advertising recovery boosts 'old media'

Sally Jackson and Geoff Elliott | October 26, 2009
Article from: The Australian

TRADITIONAL media outlets have held on to their share of advertising spending in the face of the new media onslaught, and in fact are on the threshhold of a new revenue cycle, according to new data.

As analysts upgrade their forecasts and share prices surge, the figures further support the growing view that Australia's "old media" businesses, like the broader economy, are emerging from the global financial crisis in considerably better shape than their overseas counterparts, particularly in the US.

According to ad revenue consultancy Standard Media Index, in the year to September 30 local newspapers garnered a 19.5 per cent share of the spending of the main media agencies, which was a small increase on their January 2007 share of 19.42 per cent.

Radio also increased its share, from 7.41 per cent to 7.85 per cent, and magazines dropped back slightly from 8.87 per cent to 7.24 per cent.

Digital's share of expenditure grew most strongly, from 5 per cent to 8.29 per cent, most of it taken from the TV sector, which dropped from a 51 per cent share to 49.04 per cent.

But in dollar figures, the amount agencies spent on TV remained the same, with overall market growth making up for the small loss of share, SMI co-founder and publisher Jane Schulze (who is a former editor of Media) said.

"The 'old media' are still big advertisers' preferred choice when it comes to conveying their messages," she writes.

"More than 90 per cent of all their expenditure is still directed to 'old media'."

The lively debate over the future of Australia's "traditional media" was gingered up again this month by ABC managing director Mark Scott, who in his A.N. Smith Memorial Lecture in Journalism, characterised commercial news organisations such as News Corporation as "helpless witnesses to the unravelling of all they once stood for".

"The key business success, particularly in open markets, is not about how much money you are making today, or made in the past," Mr Scott said. "It's about how much money you will make.

"What is your growth story? Well, a growth story now for traditional media? That's getting harder and harder to find."

Investors, however, have found one, at least for the medium term.

A rising tide of advertiser confidence has seen revenue estimates revised upward for 2010 and beyond, lifting media stocks off the floor and leading a string of analysts to upgrade their share price targets in recent weeks.

Some analysts said they were positive about the prospects for media companies over the next seven-year business cycle.

Royal Bank of Scotland's Fraser McLeish put "buy" recommendations on Fairfax Media and APN News & Media.

"I don't think the (stockmarket) valuation fully reflects where their earnings are going to recover to," Mr McLeish said.

"There is also evidence the TV ad market is coming back ahead of what we expected. As advertisers come back, all media will benefit. It will be a rising tide that lifts all boats. Old media still faces headwinds, but the structural issues are longer-term ones that play out over a period of time. There isn't one sudden shift where everyone goes from old media to new media."

Executives from Ten and Seven have recently reported a turnaround in the ad market after a lean 18 months.

"There has been a lot of comment in the marketplace about things improving and we'd agree with that commentary," Seven sales chief James Warburton said last week.

"Lead times are looking longer, volume is up and demand is increasing."

Merrill Lynch also raised its target prices on Fairfax, APN, West Australian Newspapers, Ten Network, Seek and Austar.


















http://www.theaustralian.news.com.au/business/story/0,28124,26258002-7582,00.html