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Sunday, January 11, 2015

2015 Media Forecast

Forecasting is always a tricky business but is especially so this year with an uncertain economy coupled with the rapid changes in media going on especially in the United States. A number of people asked me to do a forecast and with help from my panel as well as TV and radio broadcasters, cable salespeople, agency media chiefs, broadcast negotiators, and a few agency CEO’s, I have put the following report together. Many spoke very candidly and I promised not to name any names.

Here goes:

The United States

A big issue regarding the media environment for 2015 in America is the price of oil. In the summer of 2014, a barrel of oil cost over $108. As we publish, it is now just under $50. Some say the oil decline will be V-shaped and snap back quickly as rigs shut down in the U.S. and when Saudi Arabia cuts back on production some time in the next few months. I have no idea and I doubt if any else has a clear handle on what will happen. When oil was over $100 a few Cassandras worried about the price dropping to $80 but I did not hear anyone say it would fall below $50. This is a market that I have followed somewhat closely for over 40 years and all I really know is that the industry is cyclical. When oil prices are low (as they are now) companies cut back on capital expenditures so exploration and production takes a back seat. As production slows and global demand continues upward, prices rise. When prices rise the companies earn big profits and there is a return to large capital expenditures as a result of big profits. Banks also lend more to smaller firms. So, the cycle repeats as high prices retard consumption. Too simplistic? You bet. Yet some variation of that cycle repeats each decade. This means that here in the U.S. the consumer has been handed the equivalent of a nifty temporary tax cut. Forecasters are saying that since July the average American family has $125 more to spend each month as a result of lower gasoline prices.

Both broadcast and cable sales people have said that automotive advertising is holding up very well. And,why not? Cheap gasoline is propelling vehicle sales coupled with an aging North American auto fleet. This could be a big year for General Motors, Ford, Chrysler and Toyota. Profits for SUV’s and full size pickups are big for the manufacturers relative to compacts. Some estimates are that 17 million vehicles will be sold in the U.S. in 2015 if gasoline prices stay low. That is good for Detroit manufacturers but great for all forms of TV and video advertising as well. Early signs are that Ford’s all new aluminum-bodied F-150 pickup will be a real success. Perhaps General Motors can overtake Toyota and reclaim its spot as the #1 car manufacturer in the world!

Medium by medium, we find:

Spot TV--a mixed bag. Right now, automotive as mentioned above, is propping some markets up significantly. With no political spending in most DMA’s and no Olympics this year, things are not great in some markets. Also, media people are shifting increasing amounts of their budgets in to digital in 2015. Local cable people are packaging up deals with an online component and more than one admitted to me that it is really helping them stay competitive. An experienced broadcast negotiator wrote, “I always had a great record for post buy analysis for 20 years. Now, nobody can post anymore. The Nielsen numbers are evaporating book to book. We may lose a key client who is all over each post and daypart delivery within each buy. Nielsen is just plain obsolete but they will not listen.” This sentiment was echoed by three salespeople 1,000 miles from each other.

Two salespeople said that there is clear shrinkage in sales across the board. One said his boss or bosses’ boss, claims victory at headquarters for being flat.

One area that is going to suffer is the oil patch. Over the last few years, Texas, Oklahoma, Wyoming and the Dakotas have had vibrant broadcast sales which bucked the trend. As rigs shut down, the markets will soften. Texas will do better than the others due to their more diversified economy but the glory days are over for a while. A cranky old coot in Houston wrote, “Son, just watch the rig count. Until that rises, places like Odessa-Midland and North Dakota will be weak.” I doubt if many media planners reading this will monitor the rig count, but he makes a good point.

So, on balance, automotive will help the spot marketplace but the shift is in place away from broadcast and that trend will continue. Expect -5% in the weak places and up to +5% in portions of the Southeast.

Local Cable

As was true last year, they will do better than broadcast as they have varied inventory, great promotional offerings, zoned sales, and several digital options that broadcast cannot usually match. So, a modest increase overall with lower declines and higher gains by market than their broadcast brethren.

