Paris: Matthieu Coppet has a word of hope for the world's beleaguered media firms, reeling from the deepest advertising slump in memory. All signs point to a relatively robust recovery in ad spending, beginning next year, Coppet, an analyst at UBS AG, said in a recent report.
His enthusiasm is far from universal. Gerhard Zeiler, chief executive of the RTL Group, the biggest commercial TV broadcaster in Europe, reflects another view in the industry: The good times will not return anytime soon.
“I simply don't believe that we will see a quick recovery in advertising revenues," he said. “Nor do I think they will return to previous levels as fast and easily as some of us may think."
As these divergent opinions indicate the outlook for the $500 billion (Rs24,550 crore) global advertising market is unusually murky, after the first half of 2009 in which ad spending plunged by double-digit percentages in many developed countries. Many ad executives and analysts seem to agree that the worst is over. But there is little agreement on the strength, timing and distribution of any recovery.
“It's not a big rebound, but there are some interesting signs," said Maurice Levy, chief executive of one of the largest advertising companies, the Publicis Groupe.
One reason for caution is that advertisers are waiting to commit their budgets; as a result, ad executives and media owners complain that they have little visibility about spending prospects, beyond a matter of days or weeks.
This complicates some executives' thinking as they wrestle with the question of whether to try to charge consumers more for content, or to continue to rely on ads for the bulk of revenue. Some analysts argue traditional media will never regain ad spending lost during the recession, as ads shift to the Internet, cable and satellite TV channels.
“If the ad industry doesn't pay every single bill any more, then the consumer—directly or indirectly—will have to step up," Zeiler said. Newspaper publishers, too, are talking about erecting so-called pay walls for their websites.
The differing fortunes of media firms that are heavily dependent on advertising, on one hand, and those that rely more on consumer purchases, on the other, is reflected in earnings reports this week from two big European media companies, Bertelsmann AG and Vivendi SA. On Monday, Bertelsmann, which owns a majority of RTL, reported a 30% drop in operating profit and a 6.5% decline in revenue for the first half of the year, citing sharp declines in ads.
Vivendi, which is less dependent on ads, reported a 1% rise in operating profit on a 17% increase in revenue.
Consultants at PricewaterhouseCoopers Llp say they think this gap between advertising and other forms of revenue will persist, adding that global ad spending will remain below 2008 levels four years from now. By contrast, spending on media and entertainment by consumers and businesses will rise to $812 billion in 2013, from $707 billion this year, the company says. But Coppet of UBS says some of the gloom is overdone. While global ad spending has fallen more steeply than expected this year, he has increased his outlook for next year, saying spending will rise 3.9%.
Coppet is relatively sanguine about the prospects for recovery because, he said, much of the structural shift caused by the rise of digital technology has already occurred. Ad spending as a percentage of the overall economy is already at postwar lows in the US, he said, suggesting that there is room for growth.
“We expect the cyclical recovery to overwhelm the structural advertising decline for the next three years before softening," he wrote.
In ad agency executive suites, the outlook remains more subdued. Martin Sorrell, chief executive of the WPP Group Plc, said last week, as the firm reported a big drop in earnings for the first half, that he saw few signs of higher spending by advertisers.
©2009/THE NEW YORK TIMES