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US media owners’ ad revenues to increase by six per cent in 2014: Magna Global
MUMBAI: According to Magna Global, US media owners’ advertising revenues are set to grow by six per cent this year to touch $168 billion, marking an increase from the previous forecast of 5.5 per cent made in December 2013.
The main drivers include an improved economic outlook in the US and incremental advertising spend generated by non-recurring 2014 events: Sochi Olympics, Mid-Term Elections, FIFA Soccer World Cup, and communication on health insurance following the implementation of the Affordable Care Act in various states.
• Television will benefit the most from the non-recurring events of 2014, with advertising revenue growth of 8.3 per cent, following stagnation in 2013 (-0.6 per cent).
• Digital media ad revenues grew by 17 per cent in 2013 to $43 billion. Within digital, mobile-based ad sales grew by 110 per cent (versus eight per cent for desktop-based advertising) to reach 17 per cent of total digital media revenues. Another driver was social media advertising that grew 53 per cent to $3.6 billion.
• With a 27 per cent market share in 2013, digital media is now bigger than national TV, but still significantly smaller than television as a whole (40 per cent market share). Magna Global has forecast digital media advertising sales to increase by 14.4 per cent in 2014 and ultimately outgrow total television by 2018.
• Print advertising will continue to decrease by approximately seven per cent while radio revenues will be flat and outdoor media will grow by 3.7 per cent.
• Amid economic recovery and decreasing unemployment, underlying advertising growth will accelerate further in 2015, at +4.6%, excluding P&O.
Across all core media categories (TV, radio, digital media, print, out-of-home), media owners generated an estimated $158.4 billion in ad sales in 2013. Ad revenue growth was stronger than expected in the second half of the year, leading the companies to revise the full-year growth from 1.3 per cent to 2.4 per cent.
The current long-term scenario has digital media ad revenues growing by an average 12 per cent between 2014 and 2018, reaching $74 billion in 2018, while total television ad sales will grow by three per cent over the same period, also to reach $74 billion. At that point television and digital media will both control 38% of total ad dollars, leaving less than 24 per cent to all other media channels (print, radio, outdoor).
By comparison, digital media advertising is already bigger than total television in seven of the 72 international markets monitored by Magna Global including the UK, the Netherlands, Germany and Australia.
The migration of ad dollars to mobile digital platforms is accelerating, with social media being the main catalyst: Mobile-based advertising (display, search, and video) grew by 110 per cent to $7.1 billion, in line with previous expectations, while desktop-based internet advertising grew by ‘only’ 8 per cent. Mobile-based ad impressions (smartphones and tablets) already generate 17 per cent of digital media dollars. In terms of formats, search remains the number one revenue generator as ad sales grew by 18 per cent to $22.7 bn (mobile 83 per cent, non-mobile nine per cent). Video grew by an estimated 31 per cent to $3.1bn (desktop 19 per cent, mobile 300 per cent from a low base). Finally, display revenues grew by +16% to $12.1bn. Within display, growth was driven almost entirely by social media advertising (53 per cent to $3.6 billion) and also by mobile: 167 per cent for mobile-based social advertising. Facebook generated 45 per cent of its global ad sales through mobile devices in 2013 (53 per cent in the last quarter). By contrast, traditional banner display campaigns on desktop internet are now a mature format, barely growing (three per cent) in 2013.
Faced with the competition of digital media and the absence of non-recurring drivers, national television proved resilient in 2013: The 0.6 per cent decrease in full-year revenue translates into a 4.3 per cent if one neutralises the $639 million of Olympic ad sales and the $2.7 billion of political ad spend that generated incremental sales in 2012.
TV continues to lose viewers to digital media but at a slow rate. For instance, in the all-important fourth quarter (the first quarter of the ‘broadcast year’), English-speaking broadcast networks declined by an average five per cent in ratings in the fourth quarter of 2014 (6.5 to 6.2) but the drop was notably smaller than the year before (7.2 to 6.5) (primetime excluding sports, adults 18-49).
Driven by cost-per-thousand inflation and despite a dip in ratings, network television thus managed to increase its advertising revenues in that last quarter. On a full-year basis, English broadcast networks saw their revenues drop by 2.2 per cent to $14 billion, but that would have been +2.4% if excluding the Olympics from the 2012-2013 comparison.
