Slow and steady

The last quarterly reports of 2003 are out and analysts are getting a grip on the year to come: Look for slow, steady media spend growth overall, with above average spurts in radio, magazine, O-O-H and Internet

The numbers are in. As the flurry of quarterly reports settles and analysts pick through the data, a clear picture is beginning to emerge of the type of year 2003 was in media sales, and the type of year 2004 is going to be.

In 2003, the Canadian ad spend continued to outpace other world regions, with PricewaterhouseCoopers anticipating the final tally to be up 4% over 2002, ahead of a 2% rise globally, and 3% in the States. Canada’s 4% growth rate will continue through 2004, but U.S. and global increases are likely to catch up and even overtake the Canuck spend in the year to come.

The recently released quarterly reports from Canada’s largest media-owning conglomerates show that 2003 was, by and large, not a bad year. One exception is CanWest Global Communications, which attributed an overall poor performance in Canada to declining television ad sales. It did, however, experience some growth in its Australian and New Zealand holdings.

Gino Scapillati, Canadian leader of the PricewaterhouseCoopers entertainment and media practice, says U.S. federal elections and the summer Olympics will help boost sluggish ad spending south of the border, but he cautions not to expect as dramatic results from similar events in Canada.

‘If you go back to 2001, where we grew at 1%, they dropped 10%. Now we’re starting to see their rates of growth exceeding ours. We’re obviously linked, because our economy is heavily linked, but our growth will be more moderate.’

The ‘PricewaterhouseCoopers Entertainment and Media Outlook: 2003-2007,’ released last summer, projects that the Canadian ad spend will, on average, grow at 4.7% each year between 2003 and 2007, to U.S.$6.5 billion. PwC is predicting that the largest spending increases will be seen in out-of-home, Internet, and radio.

The big will also continue to get bigger. Scapillati says that we will get another taste of media consolidation in the next year or so. It won’t be on the large scale seen about three years ago, but he says there will be similar moves to consolidate and exchange properties amongst the conglomerates.

The ‘For Sale’ sign posted on Calgary-based television broadcaster Craig Media is the first step. At press time, industry speculation had Alliance Atlantis Communications, CHUM and Quebecor as possible buyers of Craig’s numerous holdings.

Other market influences to watch for in 2004 include the continued debate over loosening foreign ownership rules, which would lead to even more concentration of ownership.

In terms of specific media, Scapillati says magazines and out-of-home in Canada exceeded global rates of growth in 2003 and will be strong through 2004. The majority of ad spending in the market – about 75% – continues to be in television and newspaper and that ratio will be similar five years out.

TV: Shift to specialty continues

For conventional broadcasters, ad spending is stable at 3% to 4% growth, but the specialty channels are taking a larger piece of the pie. Scapillati says specialties experienced about 18% growth in 2003 over 2002. That pace will likely slow to 10% or 11% percent a year over the next five years.

With this kind of acceptance, it’s no wonder the specialties will be staging their own fall upfront presentations this year.

Consolidation and ownership changes could be among the issues influencing television performance this year. Craig Media is on the block and BCE previously made no secret of the fact that it would like to unload its 68.5% share in Bell Globemedia.

A decline in ad dollars made its mark on CanWest Global and now the company must address its weak program schedule to turn that around. Steve Aronovitch, broadcast investment manager for Starcom Worldwide in Toronto, says that although CanWest does have a lot of top properties, such as the Super Bowl, the Friends finale, Survivor, and a strong Sunday night lineup with The Simpsons, its adult demos in prime time are not as strong as CTV.

Jim Patterson, president and CEO of TVB, the Television Bureau of Advertising, says the television market is soft right now, but broadcasters are expecting bounce from the U.S. as well as a relatively strong Canadian economy to heat things up.

He says there are too many variables to really project what ad spending will be in 2004: ‘It takes media buyers to make media buys and it takes advertisers who want to advertise. It’s an advertiser issue, not the medium. They are the ones with the budgets. Are they going to increase them or not?’

Tim Cormick, director of co-marketing for Corus Television, says the story for specialties is the continuing trend of viewing and dollars moving over from conventionals. He’s not sure how specialties will net out this year but points to positive quarterly results recently released by Corus Entertainment, Astral Media and Alliance Atlantis Communications as a good start.

Newspaper: Lineage flat, revenue slightly up

Newspaper, which taken as a whole, accounts for slightly more spend than TV, is more stable. The medium continues to grow, albeit at a small but steady rate: revenues were up between 1% and 2% for 2003, with increases of just over 2% projected by PwC for 2004 and each of the next five years.

Anne Kothawala, president and CEO of the Canadian Newspaper Association, says a summary of 2003 ad lineage shows ad sales to be flat overall, but strong in a number of categories, including a 4% increase in classified ad counts and a 8% increase in inserts.

