Advertising market on edge during these uncertain times

International events, such as Brexit, along with upcoming elections in Australia are dampening the nation’s advertising market.

Australia’s major media companies face a challenging advertising market due to widespread business uncertainty stirred up by international factors such as Brexit.

Australia’s major media companies are set to confirm a testing ­advertising market as they deliver their latest round of financial results in coming weeks.

At the same time, much of the focus will be on the pace of integration at Nine Entertainment following its $4 billion mega-merger with Fairfax Media.

Ad veteran John Steedman described the ad market as soft, noting there was “an enormous amount of uncertainty at the moment, particularly the big business end of town”.

“Obviously, with the elections coming up, businesses tend to pull back because the airwaves are dominated by the political parties,” said Mr Steedman, referring to the NSW election on March 23 and the federal election, which must be held before the end of May.

Other headwinds include a potential change of government at the federal level as well as economic uncertainty, including Brexit and the impact of US President Donald Trump.

“There’s a lot going on globally that will have an effect obviously on where this country goes,” said Mr Steedman, who is executive chairman of media investment management at ad firm WPP AUNZ, as well as a board director.

Morningstar analyst Brian Han expects media bosses to report of “challenging advertising conditions”, with spending likely to have fallen in the six months to December 31 and the weakness to have continued into 2019.

“Of particular interest will be how the media companies managed to offset some of this revenue headwind with cost cuts and ­efficiency drives,” Mr Han said.

TV companies Nine and Seven West Media could disappoint given the downturn in TV advertising in the December-half, although their share prices have already been marked down to reflect this, Mr Han said.

However, the burst of advertising from Clive Palmer from last month will provide some support to the networks.

Media winners could be hard to find, but those exposed to radio such as Southern Cross Media and outdoor advertising, like oOh!media “will have fared relatively better from a revenue-­perspective, as these advertising sub-segments are the only ones that grew in the December-half”, Mr Han said.

Two months after Nine wrapped up its merger with Fairfax, investors are anxious to hear how the integration of the two vastly different broadcast and publishing businesses is going.

Nine has already put the “for sale” sign up on the events business inherited from Fairfax, with chief executive Hugh Marks set to be grilled over the plans for its ­regional newspaper mastheads and New Zealand business Stuff.

The company is betting its 2019 TV ratings success on a long line-up of shows, including reality programs, Married At First Sight, Love Island and a reboot of drama series SeaChange following its inaugural tennis coverage, culminating with the Australian Open recently.

Seven’s ad revenue and cost savings initiatives will come under the spotlight after the group forecast in November a flat metro TV advertising market this financial year.

At the same time, Seven increased its annual cost savings target to $20 million-$30m from its previous target of $10m-$20m.

Seven CEO Time Worner and his team are banking on a string of cooking, reality and drama shows, including My Kitchen Rules, Wife Swap, The Proposal and Between Two Worlds to attract audiences and, in turn, boost ad revenue as its summer cricket coverage draws to a close.

Mr Marks and Mr Worner recently claimed success over their summer coverage of tennis and cricket, respectively, after the networks swapped the long-held rights last year.

Challenging market conditions are expected to have hurt regional TV broadcaster Prime Media’s interim earnings, despite interest from advertisers in its cricket coverage of test and Big Bash League matches and content cost savings. ​

In a trading update to the ASX just four days before Christmas, Prime forecast underlying earnings of $21m to $22m for the six months to December 31, down from $24.3m a year earlier.

The group also expects to book profit after tax of between $9m and $10.5m, down from $14m last year.

At the time, Prime said total advertising revenue for the month of December was expected to be 15 per cent higher than the same time last year, and flagged that forward bookings for January and February were ahead of the prior year.

News Corp’s strong start to the 2019 financial year is expected to continue, thanks to its vast digital real estate operations and the consolidation of its Australian television operation Foxtel last April.

At the time of its first-quarter results in November, News Corp chief executive Robert Thomson said the new financial year was off to an “impressive start”.

He said the first-quarter revenue and earnings growth reaffirmed the company’s “strategy to focus on digital development, and to put particular emphasis on subscriptions as the advertising market continues to evolve.”

Southern Cross Media, the nation’s biggest radio network owner with 80-plus radio stations, is expected to deliver further cost savings with its interim results after telling shareholders in October that expenses rose slower than revenue. The group is also targeting a bigger share of the fast-growing podcast market.