Oz Ad Industry Under Global Economic Spotlight

18 June 2008

SYDNEY: Australian television network Ten's warnings about the effects of the economic downturn on its future revenues has ignited a wider debate about prospects for the country's A$12 billion ($11.2bn; €7.2bn; £5.7bn) advertising industry

Late last week the free-to-air broadcaster said poorer global conditions and a fall in demand were affecting the domestic TV ad market, meaning its earnings would be around 10% below 2007's A$237 million.

But many of the country's media buyers claim they have not yet felt the belt tightening and believe Ten may have been panicked into selling its airtime too cheaply.

Says Steve Allen of Fusion Strategy: "We hear that the television market is still in growth.

"If we're right that television has panicked a bit or they're being too vigorous competing with each other for short-term share, then they're going to have to sober up and realise that going to air full and sold out and not making budget is not a very good scenario, and not being able to accommodate all the advertisers is not a very good scenario.

"It means they're selling too cheaply, and that's fatal in television."

The view is shared by Mitchell Communications Group chairman Harold Mitchell: "We haven't seen any signs of external pressures as indicated by Channel Ten, and the market is still growing."

The network, however, insists its problems are not unique and will be shared by the rest of the TV and ad industries imminently.

Deutsche Bank analyst Andrew Anagnostellis concurs: "In the next few months we expect all the free-to-air networks to face a tough operating environment, with the absence of government advertising and a deteriorating consumer outlook."

He estimates metropolitan TV adspend will rise just 1.2% this year, compared with 7.6% in 2007.

ABN Amro media analyst Fraser McLeish expects TV ad sales to fall 3% in the 2008-09 financial year.

"Nobody is going to be talking bullishly," he warns.

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