‘This is pretty good performance, given that the economy was not growing by leaps and bounds,’ she says. ‘All the issues that impacted the Canadian economy, impacted newspapers – the Ontario blackout, the fires in B.C., SARS, mad cow disease. In light of all that, we’re pleased to see a quite solid outcome.’

Doug Checkeris, Toronto-based president and CEO of The Media Company, believes that skyrocketing ad rates are hampering newspaper’s growth. ‘Just look at it – you’ve got newspapers with 5%, 6%, 7% increases against declining circulation and readership. If they want to come to me and say the Toronto Star is more effective this year because of the following things, there’s no [problem]. But they don’t have a reason and they’re not even investing in research to show me it’s more valuable.’

Radio: 5.5% growth in 2004

Radio remains very solid with about 4.5% growth in 2003, jumping to about 5.5% this year, and 6% a year increases expected over each of the next five years, says Scapillati of PwC.

Peter Heron, VP business development, national, for the Radio Marketing Bureau, says auditing of the radio broadcast year from September 2002 to August 2003 indicated about a 6% increase in revenues for the industry.

Investment from national advertisers has increased, thanks to the consolidation of ownership and formats in the medium, and that trend will continue to be a driving force in the radio business.

‘The increase in investment from national advertisers is more a function of recognizing that within a fragmented environment, they need to have a strategic approach. They’re starting to realize there’s an opportunity to get a little more frequency in front of a target group using radio because of the loyalty to stations.’

Starcom’s Aronovitch says radio has definitely been holding its own. The introduction of adult formats such as JACK and BOB contributed to radio’s success in 2003 and they will continue to thrive this year.

‘That’s the trend. That’s where big players like Corus, CHUM, and Rogers have been solidifying to get some more basic, solid, adult formats. It’s created an interesting format that’s driving listeners. Those kinds of things help radio.’

Magazines: Gardening and shelter fuel uptick

Consumer magazines are enjoying year-over-year growth in their share of ad spending. Gary Garland, president of Magazines Canada, says ad spending in consumer magazines set a new industry record in 2003. Ad pages grew by 8%, with a 9.3% increase in ad sales resulting in revenues of $610 million.

Garland says 2003 was a strong year for men’s and general-interest titles and expects 2004 to bring the launch of some interesting new women’s titles amongst other categories.

Gardening and home/shelter magazines have been, and continue to be, the fastest-growing categories although women’s, city, and general interest are also doing well.

‘After the 9/11 effect, the recessionary economy and lack of business confidence really shut down the growth that business and news magazines were seeing,’ says Garland. ‘They’re now seeing growth again. It has all the hallmarks of a very healthy industry.’

Across the list of 31 advertiser categories measured by Leading National Advertisers (LNA), 19 of the top 25 groups increased their spending in magazines last year (see ‘Magazines: Growth in 2003,’ right).

Out-of-home: An attractive alternative

The out-of-home ad market in Canada surpassed global spending with about 8% growth in 2003 and 7.8% expected this year. Scapillati says this is partly being driven by the rising ad rates of other media, making O-O-H a very attractive alternative.

Stephanie Guran, marketing manager at Viacom Outdoor of Toronto, says 2004 is off to a good start with buyers making commitments earlier than in the past, and key markets and locations being booked up to eight months in advance.

Innovative applications of traditional formats – transit shelter wraps, neon posters, and 3-D effects – are still drawing the most interest from advertisers.

Posters continue to be high-demand properties in Toronto, Montreal and Vancouver. High-profile locations of large-format boards as well as impact sites, such as transit station domination, are also hot.

Media, packaged goods and fashion continue to be strong O-O-H advertising categories, says Guran, while the wireless/telecommunications category has been very active with financial and pharmaceutical categories building as well.

Internet: Catching up

Internet advertising is in serious growth mode, with PwC projecting an average rise in spending of 7.1% each year between 2003 and 2007.

Influences on the industry this year will include consolidation of major Internet suppliers MSN and Sympatico, which are teaming up to form a mega portal.

The strongest Internet advertising categories are automotive, financial services, and consumer technology. While video and interactive effects can be used for Internet campaigns, Miles Faulkner, president of the Internet Advertising Bureau of Canada, says banner advertising remains the staple, and standardization and simplicity are very much the trend.

Faulkner expects spending to be in the region of $150 million in 2003 for Canadian companies, but says the percentage of budget allotted to the Internet by advertisers is still lower than it should be.

He says sellers expect a minimum 30% increase to bring spending up to $200 million in 2004. ‘We’d be disappointed if we had anything less than that. We accept that TV and radio are the largest media in terms of reach and time spent, but we believe the Internet compares favourably to newspaper and magazines in terms of reach and time spent. There are certain segments that the Internet nails very effectively and it fills the gap for TV, mostly when talking about teens versus older demos.’