MAGNA released an updated US Media ad revenue forecast that mentions expectations about the future have improved markedly during the past two quarters. Among major economic measures, Industrial Production (IP) and Personal Consumption Expenditures (PCE) have the highest correlations with advertising, and forecasts of these variables inform their predictions of ad revenue growth and decline. While consensus forecasts for PCE have not changed meaningfully, expectations for IP have improved.
As a result, they are moderating their 2010 advertising forecast and now expect normalized ad revenues (excluding local TV political and national TV Olympic revenues) to decline 1.3% next year. This compares with their previously published expectations for a decline of 2.1% during 2010. In total, MAGNA expects suppliers to generate $159 billion of normalized ad revenue next year.
The outlook is definitely flattening for both local radio and television. MAGNA estimates in 2009 local radio will drop 21.6%. For 2010 it is estimated to drop 4.7%. Local television is even brighter, with 2009 down 19.9% and 2010 looking to be down only 0.9%. National television is estimated to be up 1.3% in 2010.
For Q4, MAGNA forecasts that US media suppliers will collectively generate 9% less ad revenue on a normalized basis than they did when compared to the prior year period. Industry revenues will fall from $47.5 billion in Q4 of 2008 to $43.2 billion during Q4 of 2009.
These figures reflect a moderating pace of decline compared to estimated revenue reductions of 13% during the third quarter and 18% declines during each of the first two quarters of this year.
As they previously forecast, the first half of 2009 marked the bottom of the ad-supported media economy’s decline. To illustrate the depths to which the economy fell during this period, year-over-year changes in PCE fell for three consecutive quarters between October 2008 and June 2009. Notably, there was no period since quarterly records were first published in 1947 which recorded any decline in PCE prior to the current downturn. Similarly, IP fell at a faster pace than at any time since 1975 during the past few quarters.
In this economic environment, turmoil was widespread among media suppliers. But fortunes in Q2 were also relative, with direct media falling 11% and national media falling 13%, compared to local media which fell 26% primarily due to weakness in the automotive sector. Local advertisers generated $31 billion of non-political advertising revenue during the first half of 2009, less than any first half of a year since 1995. By contrast, direct and national advertisers were back to 2006 and 2004 levels, respectively, after more than two years of decline. Pockets of growth in the first half of 2009 included paid search and online video, and they expect these media types to lead the industry as the fastest growing major media categories for the rest of 2009.
Their longer-term forecasts remain in-line with prior expectations, as MAGNA forecasts total normalized media supplier ad revenues will rise by a compounded annual growth rate (CAGR) of 1.2% between 2009 and 2014.
RBR-TVBR observation: So it appears that 2009 will be the bottoming out year for most ad spend here in the U.S. For 2010, Internet will still look the most rosy, with traditional media like television and radio coming out of the slump. Newspapers and magazines are a different story. The faster they shift their content to online, the better.