On a normalised basis, this was in fact a better performance than 2012 (zero per cent) but below that of the previous odd-numbered year (2011: 4.6 per cent). Spanish-speaking broadcast networks benefitted from a strong second half and full year revenues grew by 9.7 per cent to $1.4 billion.
Syndication ad revenues remained flat at 0.5 per cent ($2 billion). Finally cable networks continued to increase their share of television ad revenues by growing six per cent to $24.7 billion. Cable networks now account for 59 per cent of national television advertising, compared with 33 per cent for the five English-speaking networks. With cable and Spanish TV growth offsetting the decline of English networks and syndication, national TV as a whole grew by three per cent in 2013, or 4.6 per cent excluding the Olympic effect.
Local television was faced with the quasi-absence of political spending following the bonanza of 2012. However, the sector was helped by other dynamic categories—automotive in particular—and it keeps gaining market share from print and radio in the local media market. Total ad revenues decreased by 7.1 per cent, which would translate into a 3.7 per cent underlying growth excluding incremental political spend.
Driven by economic recovery and non-recurring events (political spending, Sochi Olympics and, to a lesser extent, the FIFA World Cup and the Affordable Care Act implementation), media owners advertising revenues will increase by six per cent this year (3.9 per cent excluding P&O) (the previous forecast was 5.5 per cent). For 2015, the underlying growth will accelerate to 4.5 per cent, which will translate into 2.4 per cent given the absence of P&O (0.1 per cent compared to the previous forecasts).
In 2014, the ad market will continue to shift to digital media as Magna Clobal predicts another year of double-digit growth (14.4 per cent); newspapers and magazines will continue to lose market share and ad dollars (-7.3 per cent and -7.1 per cent respectively), while radio should be flat (-0.1 per cent) and outdoor will continue to grow (3.7 per cent).
Television will benefit the most from the non-recurring drivers (8.3 per cent) despite a relatively low demand in the first quarter, reflected by relatively low costs in the national TV ‘scatter’ market. That weakness of demand was partly caused by the temporary economic slowdown and possibly by the extreme weather conditions affecting the sales and marketing expenditures of three major spending categories (retail, auto, restaurants).
According to Magna Global, demand will gradually pick up over the year and that political spending alone will provide $3 billion of incremental revenues to local television in the third and fourth quarters. Spanish television will also benefit from the non-recurring soccer Fifa World Cup, hosted by Brazil this summer. Although this event is approximately five times smaller than the Olympics in terms of advertising sales potential, soccer is already popular in the Hispanic community and steadily growing among other demographics too.
To capitalise on this trend, both Univision and ESPN will be broadcasting all 64 games live, for the first time in the US. In addition to getting the bulk of political spend in the mid-term elections, local television will benefit this year from incremental spending from insurance companies, healthcare institutions and government, in connection with the introduction of the Affordable Care Act; combining the two drivers, the segment can be expected to grow revenues by +16% on a full-year basis.
Digital media spend will grow by 14.4 per cent across most segments: search (15 per cent), video (25 per cent), social (45 per cent), but non-social display formats will be hit by lower demand and a negative pricing dynamic, so that ad sales will stagnate (zero per cent) and even decline (six per cent) on desktops. The volume of programmatic and automated buying will increase by 38 per cent to $11 billion. By the end of the year, it will represent approximately 60 per cent of display-related digital media transactions in the US.
In terms of spending categories, Magna Global expects telecoms and pharmaceuticals to show robust ad growth; automotive, food and personal Care are expected to expand their advertising expenditures moderately; advertising spending in finance, restaurants, technology and cinema are forecast to be flat or down.
Magna Global director of global forecasting Vincent Letang said, “Three elements are combining to generate robust advertising growth in 2014: economic recovery, the usual even-numbered year drivers of political and Olympic spending, and other non-recurring events that will specifically benefit television: the Fifa Soccer World Cup and the Affordable Care Act launch. Meanwhile, the growth of mobile and social advertising will more than offset the stagnation of traditional, desktop-based digital formats.”
Magna Global’s next forecast update (US and global) will be published in June 2014.