Tricky six months ahead for media despite ad market green shoots
By Calum Jaspan
Australia’s media sector is learning to live without government advertising filling its coffers and on track to hold the line for the rest of 2023, as overseas indicators point to better news potentially just around the corner.
While the outlook for the rest of 2023 remains flat, according to two of Australia’s leading media investment executives, an uptick in travel and a jump in automotive advertising could inject some life into the market.
Loss of government advertising has proven costly for media companies in the first half of 2023, with total advertising demand in the category down 39 per cent in the first six months compared to 2022, according to circulated SMI data seen by this masthead.
Retail is one of several sectors where there has been increased ad demand over the year to date.
However, growth in the travel (26 per cent) and auto (17 per cent) categories have helped drive spending as cars finally return to stock, and Australians flock to warmer climates over the winter break.
“The last thing people will give up is their holidays during this recession, and we’re seeing that in the data,” says Aimee Buchanan, chief executive of GroupM ANZ.
The advertising market for the first half of 2023 has been relatively flat, Buchanan says, after a “pretty buoyant 2022” as media companies prepare to deliver earnings next month.
“It’s pretty fascinating if you look back to the massive dip we had in 2020, the whole market outside of government spending dropped, but if you look at what’s happening now, every single category is different.”
The most recent SMI data for May indicates the market is down 6.8 per cent year-on-year, after a federal election in 2022 aided record spending figures.
“Government activity in 2022 has just had a massive effect on the market,” says Mark Jarrett, CEO of PHD Australia. “Now it’s real money that’s money’s not there, but if you take out government, the whole sector is actually holding up better than people want to give the impression.
“Flat isn’t necessarily very newsworthy, but that’s probably the more of the reality of it.”
One of the key sectors, TV, remains soft says Buchanan, following declines in audience and spend, down 15.3 per cent in the most recent data.
Jarrett adds television is particularly challenged and heading backwards, “partially because they got such a massive bonus in 2022”.
The marketplace is also diversifying out of linear TV “quicker than it ever has before”, he says, with smart TVs reaching “a point of critical mass” as Australians turn to smart TVs to view various BVOD (broadcast video on demand) and SVOD (streaming video on demand) options.
A busy sporting calendar, which includes the Ashes series (Nine), Women’s World Cup (Seven), and Rugby World Cup (Nine) later this year, could offer some respite for television, particularly if the Matilda’s go deep into the competition, Jarrett says.
Compared to total TV figures across 2019-21, Jarrett says spend is only back “2 or 3 per cent”, noting again the conversation is skewed after a strong 2022.
A strong sporting schedule could help in the second half of the year.Credit: Stu Forster/Getty Images
“So it’s not a good story. It’s probably still a poor story, but again not quite as disastrous as maybe people are getting the impression on.”
Behind government, the gambling category is down 20 per cent in the first half of 2023.
With regulations on gambling advertising looming, wagering companies have already begun to adjust spend while they look to position themselves for a life less reliant on advertising.
“Gambling will be the new cigarettes, there’s no question that’s where we’re headed in my mind,” Buchanan says.
Another agency executive, who requested anonymity to make the comment, questioned the value a wagering company gets when “nine of every 30 seconds now is T&Cs”, following regulations implemented in 2022.
While Buchanan says the outlook for the rest of 2023 features “not a lot of growth, but not massive decline”, Jarrett points to international figures as offering a glimmer of hope.
Inflation is dropping in several of the key indicator markets, he says, with the figure down from 8 per cent in February to 5.5 per cent in June domestically.
“There are a lot of things that are pointing to the end of the inflation challenge,” says Jarrett, “which then points to the end of the interest rate challenge.”
“I don’t think it’s going to be easy for the next six months, but there are a lot of indicators that say we might be getting close to the end of the increases and once that plateaus and starts falling, I think everyone will be a lot more bullish, a lot more quickly than we feared.”
There is another international factor that could prove pivotal – both Buchanan and Jarrett say they are waiting to see how the Hollywood strikes play out before making a judgment on its impact domestically.
“I think it’s predicted if it continues on past next week, it will have impact on release dates and content pushes, so that’s the moment we’re all looking at,” says Buchanan.
Jarrett says the majority of this year’s content is already “in the can”, leaving it unlikely to have an impact in the short term, however, should the strikes stretch out, “you can see it having a real negative effect next year”, he adds.
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