Optimism is a reckless emotion at the best of times and those indulging in it now are best advised to calm down. It is exciting enough watching the start of the new series of The X Factor (and, of course, seeing who will have the X factor in the contest to become chief executive of ITV) but it is not clear why the broadcaster’s share price should have lifted by as much as 40 per cent over the summer holidays. Advertising bookings are down about 7 per cent in September, which, had it happened a couple of years ago, would have been considered a disaster. But when you are living in the worst recession since the 1930s, it suddenly seems a result — when, of course, it isn’t.
Look also at the structural trends in the media business. It is not obvious they will change radically next year. In television, it has never been cheaper, in real terms, to buy 30 seconds of advertising than it is now. ZenithOptimedia, the kind of long-named company of pointy heads whose job it is to calculate figures like these, reckons it costs an average of £4.60 to reach a thousand people these days. That figure has been falling consistently since 2000, when the same amount of advertising cost £6.70 — meaning that there has been deflation of nearly a third over the past decade. In absolute terms, without adjusting for inflation, advertising today is cheaper than it has been since 1993. No wonder, then, that there are no arts or politics programmes on ITV1; they are unaffordable luxuries.
Television advertising is tumbling partly because there is oversupply — all those new digital channels — and partly because advertisers regard online as a more efficient medium. Neither of these trends is likely to change, although a third factor, regulation, could at least be eased. Some problems are caused by the contract rights renewal (CRR) rule that forces ITV to cut prices as its audience falls, inexorably, on its main channel (because of all that choice again). But on top of that, there are the long-standing rules that stipulate how many minutes of ads there must be per hour. Broadcasters, in short, can’t cut the supply of ads to try to maintain rates. And because television, and in particular ITV1, is a benchmark for everything else, it helps to deflate the whole market.
The crumb of good news for anybody seeking solace about 2010 is that there is a chance the CRR mechanism will be loosened. But that will not solve the problems posed by oversupply or online unless Sky and Google are also abolished, which seems unlikely.
Long-term trends have been dreadful elsewhere too: newspaper advertising was £4.3 billion in 2004; this year it will be about £3 billion. Regional titles — where advertising is down 40 per cent in the past five years — are unlikely to see a significant recovery because most forms of classified advertising perform better online and local newspaper owners don’t own the companies that capture the new revenues, such as Rightmove, the property website. Even in a recovery, that trend won’t go away.
Advertisement
The upmarket national newspapers, whose cover prices have risen sharply over the past five years, are near the psychological £1 and £2 limits. At the bottom end, intense competition — see the 20p Daily Star — makes it hard to boost income through price rises.
The newspaper business is also characterised by oversupply, because it is simply too much fun staying in the game. No wonder, then, that most upmarket titles are losing money. Unless Denis O’Brien, the highly vocal shareholder at Independent News & Media, somehow gets his way over the sale or closure of The Independent, or Guardian Media Group abandons its belief in publishing and kills The Observer, the hyper-competitive dynamic of the industry won’t change next year either, even if it should.
Hope, then, rests with the consumer — and there are areas of resilience, even modest growth, such as in pay television. But HMV, the entertainment retailer, estimates that music sales were down 8 per cent over the summer, DVDs about flat, and games sliding about 40 per cent. No doubt the recession is part of that problem but the real issue is piracy, which has crushed music sales — down 22 per cent, or £550 million, since 2003 — and will have an impact elsewhere. DVD growth has also stalled amid price deflation — those £8 discs from Asda or Tesco — and the gradual shift to catch-up television, whether via the free BBC iPlayer or a digital video recorder, which means there is less need to buy a box set of that series you missed first time round.
New ideas and new business models will doubtless emerge steadily. Consumers should start being paid for the contribution they make, as they will by getting a cut of the advertising income generated by their YouTube clips. But for traditional media, unlikely to rush to pay viewers and readers, the path to recovery will be gradual — the spreadsheet jockeys at ZenithOptimedia reckon that all media advertising will fall 1.4 per cent in 2010. Don’t expect much economic excitement this side of next summer’s World Cup, although naturally, all bets are off when England win.