Group M, part of Sir Martin Sorrell's WPP, cuts growth forecast for UK ad spend in 2011 from 3.6% to just 1.5% year on year
Media buying network Group M has significantly downgraded its UK advertising forecast, slashing growth for TV and predicting that the national newspaper market will now go into reverse this year, in the latest sign a spending malaise could be setting in.
Group M, part of Sir Martin Sorrell's WPP, has slashed its growth forecast for total UK ad spend in 2011 from 3.6% to just 1.5% year on year.
The group has also radically cut its forecast for UK TV ad spend growth this year to just 1% year on year. In December it had predicted a 4% boost.
Group M, which last put out a forecast for the UK market in December when the market was buoyed by a strong recovery in 2010, said that marketers are putting their TV budgets under "renewed scrutiny" in the second half of 2011.
The group said that while it has been widely expected that TV ad spend growth would be "slower" in the second half of this year ? particularly in comparison with last summer when the market was boosted by the football World Cup ? there has nevertheless been a "drift" in consumer demand and advertisers' non-wage costs have inflated.
While the downgrade paints a bleak picture, analysts Liberum have put out a more upbeat note on ITV's performance through the tough early spring/summer months.
Liberum analyst Ian Whittaker said that according to conversations it has had in the TV market, ITV's prediction of a 9% year-on-year fall in TV ad revenue in May may be overcooked. Liberum believes ITV may be down about 5%, making it more likely the broadcaster will hit Liberum's forecast of 3.2% growth year on year.
However, the outlook is even grimmer for the UK newspaper industry. In December, Group M predicted national newspapers would see an ad spend increase of 1.9% year on year across 2011. Group M has now downgraded that view to a decline of 4.1%.
Regional newspapers have also suffered a significant downgrade. Group M said in December that regionals would fall 4.2% year on year in 2011 ? now the forecast is for a 12.6% decline in ad spend.
The total newspaper market is now expected to see ad spend contract by 8.3% year on year, a large downgrade from Group M's December prediction of a fall of just 1.1%.
This reduced re-evaluations chime with a series of bleak trading updates that have been put out by Trinity Mirror, Johnston Press and Daily Mail & General Trust in recent months.
The UK magazine ad market has been downgraded from a 0.1% year-on-year fall to a 7.2% drop for 2011.
Within this, business-to-business magazines have been downgraded from a 2.6% year-on-year decline to a 10% drop, while consumer titles have been re-forecast from 2% growth to a 5% contraction in ad spend.
"Real household disposable income is presently the same as it was in 2008 thanks to wage deflation and the tax/benefit squeeze," said Adam Smith, director at Group M. "And it is going to get worse before it gets better. 2011's UK retail sales slowdown has put a brake on advertising, at least short-term. We always expected 2011 would be fundamentally tougher, but have had to reduce our previous forecast."
He added that the year has proved harder going "particularly in print", with a "similar narrative" coming out of the other big European economies.
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Source: http://www.guardian.co.uk/media/2011/jun/22/group-m-uk-ad-forecast
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