent from 0 percent, with auto, telecom and retail as the key drivers.
Zenith has also upgraded its forecast for U.S. advertising revenue growth in 2004 to 4.5 percent from 3.6 percent.
The picture for the six other main global advertising economies--five western European countries and Japan--is far less rosy.
Zenith has downgraded its five-country European forecast for 2003 to 0.4 percent from the 1.8 percent forecast made in December. This extinguishes any hope of real growth this year in the region. What’s more, the company also downgraded 2004 forecasts for Europe to 3.2 percent from 4.2 percent.
Forecasts for Japan have been downgraded too, to -6.8 percent from -3.5 percent.
The increasingly gloomy predictions for European advertising revenue have little to do with the war, says Barnard, and more to do regulation and culture in western Europe. The same is true of Japan. It is far more difficult for corporations to slash costs, especially employment costs, when there is an economic downturn. This makes recovery slower to achieve.
Germany is expected to fare particularly poorly this year, with Zenith Optimedia downgrading the advertising growth forecast to -0.9 percent from +1.0 percent. This is the biggest downgrade of any of the big seven companies. Zenith blames the gloom on sluggish consumer and corporate demand combined with heavier taxes and the Iraq situation.
Europe, however, is still expected to experience recovery in earnest in 2004, with growth of 3.2 percent.
| Advertising
expenditure (seven markets) Major media--newspapers, magazines, television, radio, cinema, outdoor, internet US$ million, current prices. |
|||||
|
markets |
2001 |
2002 |
2003 (e) |
2004 (e) |
2005 (e) |
|
USA |
141,636 |
143,552 |
146,671 |
153,335 |
158,319 |
|
Five-country Europe--total |
60,624 |
59,333 |
59,556 |
61,463 |
63,984 |
|
France |
10,532 |
10,281 |
10,416 |
10,707 |
11,027 |
|
Germany |
20,146 |
19,323 |
19,147 |
19,819 |
20,910 |
|
Italy |
8,349 |
8,053 |
8,098 |
8,337 |
8,634 |
|
Spain |
5,710 |
5,787 |
5,828 |
6,062 |
6,339 |
|
U.K. |
15,888 |
15,889 |
16,067 |
16,538 |
17,074 |
|
Japan |
37,650 |
35,089 |
35,359 |
35,906 |
36,578 |
|
Seven-country total |
239,910 |
237,974 |
241,586 |
250,705 |
258,882 |
|
Spurce:
Zenith Optimedia |
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April 7, 2003© 2003 Media Life
-Heidi Dawley, an American living in London, is the European correspondent for Media Life.
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