MECOM, the European newspaper firm led by former Mirror executive David Montgomery, yesterday said that the decline in its advertising revenues had started to slow. Ad sales in November and December were down just eight per cent, a major improvement on the 18 per cent fall in revenues over the entire year, and on the 22 per cent nosedive in the first six months.
Similar stabilisations are taking place across the industry, with anecdotal evidence suggesting that things are on the up. So, we can all breathe a collective sigh of relief. The worst advertising recession in decades is drawing to a close.
Not so fast. It’s true that there have been some slight improvements, and that 2009 wasn’t quite as bad as first feared. GroupM, the media agency owned by Martin Sorrell’s WPP, recently revised upwards its forecast for 2009 from a fall of 14 per cent to one of 12 per cent. Still, it’s a bit like asking someone to choose between a life expectancy of 12 or 14 days: no-one’s going to bite your hand off – both options are devastating.
And if things are looking good at the moment, it’s partly because there’s a general election on the way. Much-needed fiscal tightening to narrow the deficit is being delayed by the government, but after the election that will change.
According to Douglas McCabe of Enders analysis, 2010 will be a year of two halves. If David Cameron’s Tories win the election as expected, public sector jobs and advertising will be slashed after May. That will be particularly bad for regional newspapers and The Guardian’s owner GNM, which relies massively on public sector recruitment ads in its Society and Education supplements. Having posted a £57m pre-tax loss in its accounts for last year, it is revenue it can ill-afford to lose.
McCabe reckons public sector advertising spend would hold up in the short term if Gordon Brown clings to power, although the real possibility of a sovereign debt crisis would be even more damaging to ad revenues.
In 2010, Enders reckons press advertising in the UK will end the year down some 8.4 per cent while TV will shed 2.5 per cent. Then, 2011 will continue to be dire, with press ad revenues falling 3.3 per cent and TV 1.5 per cent.
GOOGLE CLEANS UP
The only success story in terms of growth will be the internet, with UK revenues rising by 6.9 per cent to £3.49bn in 2010 and then 4.7 per cent to £3.66bn in 2011. But Google – not newspaper websites – will benefit from the vast majority of this.
For a real recovery in television and press however, we’ll probably have to wait for the second half of 2011 or early 2012. Until then, it’s wrong to mistake the odd glimmer of brightness for a light at the end of the tunnel.