A SHOOT STAFF REPORT
NEW YORK-Although the global financial difficulties that surfaced last summer-particularly in Asia, Latin America and Russia-remain cause for concern, the bottom-line word from a trio of expert forecasters is that ad-media spending in 1999 should reach a record high level. And, arguably, the prognosis for 2000 and 2001 is even more bullish.
This positive consensus came in separate studies from McCann-Erickson U.S.A., New York, Zenith Media, London, and New York-headquartered investment bank Veronis, Suhler & Associates. However, will this continued growth bode commensurately well for the commercial-production community? Keep in mind that 1998 was a reasonably good year for media spending in broadcast and cable, yet many spot-production houses reported declines in business, with severely prolonged slow spells.
Before conjecturing as to why, here’s a rundown of projections for ’99, starting with the McCann U.S.A. report.
Robert J. Coen, senior VP/ forecasting director at McCann-Erickson, predicted that marketers would tally ad-media expenditures of $212 billion in the U.S. this year, an increase of 5.5% from the $200.8 billion he projected for 1998. The ’98 figure represents a 7.1% gain from the $187.5 billion spent in ’97, according to Coen.
Though the 5.5% hike is the smallest in percentage terms since a 5.2% rise in 1993, it’s a considerable improvement over the grim prospects of late summer, when the stock market was hit by international economic turbulence. The foreign instability, though, did impact McCann’s projections for overseas ad spending in ’99, which Coen pegged at $223.9 billion, up just 3.5% from his predicted $216.3 billion for ’98. That ’99 projection was revised downward by Coen, who last June forecast $228.2 billion in overseas ad expenditures. He noted that ad spending weakness in such countries as Japan, Malaysia, the Philippines and South Korea offset strength in growing markets like Hungary, Poland and Australia.
Still, in the big picture, Coen’s worldwide total for ’99 is $435.9 billion, a 4.5% jump up from his estimated $417.1 billion tally in ’98, the first time McCann’s projections of world ad spending exceeded $400 billion. Coen-who’s been tracking advertising and media trends since 1948-said growth in ’99 would be fueled largely by low inflation rates and low unemployment, which should translate into American consumers feeling fairly secure about spending. Generally, ad spending closely parallels consumer spending.
Corroboration
Though his research methodology and resulting totals are different from Coen’s, John Perriss, chairman/CEO at Zenith Media-a joint venture of Cordiant Communications Group and Saatchi & Saatchi PLC, London-predicted a similar growth pattern. He projected a 2.2% increase in worldwide ad spending from his $300.3 billion figure in 1998 to $312.9 billion this year. He then sees slightly escalated growth of 2.5% in 2000, to $329.5 billion, and 2.7% in 2001, to $348.7 billion.
The gains foreseen this year by Perriss are due to several factors, including continued U.S. strength, accelerated growth in European nations (e.g., Germany and Italy) and comebacks in some of the harder hit Asian markets. He predicted a stronger second half in 1999 as Asia gradually recovers from the problems of ’98. Those problems, according to Zenith research, were profound: National ad spending slumped 60% in Indonesia last year as compared to ’97, 33.5% in Thailand, 28% in South Korea, 22% in Malaysia, 10% in Singapore, 4% in Japan and 1.2% in Hong Kong. Television ad revenues plummeted by up to 50% in Indonesia, Malaysia, the Philippines, Thailand and South Korea.
Like McCann and Zenith, Veronis, Suhler & Associates also predicted an increase in U.S. ad spending. Company president John Suhler projected a compound annual growth rate (CAGR) of 8.3% for a five-year period stretching from 1997 to 2002, reaching $294.3 billion in 2002 from $136.9 billion in ’97. Veronis, Suhler reported that the reach advantage of broadcast television would remain attractive for the largest advertisers, though accelerating audience erosion will moderate growth. Growing audiences for cable networks will generate double-digit annual advertising increases. Overall television advertising is forecast to grow at an 8% CAGR over the forecast period through 2002.
Prodn. Co. Feedback
While the figures from McCann, Zenith and Veronis, Suhler are undoubtedly a positive sign, there’s lingering doubt about the extent of the ripple effect on the commercial production business. Certainly, 1998 was hardly a prize year, despite relatively healthy growth in media expenditures, including traditional broadcast and cable. In an informal survey of production community veterans, speculation varied widely as to why spotmaking didn’t enjoy a better ride on media coattails.
Some cited the overwhelming number of production companies and directors in the business, making it a buyers’ market and translating into diminishing shares for many mid-level houses. Others contended that while media buys hit mega proportions, by sharp contrast the cost-cutting squeeze is on production expenditures. Several called this widening disparity penny-wise and pound-foolish in that the quality of the messages being slotted into expensive media time is suffering. Still others claimed there was an increased volume of recycled, re-edited commercials, further reducing the pool of new production opportunities.
And a diminished market-whatever the cause-prompts more desperate measures, with certain fledgling production houses undercutting their more established competitors, some of whom themselves begin to bid their A-level directors on B-level jobs, siphoning off business from others in the production company food chain.
Still, there’s room for optimism. Increased consumer spending and ad-media expenditures underscore a well-performing economy. And those production houses in for the long haul-and able to ride out the slow stretches-can only benefit from a healthy economy. The problem, observed one pundit, is that there are many companies that live from job to job and don’t have the financial wherewithal to stay the course. As those shops fall by the wayside-a shakeout some foresee in ’99-many of the enduring houses will be in a better position to prosper. "It’s a survival-of-the-fittest scenario," noted a principal at a well-capitalized production company. "Like it or not, that’s the basis of a free enterprise system."