Newspaper

Death by a thousand cuts continues. The rate of decline may be halted but they will still lose ground in 2015. National papers, The Wall Street Journal and USA Today, are exceptions, but the game is close to over for many papers. Some try offline and online packages but mid-sized markets are in real trouble and the product gets weaker and weaker as wire service copy predominates.

Magazines

Similar to newspaper although, given the selectivity of interest, some titles are thriving. The online product is getting more play but they may be several years too late.

Out of Home

Pretty good prospects! The last mass medium has lots of appeal for established brands with a reminder message. Also, electronic billboards of all sorts should do well.

Radio

This was interesting to look at given the reactions my questions provoked. To my surprise several agency people say that it still worked well for smaller, local retail clients.
Those spending money for major clients either ignored it or have cut back drastically. Talking to broadcasters was striking. Most said that sales would be down a bit although a few markets, particularly in the Southeast, were modestly bullish. The surprise came from those who were successful. All said they made money last year via non-traditional means and that was generally through their websites. Couponing was particularly successful. The only format which seems to be thriving is sports talk and that tends to be in markets where there is no or weak competition.

Mobile

The trade press, in my view, sometimes does this emerging medium a bit of a disservice. Admittedly, some people made somewhat breathless forecasts about how well mobile would advance in 2014. And, they did have a nice percentage gain in sales. They did not become a major player yet and some say it was a disappointment. My attitude is that they are doing just fine and will advance again in 2015. Maybe this year will be their breakthrough year; maybe not. Ignore this category at your peril.

Sports

An old hand tells me that other than the Super Bowl and ESPN, most sports sales are soft. There does appear to be some excessive saturation out there. Also, people are increasingly wondering if the premium for sports is worth it if “two fisted viewers” have a few screens going during commercial breaks.  Sling Media’s inclusion of ESPN in their stripped down TV product is interesting and it will see if ESPN can lure millennials who have never bought cable into paying for some form of TV.

On Line--continued growth here at double digit levels. The big growth spurt comes from on line video which takes many forms and is an especially good way to reach young adults. Increasingly, advertisers are wisely hedging their bets here.

Media Research Issue--Is Nielsen still viable? Our currency for TV measurement appears to be asked to do much in the world of 2015. Can they keep up with the lightning fast changes going on these days. It seems unlikely. Also, when is an impression an impression? Is a TV impression equal to an online video impression?

Conclusion for U.S.--modest growth (3-4%) overall IF the economy continues to crawl higher and oil prices do not spike back upward. Conventional media will struggle or lose ground while online and mobile grow nicely.


Global Growth

There are some 200 countries on earth (depending on how one is counting). Here is a top-line forecast for some in the news:


Briefly, Europe should not see much growth with real weakness in Spain and Italy. Russia is getting crushed with low oil prices so their overall economy will struggle mightily for a while. The Ukraine is obviously a marketing wasteland at the moment.

India, Turkey and Japan will be much helped by lower oil prices so Turkey and India may see advertising perk up for a while.

Southeast Asia will grow at 7%+ in ad revenue which is very good in today’s shaky global economy.

China--always a wild card. The consensus is that Chinese GDP will grow by 7-7.2% in 2015. Also, 25-30 million Chinese will vault in to the middle class. That, to me, translates to a good year for advertising. The press keeps harping on how China is no longer growing at 12%. So, clearly they are growing at a decreasing rate relative to recent years. Yet America is presumed to be growing at a consensus forecast of 3.1%. Wouldn’t we kill for a 7.1% growth rate? Is China cooking the books? Who knows? Advertising should fare quite well there in 2015--up 8%.

In Latin America, Venezuela is a basket case. They may be the most oil dependent country on earth and need a cost of $130-160 per barrel to balance their budget. So, do not look for much activity there. Brazil will be helped by lower oil prices.

That is how I see it.  Good luck to all of us in 2015.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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