Media braces for big ad squeeze

MEDIA companies are bracing for a slump in advertising revenues, with the peak ad industry body warning of significant belt-tightening.

MEDIA companies are bracing for a slump in advertising revenues, with the peak ad industry body yesterday warning that significant belt-tightening was imminent.

Collin Segelov, executive director of the Australian Association of National Advertisers, said evidence was increasingly pointing to companies lowering their ad spending.

"I certainly think the slowdown is happening right now. What we're hearing from marketers is budgets are under extreme pressure. It will be sorted out in the next few months," he said.

Mr Segelov's revelation of the anecdotal evidence from clients of AANA -- the peak advertising industry body -- comes just days after Seven Network executive chairman Kerry Stokes predicted a significant downwards "repricing" of media assets in the next 12 months as economic times tightened. Mr Stokes expects the repricing to create buying opportunities for a cashed-up Seven.

They also follow a move last week by Goldman Sachs JB Were's equity strategist Chris Pidcock to identify a number of main media companies -- including Fairfax Media, Austereo, APN News & Media, Seek and the Ten Network -- as "potential candidates for profit warnings over the next two months".

Mr Pidcock has predicted "ad market weakness" in the second half of the 2008 calendar year.

This reinforces another recent report by Goldman chief media analyst Christian Guerra of zero growth for Australia's free-to-air TV, print and radio advertising for the 2008-09 financial year, as the global credit crunch and interest rate rises start to affect consumer sentiment. He said corporate advertisers were "intimately concerned with broader trends in consumer spending", such as "private consumption".

Credit Suisse media analyst Finola Burke has also slashed target prices for local media stocks across the board by 25 per cent for similar reasons.

Meanwhile, media strategist Steve Allen has highlighted a disappointing growth in retail sales for March, compared with the figure for March 2007 -- a further dampening sign for ad levels.

March retail sales rose by just 2.96 per cent on the same month last year, with hospitality, household goods and clothing/soft goods all in negative territory.

"We compare these figures differently from all the economists, who compare retail sales on a month-to-month basis," Mr Allen said.

"We think the most fundamental comparison for how retail sales affect advertising is comparing the sales with the same month last year.

"And there are clear signs the RBA is taking a bite into the economy (with rate rises)."

Mr Segelov said that his evidence was pointing to serious belt tightening at many companies.

"This may be the year that finance directors are moving beyond simply complaining about the amount of money marketers are spending, to serious controls that would require cutbacks to ad spends. That's what I'm hearing most of."

The AANA boss said, somewhat surprisingly, that based on his discussions with advertisers, if there was "much more than a mild tightening" in ad budgets, he expected traditional media to hold up better than new media.

"It's a basic human instinct that we go to what we know when we are uncertain on what's going where," he said. "I can see there are advertisers who are talking about a tightening market and pulling back to their more traditional channels -- that is, TV, radio and print -- and less experimentation online."