“Media owners have provided a great deal of additional value during the past six to nine months but we’re now entering a more ‘normalised’ environment. So trading will have to return to contracted levels.” – TVNZ Head of Sales Dave Walker, quoted in Planit last week (14 October 2009)
MediaWorks CEO Brent Impey was similarly bullish at the TV3/C4 new season launch this week, reporting that business has really picked up over the last eight weeks, and more money has been booked on television with MediaWorks in the last seven days than ever before in its history.
So – back to business as usual then, at least for television?
Alas, if only it were that simple. As we've learned from past 'economic corrections', the fourth quarter of each year is always a time of hope, when those marketers who have held back during the earlier part of the year spend what pennies they can scrape together, hoping for at least some Christmas sales to offset what's been for most an annus horribilis.
Much as we'd like to believe that those 'green shoots' of economic recovery spotted by optimistic observers will blossom forth and bear sumptuous harvest (if we may be forgiven for threshing the metaphor) – we fear that this new growth spurt won't last past Boxing Day.
We're not just being cantankerous. Despite the well documented restoration of consumer and even business confidence, in our opinion it's only skin-deep; the underlying realities suggest a slow recovery. As Reserve Bank Governor Alan Bollard observed recently, “we expect the economy to begin growing again toward the end of , but the recovery is likely to be slow and drawn out. It could also be erratic. To many households it may not feel like a recovery at all, with lower employment, house prices and wage increases into next year.”
Businesses will be starting to plan now (or soon) for 2010/11 financial years starting in April or July 2010. Based on current trading conditions, company finance directors are unlikely to approve significant marketing budget increases for next year – green shoots may look pretty in the garden but they don't stand up too well under the harsh spotlights of the boardroom.
As a result, we don't expect marketing budgets to show much improvement until 2011. Consumers and businesses may well be telling researchers that they expect conditions to improve over the next twelve months – but that's largely expressing an expectation that things won't get any worse, not that they'll suddenly turn absolutely fabulous.
Even Christmas 2009 may not provide the boost that business is anticipating. The latest Kiwi consumer credit figures (to August 31) show a 4.6% slump in borrowing; and Kiwis are saving just 0.2% more than they were twelve months ago. Philip Borkin, economist at ANZ National Bank, summed up the challenge we all face: “A lot of people are paying down debt, and until we see the credit numbers improve, we’re not expecting much to change. For retailers this is a critical time – if we don’t get a pick-up then this could be a very challenging time for them.”
Economists' cautions are supported by other indicators. Jasons Travel Media recently asked Kiwis what they’re planning to do for the Christmas and summer holidays. A staggering 60% of respondents are changing their plans from the norm this summer – opting to spend their time somewhere other than where they have gone for summer holidays in the past. When asked, there were a plethora of reasons for the break from traditional plans including "better deals on accommodation elsewhere", "decided to go somewhere close" and "money is a bit tight this year". In those Clintonesque words, "It's the economy, stupid."
It's not just us, of course. The latest news from the land of (former?) Hope and (lost?) Glory suggests that parsimony rather than plenty is a global reality these holidays.
- Acquaintances, 57%
- Co-workers, 53%
- Service providers (eg parking attendant, housekeeper), 44%
- Extended family (sorry auntie), 42%
- Friends, 31%
Other holiday trends from the PriceGrabber.com survey of 2,018 online consumers, conducted from 24 Sept. 2009 to 12 Oct. 2009:
Consumers are more price-sensitive than ever
More than ever, comparison shopping is on the forefront of consumers’ minds, with 70% of consumers doing more research and comparison shopping online, compared with 38% last year. And 50% of consumers are planning to shop at discount or outlet stores this year, while only 43% did so last year.
Consumers are cutting back
Fifty-three percent of consumers are planning to spend less than they did last year. Of the consumers who are planning to spend less this Christmas, 48% reveal that one of the reasons that they are spending less is due to an increase in prices (necessities, gas, etc.), 45% cite lack of confidence in the economy and 38% indicate making less money as a reason for spending less.
Shopping has started earlier, to ease the impact of holiday spending
In past years, Black Friday (the day after Thanksgiving, late in November) has been the unofficial start of the American holiday shopping season. This year, US consumers are planning to start their holiday shopping long before Black Friday, with 22% of consumers starting their holiday shopping in October and 29% starting in November.
In New Zealand, retailers have been in Christmas shopping mode for some time. The ubiquitous Cameron Brewer, chief executive of the Newmarket Business Association, warned in late September that "for better or worse consumers can expect to see Christmas decorations and displays popping up in some New Zealand shops over the next few weeks".
Kiwis usually do their shopping somewhat ahead of the Christmas rush anyway. A 2007 study by AMP Capital Shopping Centres found that:
- 25% of Kiwis have begun their Christmas shopping by September 25, three months out from Christmas
- 16% start shopping in October
- 21% hit the malls in November
- 33% wait until the last fortnight before Christmas
- 7% of us (three-quarters male, inevitably) leave Christmas shopping until the last minute
- Meanwhile an impossibly virtuous 3% head to the Boxing Day sales with vim and vigour, buying their gifts for the following year 364 days early.
