December 5, 2008 / 8:52 PM / 12 years ago

Reuters Summit-Advertising, media headed for shake-up

(For other news from the Reuters Media Summit, click here)

By Paul Thomasch

NEW YORK, Dec 5 (Reuters) - Advertising executives cannot be blamed for writing off 2009 — distressed industries that rely heavily on marketing and promotion like automakers, banks and financial services have left them no choice.

Now, the question is if the recovery in advertising spending will begin in 2010 and, if after it does, the media industry will look anything like it does today.

“There’s no question whatever is going on is not getting better,” IAC/InteractiveCorp IACI.O Chief Executive Barry Diller told the Reuters Media Summit this week. “It’s going to get worse, unquestionable. For how long, at what depth, I can’t judge.”

Any upside? “Tomorrow is going to present unknown opportunities to us. I’m confident there is going to be opportunity. I just don’t know where it will come,” Diller said.

How much change the global financial crisis will create in the media business depends in large measure on how long it takes for advertising to start turning around.

Forecasts keep changing. Analysts who six months ago figured U.S. advertising spending would rise by around 3 percent next year now see it declining by 5 percent or more. Predictions for 2010 are all over the map.

Executives at the summit suggested a host of possible shifts in the business, starting with dealmaking for those who have the money or can raise it.

“If you are dependent upon advertising, the single largest category is automotive. The second largest category is financial services. The third largest category is retail,” said Sirius XM Radio Inc (SIRI.O) chief executive Mel Karmazin. “There’s nobody out there to replace those guys.”

The solution may lie in acquisitions. “I believe there needs to be further consolidation in the media business,” Karmazin said.


The way Karmazin sees it, “if you were to take two large media companies and combine them, you would have an opportunity not to necessarily grow your revenue but to at least operate more efficiently.”

Beyond dealmaking, the shake-up may mean subscription-based businesses, like satellite radio, will be reconsidered; sports sponsorships could fall out of favor; advances in audience measurement may accelerate; and experiments with new sorts of advertising could well suffer as marketers with tight budgets concentrate on more traditional media like TV.

Steve Lanzano, chief operating officer of MPG North America, a unit of advertising group Havas SA EURC.PA, said, for instance, when it comes to pressing ahead with more experimental media like mobile, video games, social networks there will likely be “a split with clients.”

“Clearly you’re going to have some clients that you know are going to stick their head in the ground and say, ‘I know this traditional (advertising) worked for us, and I’m continuing to do that and hope that I get through this,’” he added.

But Lanzano said savvy marketers will continue to test new technologies, even if budgets are tighter, pointing to mobile advertising as a spot where companies should keep putting funds.


Exactly how uncertain is the U.S. media business and the $150 billion of advertising spending that drives it? Lanzano jokes to his 12-year old son that he may need to trade a college classroom for basic training.

“I kid him all the time that, “Your brother is out of college, your sister is paid for, you can be all you can be,’” said Lanzona, referring to the U.S. Army’s advertising slogan.

Lanzano is among those forecasting a U.S. spending decline of at least 5 percent next year. He said the broader economy will likely dictate the timing of a recovery, though the 2010 Winter Olympics could help.

“This is kind of a generality, but normally when you see real GDP growth, whatever quarter that is, usually the advertising marketplace starts to grow either two or three quarters after that or six to nine months after that.”

Another senior ad executive, Nick Brien, said the worldwide turmoil makes predicting a recovery trickier than ever.

“I’ve got forecasters looking at this on a daily basis, it’s moving so fast,” said Brien, chief executive of Mediabrands, which has responsibility for Interpublic (IPG.N) media agencies such as Universal McCann and Initiative.

Brien believes the global ad market, of which the United States is the biggest, won’t recover before the end of 2010.

“I think the bigger issue is how will marketing change in the face of what seems to be a more sustained, ongoing economic recession for consumers around the world,” Brien said.

(Reporting by Paul Thomasch; Editing by Toni Reinhold)

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