Ballast Overboard, TV Broadcasters Seek Ad Lift

Michael Hedges August 31, 2017 Follow on Twitter

Ad spending growth rates have long correlated with GDP growth rates, a lagging variable say the economists. Through the last decade TV ad spending led GDP growth, partly on the collapse of print advertising. That bubble has lost its lift. The worrying possibility of a disconnect appears to be another digital dividend.

Big commercial television companies are emerging from the summer holidays in a somber mood. Revenues, largely but not exclusively from advertising, are in decline. German broadcaster ProSiebenSat.1 Media, Spanish broadcaster Atresmedia and Italian broadcaster Mediaset all reported weak revenues with profit warnings within a couple of days. Stock traders are responding predictably.

Contagion is worse than the disease for publicly traded companies. Global advertising holding company WPP sounded a warning about TV advertising. Within days broadcasters also hit the red button.

London-based WPP warned of “sharp declines” in ad spending for the remaining months of 2017, much of it in the United States but also within Europe. Consumer and packaged goods advertisers, it said, are expected to cut back on traditional ads. "In the last year or so, growth has become even more difficult to find," said the company statement (August 23). The company’s 2017 revenue growth forecast is now “between 0% and 1%” from the more optimistic 2% six months ago.

"It's the digital disruption in consumer consumption of media, the digital disruption you see in distribution, and the digital disruption you see in production through 3-D printing, and digital forms of production, autonomous cars, electrical cars, whatever it is disrupting legacy models," said always quotable WPP chief executive Martin Sorrell to CNBC (August 23).

Barely a week later ProSiebenSat.1 Media reduced for the third time its guidance for the year. “Previous expectations regarding an improved TV advertising revenue performance in the Broadcasting German-speaking segment of ProSiebenSat.1 Group in Q3 2017 are unlikely to be met,” said the company statement, quoted by Reuters (August 28). Stock traders met out considerable punishment, whipping Mediaset, Atresmedia, TF1 and ITV on their respective stock exchanges. Most recovered within a day or so.

TF1 chief executive Gilles Pélisson blamed the stock-trader freak-out on overheated German and UK TV markets, too hot not to cool down. The French TV ad market has had “extremely modest growth,” he said, quoted by Le Figaro (August 31). "Our German friends have had advertising markets that have grown strongly in recent years, as has the English market. Seeing the German market slow down… is something that surprised the markets and led to a correction. I do not think it applies to our market, which is much more resilient.”

A bit of a contrarian in TV land, RTL Group reported a 9% increase second quarter German market sales and 4% rise in net profit. “We believe that our Q3 German TV advertising revenues will be around plus 3 percent,” said co-Chief Executive Guillaume de Posch to Reuters (August 30). “The only reason we’ve been outperforming is audience performance.” Total TV ad spending in all countries in which it operates have fallen, said the company statement. RTL Group issued an interim dividend.

A digital advertising sales joint venture of ProSiebenSat.1 Media, TF1 and Mediaset was blessed by the European Commission DG Competition (August 31) as it will have “very limited impact” across European Union Member States. The European Broadcaster Exchange was formed in June with a London headquarters. Separately, RTL Group completed its takeover of ad tech company SpotX.

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