Magna Global Ad Forecast Sees Flat Growth For Radio

Updated Forecast

MAGNA GLOBAL has released a WINTER update to their Global Advertising Forecast, with solid ad growth in the digital arena. Radio was flat or down in most catagories.

Key Findings

• Globally, advertising revenues demonstrated their strongest growth since 2010 this year, as advertising sales reached $493 billion
• Global ad growth will slow noticeably in 2017, to +3.6%
• Social and search captured the bulk of dollar growth in 2016: $23 billion out of $26 billion
• TV ad sales resilient due to stronger pricing and cyclical events including sports and U.S. elections
• Digital ad sales to surpass TV by 2017
• U.S. ad sales grew nearly 7% to $180 billion, achieving its strongest growth in 12 years

Global Overview 2016

Globally, net media owners advertising revenues grew by +5.7% in 2016, to $493 billion, up from +4.0% in 2015 and marginally above our previous forecast (+5.4% in JUNE 2016). The 2016 growth was the strongest since 2010, which experienced a post-recession recovery of +8.8%.

The strongest growth came from NORTH AMERICA this year (+6.7%), as the U.S. market (accounting for 37% of global ad dollars) recorded its strongest growth rate in 12 years (+6.9%), while growth slowed down in many emerging regions. Then came CENTRAL and EASTERN EUROPE (+6.0%), LATIN AMERICA (+5.5%), ASIA-PACIFIC (+5.3%) and WESTERN EUROPE (+3.9%).

The 2016 growth was the result of digital ad sales growing by +17% while offline media ad sales (linear TV, print, radio, and out-of-home) were flat (+0.3%). If not for the incremental cyclical spend, benefitting mostly television, offline media sales would have decreased by approximately -2%, matching the 2015 performance.

Linear television advertising sales were resilient in 2016, growing by nearly +4% globally to $186 billion, due to the additional ad spend generated by cyclical events, as well as pricing inflation (CPM +8% on average) which offset a decrease in ratings (-7% in the US, more moderate elsewhere). Traditional television categories, such as CPG/FMCG, personal care, food and beverage, showed strong television spend this year. This was partly due to sports events encouraging beverage and automotive brands to increase their budgets on even years. In addition, some major CPG groups publicly stated their strategy to re-allocate more budgets into traditional television as digital formats had provided disappointed sales results. In fact, big TV categories had to increase their TV spend just to maintain their share of voice in a media that remains essential for reach and awareness goals, in an inflationary environment. In most cases, TV spend increases did not come at the expense of digital media spend, which continued to increase at a fast rate. If anything, it came at the expense of print and radio budgets.

Global Overview 2017

MAGNA forecasts media owners’ net ad sales to slow down to +3.6% in 2017, due to the lack of cyclical events, and the economic and political uncertainty in several markets (Brexit process, new presidency in the U.S., general elections in GERMANY and FRANCE). That would be the lowest growth rate recorded in 15 years outside the great recession of 2008- 2009.

We anticipate digital media sales to grow again by double-digits (+13%) while offline ad sales will shrink by 2%. Linear television and radio ad sales will be essentially flat (-0.1% and -0.9% resp.) while print ad sales will continue to decline (-9%) and out-of-home will maintain decent growth (+3.7%).

NORTH AMERICA, being the region with the heaviest cyclical shift (due to the $3.5 billion of incremental spend around Elections/Olympics in even years) will show the most significant slowdown in 2017: +1.8% (+1.7% in the U.S.).

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