Raymond Snoddy on media: Slowing decline is reason to celebrate

It's a tough time for optimists at the moment, as media pessimists have a field day. Everywhere one looks there are collapsing share prices and advertising revenues.

ITV can always be relied on to add to the general gloom by somehow managing to do worse than expected - consistently. And this week, Ernst & Young issued a report noting that no fewer than nine UK media companies had issued profit warnings in the second quarter of the year. This was before Emap warned of a slide in revenues, followed instantly by a 125p drop in its share price - the steepest for 15 years.

Elsewhere, radio advertising remains soft and newspaper circulations are melting in the sunshine.

If you want to wallow yet deeper in the general air of pessimism, just stir in an oil price of $80 a barrel, with the prospect of further rises as a result of the chaos in the Middle East. Then, for good measure, add in the fact that interest rates are on the up.

Has there ever been such a perfect time for pessimists to thoroughly enjoy themselves?

A wise optimist might conclude that now is the time to head off to a beach hut with an uplifting novel and hope - as optimists do - that things will be better in September, October, or, at the very latest, November.

But just before heading off, one spots it - that small ray of sunshine in an unlikely place that can make a congenital optimist's day. Peering beyond the gloom, the cause for optimism is to be found in the latest IPA Bellwether survey.

The sentence in question would not normally fill the heart to bursting. It reads: 'The overall cut to budgets was the weakest recorded since budgets began to be trimmed in Q2 2005, and markedly below the reductions seen in the previous two quarters.'

So, where is the good news in all this talk of weakness and cuts? Concentrate. This is all about falling off cliffs less rapidly, which therefore amounts to good news. At the very least, it will have to stand in for good news until the real stuff arrives.

Pessimists will no doubt choose to dwell on the fact that in the three months to June, marketing budgets for the year were revised down, on average, for the fifth successive quarter. Some people are just like that.

The IPA Bellwether Reports may not get the blood racing, mainly because of an absence of absolute numbers. But the 'more companies, rather than less, about to increase or drop their marketing budgets' measurement is useful for establishing moods and trends.

And, as the report says modestly of itself, it has developed 'a good track record' of anticipating economic growth far ahead of the publication, usually unreliable, of data on the growth of gross domestic product.

It claims, with some justification, that it is picking up early indications that the rate of decline in adspend has bottomed out and the growth of the wider economy has picked up. Stripped of all the tedious caveats, that virtually amounts to rooftop optimism.

True pessimists can still delve beneath the surface and come up with the rather inconvenient news that both corporate main media advertising and sales promotion have posted their biggest annual declines since 2000. They would say that the brakes have been applied to the downward spiral only by the continuing growth of direct marketing and 'all other' budgets - a category that just happens to include internet activities.

Never mind. Traditional media types can always smirk about click fraud and point to growing concerns that web destinations such as MySpace are being colonised by paedophiles. Oh, and there could be a cease-fire in the Middle East.

Optimists, after all, can find a sunny side in anything.

- The Q2 survey revealed that traditional media budgets were reduced for the seventh quarter in a row; 27% of advertisers reported cuts, while 19% reported an increase.

- Direct budgets have seen overall growth; 19% reported an increase, while 18% said they would decrease their direct budget.

- Ten per cent of firms have boosted their sales promotion budgets, while 18% have cut back.

- Internet spend also continues to grow, with 30% of firms increasing budgets and 10% decreasing them.

- Financial services, entertainment and travel and FMCG were most likely to have increased their budgets, while autos and consumer durables saw the biggest cuts.

- The rate of budget reduction eased for the second quarter in a row - 24% of firms cut their budgets while 22% increased them.


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