Adspend to Fall Down Under

30 September 2008

SYDNEY: Advertising expenditure in Australia will decline by 2.4% in 2009 as the credit crunch bites – with traditional media sliding by some 5% – according to Finola Burke, media analyst at financial services giant Credit Suisse

Higher lending costs and rising interest rates are said to be among the main contributors to this situation, which is increasingly likened to the 1991 and 2001 recessions. 

The country's metropolitan TV networks – including Consolidated Media, owned by James Packer, and its rival Channel Ten – are forecast to be most at risk, as they rely on national advertisers.

Ad revenues at Ten are predicted to decline by 9% next year, after its TV income fell by around 10% in the company's last financial year.

"The risk" for Ten, Burke opines, "is that the network won't be able to reduce its cost base as fast as revenues fall." 

She also forecasts that Consolidated Media will post a 10.5% decline in advertising income for the twelve months from June 2008, with a recovery likely to begin only in 2010–11.

The company's pay-TV unit Foxtel is also likely to see ad revenues and customer income fall, as consumers seek to cutback on spending.

Overall, Burke says: "Based on our forecasts, operational cashflow from the core divisions of magazines, television and ticketing may fall short of being able to meet the expected interest payments."

According to Credit Suisse, media firms with strong regional operations – like Austar and Prime Media – may benefit, as local advertising appears to be a beneficiary of the downturn.

Merrill Lynch, however, predicts market growth of 5% in 2008, and 3% next year, while Goldman Sachs expects advertising sales to flatten out for the year ending June 2009.

Data sourced from Sydney Morning Herald; additional content by WARC staff