Media business chiefs brace for bleak 2012
NEW YORK (Reuters) - Top media executives across North America and Europe are bracing for a global economic slowdown in 2012, and are already surrendering to demands by advertisers that they offer shorter-term, flexible deals in case of another crisis.
After finally increasing advertising spending -- the lifeblood of the media business -- corporations have yet to show any sign that they are cutting budgets as they did in dramatic fashion between 2007 and 2008.
Still, executives who attended the Reuters Global Media Summit in New York, London and Paris this week said advertisers have turned more cautious in recent months and want to protect against uncertainty around the euro zone's future and political gamesmanship in the United States.
Globally, advertising deals and other business partnerships are being re-assessed and reworked, meaning deals that would normally run for six or nine months are now being shortened to just two or three months -- or less.
"It's very short-term thinking," said David Carey, president of Hearst Magazines. "There was a time when advertisers would commit three or four print issues at a time four or five months out. People are now committing a month or two out."
This fall, markets around the world suffered through weeks of turmoil as fears of an unraveling of the euro zone mounted with little sign of a settlement until the last minute. The result for corporations was a rethinking of previous plans, including how they would spend advertising money, among the most economically sensitive parts of any budget.
"You just can't run your business on the basis that something will turn up, so you have to plan on the basis that it doesn't turn up," said Sir Martin Sorrell, chief executive
of WPP, the world's largest advertising holding company.
"So you think about what legally and contractually it is going to mean. You also say 'I'm going to run my balance sheet as conservatively as possible,'" he said.
CHICKENS COMING HOME
Jacki Kelley, global CEO of Interpublic Group's Universal McCann, was among those who said that advertisers had taken a noticeably "more cautious approach" in recent months.
"Advertisers are still hanging in there," she said. "While there hasn't been a significant pullback, there has been a shorter-term, more cautious approach."
Kelley, whose media agency's clients include Microsoft Corp and Exxon Mobil Corp, is expecting U.S. advertising to climb a modest 2-3 percent next year, with worldwide spending at a healthier 5 percent growth rate.
Several European executives, meanwhile, said they had high hopes the Euro zone issues would be resolved in time.
"Is it the apocalypse? I don't think so, said Maurice Levy, chief executive of Publicis, the third-largest advertising holding company in the world. "There are some serious issues, very serious issues. Can we find a solution? I am hopeful for a lot of reasons."
One bright spot is that corporate balance sheets in countries like the United States remain healthy. According to Federal Reserve data, there is more than $2 trillion on S&P 500 companies' balance sheets which is not being plowed directly back into the U.S. economy.
The question is how to spend the cash: A number of executives complained this week that solid decisions were impossible given the bitter atmosphere and political gridlock in Washington.
"I'm critical in a bipartisan way, it's pretty problematic," said Strauss Zelnick, chief executive of video game company Take Two Interactive and private equity firm Zelnick Media.
Zelnick, who called himself a liberal Democrat, said he believed that President Barack Obama's administration has "demonized capitalism."
A number of companies have used their cash to repurchase stock, and have come under criticism for not investing that money in growth and hiring. The U.S. unemployment rate has hovered above 9 percent for much of the past 18 months, though new numbers on Friday showed it had dipped to 8.6 percent.
Zelnick, however, pointed out that a closer look at the unemployment picture reveals a growing divide between classes.
"We have some really bad structural issues that are the chickens coming home to roost, no wonder people are camping out in Zuccotti Park," said Zelnick.
(Reporting by Yinka Adegoke, additional reporting by Liana B. Baker, Lisa Richwine and Peter Lauria in New York; Kate Holton and Georgina Prodhan in London ; Editing by Paul Thomasch, Dave Zimmerman)