Gift lists are trimmed down to manage budgets
When it comes to holiday spending this year, 36 percent of US consumers expect to spend between $100 and $499, 28 percent plan to spend $500 to $999, and 30 percent anticipate a holiday spend of $1,000 or more.
We don't have any recent NZ data for Christmas spend levels, but a five-year-old study by UMR Research on behalf of Visa International found that:
- More than 50% of Kiwis expected to spend less than $300 on Christmas gifts
- 16 percent intended to spend less than $100
- One in twenty said they were planning to "splash out" and spend more than $1000
- Credit card holders were more likely to expect to spend over $500 than non-cardholders (22 percent compared with 12 percent)
- Men generally planned to spend slightly more than women
- The most profligate age group was 30-44 year-olds
Add a few dollars for five years of moderate inflation, deduct as required for economic downturn du jour, season to taste.
THAT'S THE CONSUMER, WHAT ABOUT BUSINESS?
The biggest declines in year on year reported advertising expenditure (according to Nielsen Media Research data, Jan-Aug 2009 vs Jan-Aug 2008, at ratecard values) are:
- Automotive (down $20.1 million)
- Investment/Finance/Banking (down $17.8 million)
- Government (down $11.8 million)
- Home Improvements (down $7.7 million)
In terms of individual advertisers, Telecom has had the biggest drop in reported spend, down by 32% ($10.7 million) YOY. Sixteen of the top 20 advertisers would seem to have recorded YOY expenditure increases, but we suspect this has more to do with better deals being negotiated in recessionary times rather than extra dollars squeezed out of corporate coffers.
Are we likely to see any of those lost ad dollars return in 2010?
We don't expect the Financial sector to dip into its battered piggy banks in the near future. As we've already seen, consumer borrowing remains down as we pay off our debts (just in case). The housing boom is over so we won't be desperately seeking mortgages every six months; and our memories of the financial sector meltdown are all too fresh, so the non-bank financial intermediaries are rather less likely to advertise just now.
The government? Officially on a fiscal diet. We'll see a splurge of local body activity in Local Election Year 2010, especially as the supercity emerges from its chrysalis, but that doesn't usually translate into big dollars.
Automotive? Well, you know what's been happening offshore. Within New Zealand, if we look at how many Kiwis say they'll be buying a new car within the next six months, that number's dropped from 41,000 in July 2008 to 24,000 in July 2009 (Roy Morgan Single Source data).
Home Improvements? According to Roy Morgan Single Source, 706,000 Kiwis say they plan to refurbish or redecorate their home in some way (such as replacing curtains, carpet or wallpaper) in the next year -- well down from 830,000 twelve months ago. And just 367,000 (was 460,000) are planning to spend more than $5,000 renovating or extending their homes in the next twelve months. With fewer consumers willing to pimp their homes, competition's going to be fiercer than ever for the home improvement dollar.
THE MULTINATIONAL EFFECT
As a small country far out in the uncharted backwaters of the unfashionable end of the Western Spiral arm of the Galaxy, New Zealand is at the mercy of global forces in a number of ways, not least the dark and mysterious menace known as the multinational balance sheet. As each quarterly reporting deadline looms in the financial capitals of the world, global CFOs swoop on allocated but unspent marketing budgets from the tiny, farflung outposts of their empires in a futile botoxian effort to tart up the numbers.
Given the current economic woes in most of the countries to which our multinational branches report, local marketing budgets won't be doing anything but shrinking in most 2009/10 financial years – which takes us to October or November 2010 (based on typical multinational financial years) before any fiscal relief is even theoretically possible.
In other words, multinational marketers (the biggest spenders in our mass media) won't be driving any Kiwi advertising recovery any time soon. Don't batten down the ratecard just yet.
MEDIA FORECASTS FROM ELSEWHERE
Our global counterparts aren't expecting much from 2010. World Advertising Research Centre (WARC) media inflation forecasts for the year ahead (just released) don't inspire much optimism unless you live in the emerging economies of China, India or Russia. Projections for media inflation (2010 vs 2010) for three of our key indicator markets:
- Television up 1.6%
- Newspapers up 0.6%
- Magazines no change
- Radio up 0.5%
- Cinema up 0.8%
- Out of home up 1.1%
- Internet up 5.5%
- Television down 3.3%
- Newspapers down 0.6%
- Magazines down 2.4%
- Radio down 2.0%
- Cinema down 0.5%
- Out of home down 0.8%
- Internet down 5.8%
- Television down 5.0%
- Newspapers down 4.5%
- Magazines up 1.0%
- Radio down 5.0%
- Cinema up 2.0%
- Out of home down 1.0%
- Internet up 0.5%
Not much there to encourage embattled media owners.
SO ARE WE THERE YET?
We've seen the feathers, we've heard the tweets, but so far no actual sighting of the first cuckoo of a new economic spring. Our consensus view at this point is for a seasonal uptick till Christmas, then slow simmering during 2010. Sorry.
This article is drawn from our presentation MEDIA 2010: A Sneak Peak At What Lies Ahead.