Uncertain Prey And Creature Comfort

Michael Hedges July 11, 2016 Follow on Twitter

Uncertainty is always stress inducing. People quite normally look at possibilities, alternatives and opportunities. The human mind, definitely analogue, checks the landscape for clues. Favored outcomes are, more often than not, blinded to reality. That saber-tooth tiger, headed toward extinction, can still eat you.

Employment in the UK creative sector has risen about 20% since 2011 to 1.9 million jobs, according to an effusive report by the Department of Culture, Media and Sport. All the good work of singers, dancers, actors, directors, artists and those who toil behind the scenes add GBP84 billion a year to the UK economy.

Intent of whipping up excitement, State Secretary for Culture, Media and Sport John Whittingdale said the creative sector is “one of the UKs greatest success stories,” quoted by independent.co.uk (July 7). “That success is built upon the extraordinary talent which exists in this country, an amazing cultural heritage, the English language and a tax system designed to support and encourage growth in the creative sector. None of this is changed by the UK’s decision to leave the EU and I am confident that our creative industries will continue to thrive and take advantage of the new opportunities which are opening up to do business across the world.”

Obviously, many numbers and predictions have been bandied about since the inglorious possibilities of a UK exit from the European Union migrated from populist fantasy to painful reality. Uncertainty smacks the media sector smartly and deliberately. Like elsewhere, the UK’s traditional media has contracted and consolidated in recent years, new media siphoning off advertising, subscriptions and, more importantly, attention.

This year will be “wretched” for ad revenues, reported UK media consultancy Enders Analysis (July 4). “We are in a state of complete uncertainty about the final outcome. An implicit assumption behind our advertising forecasts is that the UK parliament elects to remain in the Single Market.” Ad spending growth rates for publishing, television and, even, online will fall over the next two years and perhaps as long as five. Radio advertising growth rates, they predict, will tick up slightly.

"Brexit is upon us," condemns the Enders Analysis observers. "It promises no benefits to the UK creative sector, only offering the prospect of damage. The question is how much.” Two weeks before the results of the Brexit referendum were known business consultancy Pricewaterhouse Coopers (PwC) forecast UK entertainment and media sector revenues to overtake their German competitors, currently European leaders, next year and just keep going. PwC has been silent since the UK-EU referendum vote.

The ad business, always and everywhere, is vulnerable to uncertainty. Several UK ad people struck the familiar: When life gives me lemons, I make lemonade. “As soon as the pound tanked off the back of the vote it immediately made us more competitive overnight in Europe,” said branding agency Bulletproof managing partner Jonny Stewart, quoted by The Drum (July 8).

Predisposed to optimism, the digital ad people are squeezing hard. “The short message is, we’ve had a recession before and we were reasonably resilient, so hopefully if any Brexit-related activity does affect the UK economy then we’ll still be resilient,” said Internet Advertising Bureau (IAB UK) strategic officer Tim Elikington to eMarketer (July 4). “I’m relatively optimistic about the UK’s future as a center of digital excellence because we’ve got great creative industries and great tech hubs, particularly in London. While I can’t speculate about future tax regimes, if it does become more expensive, I’m really confident that because of the skills, talent and infrastructure that companies have already set up here, then the future for UK advertising, digital advertising and tech looks really positive.”

The foreboding extends well beyond ad dependent media. Conventional economic wisdom holds that consumers faced with uncertain times trim discretionary spending. That could include pay-TV and every sort of digital subscription. Share traders punished ITV and Sky PLC, both companies well integrated into the EU marketplace as broadcasters and producers. Also unnerving share traders were foreign broadcasters using UK domicile as an EU distribution point - Discovery and MTG, for example. Financial analysts are of divided opinion on whether or not UK media houses will be take-over targets.

Also unnerved are specialty media houses, many in London, selling their products and services throughout the European Union. “I think (London) will go from the capital of media in Europe to capital of the UK,” said Shorts International chief executive Carter Pilcher, quoted by recode.net (July 6). Shorts International produces and distributes short films and videos. “They haven’t yet negotiated what will happen, but I am almost certain that the EU will not allow TV networks created outside the EU to broadcast because media is too precious to be regulated outside the trade zone.” Similar producers, he added, will “possibly” consider relocating to Berlin or “probably” Amsterdam.

An outlier to all this gloom and doom was publisher News UK, owned by News Corporation, setting in motion its acquisition of Wireless Group, the radio broadcaster operating all-sports UK national channel TalkSport and seven stations in Ireland. "Clearly it's a deal that's been in the works for a while, but it's quite fair to say that the decline in the pound is auspicious in the circumstances," said News Corp chief executive Robert Thomson, quoted by Reuters (June 30). The GBP220 million offer, a considerable share price premium, will add to sports rights holdings.

TalkSport’s audience, said News UK chief executive Rebekah Brooks, fits with tabloid Sun’s readership. Editorially, the Sun has been a vociferous supporter of taking the UK out of the EU. Later this year the Sun will launch an online betting portal - Sun Bets - an invention of Ms Brooks, credited for “instilling swagger” in the business, said Enders Analysis analyst Douglas McCabe, quoted by the Financial Times (July 10). “Declining brands and a declining industry can be depressing environments to work in,” he noted.

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