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GroupM This Year Next Year UK Summer 2009 forecast


UK media investment predicted to fall 14% this year, 3% next year

• Print media suffering heaviest downward revision
• Weak summer will reveal media at greatest risk in Q4

In December 2008 we predicted UK media investment would fall 5% in 2009. Our global update in March lowered this to minus 11%. Now we are at minus 14%, hoping this is finally enough to catch up with the curve and that easier comparatives across 2H will apply the brakes.

The main change since March is to print. Newspapers move from minus 20% to minus 26%. Classified print advertising in the regional press is the principal victim. Thanks to recession and internet substitution, we think print classified will raise £718 million in 2009, a 40% drop from 2008 and 60% lower than its £1,817 million peak in 2004. Our forecast for 2009 consumer magazines ad investment falls from minus 16% in March to minus 20% now as circulations fall but supply still outstrips advertiser demand. In contrast, our TV revenue forecast has stabilised at minus 14% since March.

Recession has highlighted three distinct bands of media pricing. Market leaders with good audience reach – most noticeably in newspapers and magazines – have sacrificed advertising space to reduce audience supply and thus limit discounting on the space they do sell. Prices to advertisers in such media have generally not fallen as much as investment volume.

In a second category of its own, TV exhibits ’dynamic pricing’, which moves up and down in line with investment. This is because by law and convention UK TV broadcasters do not sacrifice ad minutes like a magazine or newspaper sacrifices ad pages, and all actively seek the biggest audiences they can. TV costs-per-thousands are now very attractive. This is why TV revenue seems to have found a floor while less ’dynamic’ media are still falling.

In the third category are secondary and tertiary media brands for whom sacrificing space is not an option, because cash today is more urgent than defending prices for a tomorrow which some might never see. By the same token these media are more open to new ideas and show more initiative towards advertisers. But advertiser demand is set to remain weak this summer, so it is possible mergers, restructures and closures will accelerate as we move into the fourth quarter.

We hope to see some sort of recovery in 2010, but assume consumer demand will remain weak for at least another year as falling jobs, wages, debts and house prices play out, with the unwelcome possible accompaniment of looming public-sector austerity - not least in advertising, given that the Central Office of Information is its largest investor.

No previous ad recession has put household media names at risk like this one has, from local newspapers to high-street magazines to national TV channels. Consolidation and merger could change the shape of the media supply-side this year and next. Though hard to quantify in forecasts like ours, a big shakeout and fewer, stronger survivors will make for tougher media negotiation independently of economic recovery. Another wild card which could potentially accelerate advertising recovery, as it has in the past, is advertisers anticipating consumer recovery by returning en masse to the media markets.

This Year Next Year is GroupM’s media and marketing forecasting series drawn from WPP’s worldwide resources in advertising, public relations, market research and specialist communications.

GroupM is the leading global media investment management operation. It serves as the parent company to WPP media agencies including Maxus, MediaCom, Mediaedge:cia and Mindshare.

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