Not so below-the-line

Another big change is informing the way we do business: the growth of marketing services – especially digital – as a proportion of our total business. Advertising and Media Investment Management – which concentrates historically on traditional areas such as television, radio, newspapers, magazines, outdoor and cinema – has grown well in recent times and led the industry out of the last recession. But its overall share has declined as supposedly less sophisticated, less global and less-developed marketing services have gained. These areas are Information, Insight & Consultancy, Public Relations & Public Affairs, Branding & Identity, Healthcare and Specialist Communications – particularly direct, interactive and internet communications.

Marketing services have grown more quickly for two reasons. First, network television pricing has risen faster than inflation, to the disquiet of big advertisers. Procter & Gamble, the world’s biggest advertiser, Unilever, Coca-Cola and American Express have all registered voluble protests in recent times. They are sick and tired of paying more for less.

In 2003, in the upfront network buying season, cost per thousand rose by an estimated 15-22% against an expected 7-12% – this against general price inflation of 3%. In 2004, upfront pricing continued to outpace inflation, cost per thousand rising by 6-7%. 2005 saw more softening, but prices still grew faster than inflation at around 4-5%. NBC was particularly hit hard – dropping $900 million in revenues, with pricing, programming and late bargaining issues combining to cause significant issues.

Although the pressures on network television intensified in 2006, network cost per thousand probably rose by 4-5%, still faster than general price inflation of 3%. In 2007, network cost per thousand again rose faster than general price inflation and, even with the acute economic pressures of 2008, US network television may have increased in cost relatively. Imagine what would happen in the car industry if the price of steel rose consistently by 10% against general price inflation of 3%. Manufacturers would use less steel or find a substitute. That is what is happening in our industry, too. Marketing services, digital and even other traditional media such as radio, outdoor and cinema advertising are becoming more acceptable substitutes.

Don’t expect network television, however, to disappear any time soon. It will remain important. If we were starting a multinational packaged goods company from scratch, we would still use network television to influence the largest number of people in the shortest time at the lowest cost. Clients still need reach, but it isn’t what it was. In the US, for example, primetime network television used to claim 90% of households. A few years ago it was 50%; today it is perhaps only 33%. There are, of course, still programs with significant global or national reach, such as the World Cup final (500 million); the Olympics (400 million in a normal year – but an audience of over two billion for the opening ceremony in Beijing in 2008); the Super Bowl (90 million); and the Academy Awards (35 million).

The largest regular live event audience, however, is none of the above. It is the Chinese New Year Gala on CCTV in China, Asia and elsewhere, watched consistently by more than one billion. These events remain in relatively fixed supply with the pools of money chasing them stable or growing. As a result, their prices are bid up. That is why a 30-second Super Bowl advert still costs around $3 million and an Academy Awards slot around $1.5 million.

This is not a situation that can last, particularly when significant segments of the viewing population seem to go missing. Phenomena such as the disappearance of young American men on Monday nights – perhaps gaming on the internet or watching sport in bars – and the defection of housewives from soap operas have prompted changes to the way audience figures are compiled. Nielsen and our own Kantar Media research and IBOPE technology now include out-of-home and internet audience figures.

