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Tuesday, December 29, 2015

A Sort of 2016 Media Forecast

In recent weeks, I have received a number of requests from readers and friends to put together a 2016 Media Forecast. I was very hesitant as I do not see the next year with much clarity. The economic world, among others, is in great flux. After years of explosive growth, emerging markets are taking a rest. The low cost of oil is affecting Russia and Brazil significantly and many do not see the supply overload righting itself until 2017. The muscular US dollar will likely only rise as interest rates inch up in 2016, and, as a result, American exports will suffer. Friends who are uber-bullish about the stock market seem to ignore that part of the relative strength has been companies simply buying back their shares rather than investing in innovation, personnel, or capital equipment. An old friend told me to go ahead with a forecast saying, “Don, you have been on this forecasting beat for 40 years; you must know something.” He is correct. What I know is what I do not know. And, I have never been more uncomfortable as I look ahead to 2016.

This year, I decided an interesting tact would be to avoid going to my “old reliables.” These are people whom I have known forever and whose judgement I respect. Instead, I went to an ENTIRE new crew of contributors for a forecast. Candidly, I have been disappointed. There were too many remarks that were self serving. I received comments along the lines of “my medium is in tough shape. But my station (magazine, newspaper) will prance through 2016 smiling.” Others said that, “in 2016, we may have a brokered GOP convention. Think how much ad spend we will get in my state after decades of virtually nothing.” Finally, “you worry too much. Things are going to get better each quarter.”

Let me share a few things that I have often used as benchmarks for economic activity. They may not get much press but they have been my ultimate checklist over the years.

1) The Labor Participation Rate--the talking heads on TV talk about the relatively low unemployment rate. Yes, employment has slowly improved over the last few years. At the same time, my acid test, the Labor Participation Rate, is terrible. One group says that it is the lowest since 1977 while another group says that it is at the lowest level ever. Why split hairs? It stinks. One is only considered to be unemployed if he or she is actively seeking employment. If you are discouraged and stop searching for gainful employment, you are no longer considered unemployed.
2) Caterpillar (CAT)--the fortunes of the Illinois based company with the distinctive yellow backhoes and other earth moving equipment is a simplistic touchstone for me of global economic health. If CAT is not getting new orders, then ground is not being broken both in the U.S. and around the world. Right now, Caterpillar appears to be struggling. That is not a good sign for economic activity.
3) Trucking--most goods in the U.S. still move by truck. If the action slows as it has, that is not a good barometer of a vibrant economy picture.

Oversimplified? You bet! Scary. You bet?

Okay, here are a few fearless forecasts for 2016:

1) Digital will continue to grow at a double digit pace.
2) Social media will likely have a majority of its action in mobile vs. laptop. Not by much but a clear winner.
3) Mobile will continue to invade our lives but growth as an ad medium may be short of expectations.
4) Conventional media will continue to weaken due to what I have dubbed “internal deterioration.” Yes, TV could be up a few percentage points overall and radio in many markets will hold steady but their share of the ad pie will get smaller despite headlines touting increased spending for elections and Olympics. Newspaper and magazines will continue to decline.
5) Outside the U.S., the rate of growth will slow a bit as China softens (still growing but at slower pace), and Russia and Brazil and other natural resource dependent countries struggle. Europe will move forward a bit in most countries.

A sleeper. You have all heard of cord-cutting--some people give up on cable or satellite and make do with Netflix, Hulu, You Tube and other options. This year, you may hear about cord-nevers. These are young people who have never had a mainstream TV service and see no reason to get one. They tend to be well educated and increasingly affluent. How will you reach them? Hint--Big Data will help.

Toothless comments? Perhaps. Yet 2016 strikes me as being a year of murkiness and contradictions.

Here is wishing all of us a happy, healthy and prosperous 2016 despite the headwinds that I see ahead.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog

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