Growth of media in major markets 2004-2009 %

Television 2004 2005 2006 2007 2008f 2009f
North America 11.8 1.2 5.9 (0.6) 2.0 (2.5)
Latin America 16.5 14.3 14.2 11.1 10.8 8.9
Western Europe 7.9 4.0 2.4 4.3 (2.3) (2.3)
Emerging Europe 24.5 27.2 24.2 22.8 16.9 (3.5)
Asia Pacific (all) 11.4 7.4 9.4 6.9 3.0 3.5
North Asia1 18.6 16.7 22.1 13.3 13.4 9.4
Asean2 27.5 14.1 13.8 8.2 7.7 5.9
Middle East & Africa 19.5 2.9 18.5 25.0 19.5 11.5
World 11.6 4.9 7.5 4.7 3.2 0.3
Radio 2004 2005 2006 2007 2008f 2009f
North America 0.2 0.3 1.2 (3.2) (6.0) (8.1)
Latin America 9.4 14.7 6.1 11.4 13.1 7.2
Western Europe 8.8 4.4 1.7 3.7 (1.4) (2.4)
Emerging Europe 25.5 19.8 34.6 29.4 7.8 1.0
Asia Pacific (all) 4.2 2.2 19.5 5.3 5.2 0.4
North Asia1 0.9 0.4 177.5 20.4 22.8 5.7
Asean2 11.1 7.3 3.2 1.8 8.1 1.3
Middle East & Africa 36.5 18.8 6.2 30.4 17.5 (1.0)
World 4.2 3.1 5.3 2.5 (0.6) (3.5)
Newspapers 2004 2005 2006 2007 2008f 2009f
North America 7.2 1.6 (1.8) (3.4) (5.6) (7.6)
Latin America 12.4 16.4 8.6 14.7 4.4 3.6
Western Europe 4.2 1.2 2.2 2.9 (5.4) (5.1)
Emerging Europe 26.3 (9.6) 14.7 9.7 6.1 (10.2)
Asia Pacific (all) 8.1 1.4 (4.3) 2.4 (1.2) (0.4)
North Asia1 8.6 1.7 (13.9) 5.6 8.7 3.0
Asean2 20.4 4.0 1.3 10.7 10.0 3.1
Middle East & Africa 21.7 15.2 9.8 18.9 12.2 8.8
World 7.2 1.9 (0.1) 1.8 (3.1) (3.9)
Magazines 2004 2005 2006 2007 2008f 2009f
North America 9.1 5.6 1.8 5.9 (5.1) (6.9)
Latin America 8.5 23.8 7.7 8.9 8.8 5.5
Western Europe 2.5 0.9 2.6 1.0 (3.3) (4.1)
Emerging Europe 22.9 57.5 16.5 8.7 9.8 (9.1)
Asia Pacific (all) 2.3 18.6 2.3 0.1 (6.7) (3.8)
North Asia1 8.8 15.1 15.2 11.3 10.2 5.8
Asean2 20.8 7.4 8.1 (3.0) 5.4 2.8
Middle East & Africa 22.6 24.1 12.4 12.7 12.5 7.3
World 6.5 7.2 2.9 3.9 (3.7) (5.4)
Cinema 2004 2005 2006 2007 2008f 2009f
North America 22.5 19.7 14.7 8.9 5.6 3.9
Latin America 88.2 16.7 21.5 0.3 7.0 6.5
Western Europe (0.1) (0.8) (3.4) 0.4 (5.1) (3.3)
Emerging Europe 24.2 22.7 25.7 15.1 22.1 (0.4)
Asia Pacific (all) 20.1 24.8 6.9 58.8 (3.1) (4.2)
North Asia1 (62.5) (41.0) 39.2 58.4 (7.8) (21.7)
Asean2 39.4 26.2 10.4 110.2 (6.3) (5.3)
Middle East & Africa 45.3 61.3 (23.0) 8.4 0.1 15.3
World 10.4 9.3 4.3 8.5 0.4 0.3
Outdoor 2004 2005 2006 2007 2008f 2009f
North America 19.0 10.1 8.5 3.3 3.4 2.0
Latin America 18.4 20.9 5.6 1.8 7.8 6.8
Western Europe 6.8 4.6 5.1 3.7 (2.3) (0.7)
Emerging Europe 26.4 29.0 29.3 17.0 7.0 (11.6)
Asia Pacific (all) 3.5 19.9 9.6 5.8 5.6 3.2
North Asia1 4.7 13.3 21.4 8.8 9.6 7.3
Asean2 33.2 14.9 13.0 11.7 14.9 (5.8)
Middle East & Africa 30.6 19.6 31.6 49.5 3.9 12.8
World 8.9 13.9 9.6 6.4 3.2 1.0
Internet 2004 2005 2006 2007 2008f 2009f
North America 32.1 31.0 27.6 26.4 17.2 5.6
Latin America 29.4 23.6 52.2 60.5 33.1 26.8
Western Europe 56.0 80.4 68.1 41.0 23.6 9.9
Emerging Europe 104.6 113.3 68.5 76.5 37.3 16.7
Asia Pacific (all) 54.2 92.4 33.5 32.5 28.2 20.5
North Asia1 53.2 66.4 40.3 52.3 49.5 36.5
Asean2 45.3 50.0 36.7 49.4 45.8 22.5
Middle East & Africa 134.7 641.3 24.4 (5.8) 57.9 27.1
World 40.0 51.7 38.2 32.5 21.9 10.8
Source: GroupM
f
Forecast.
1
China, Hong Kong, South Korea, Taiwan.
2
Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam.
(Figures rounded up.)