Media Forum: Is the slump bottoming out?

Murdoch thinks the worst of the downturn is over. Is it, Alasdair Reid asks.

Rupert Murdoch isn't universally acknowledged as the wittiest media mogul that has ever lived - but at News Corp's recent interim results presentation, he got off a good one when he pointed out that economists had been created to make weather forecasters look good.

As the muted crescendo of barely suppressed chuckles died down, however, the audience knew instinctively what was coming next - the News Corp chairman was about to mess with people's heads by invoking the combined wisdom of the world's economists to back his assertion that "it is increasingly clear that the worst is over".

Pick the bones from that one. Happily, however, there's one absolutely unambiguous and unequivocal certainty that we can depend on in the midst of this mess - the fact that economists have never had it so good. We hang on every word of the most obscure of think tanks as we continue to elevate the art of clutching at straws into an epic pursuit.

But unfortunately for Murdoch, there's nothing like the consensus he was suggesting - though from a UK perspective, we will surely cheer to the rafters a report from the revered National Institute of Economic and Social Research, which stated last week that the UK economy is "stabilising".

Trinity Mirror and Johnston Press tend to agree, as it happens. In announcements last week, both reported further steep year-on-year declines in ad revenue, but both also said they saw signs that the market was bottoming out.

And where the wider economic outlook is concerned, we shall perhaps ignore the rather more cautious counsel from that flimsy and superficial body known in some circles as the Bank of England.

It's time, at last, for optimism, isn't it? Not according to Mike Hughes, the director-general of ISBA. He says: "From an advertiser point of view, the answer has to be no. It's different by sector, of course. If you're involved in staple goods - FMCGs primarily - or retail, the surprising thing is that it's not been as bad as some people predicted or feared. If you're in cars or the financial sector or consumer durables, then it's a different story."

And he's also worried about the shape of the exit curve, when eventually it does hove into sight. He explains: "When we do hit bottom, there are those who believe we're going to bump along for a bit. So with respect to the advertising market, I believe we'll continue to see what we've seen in recent months with advertisers approaching the market on a pay- as-you-go basis, with ever later commitments."

But Robert Horler, the managing director of Carat, is prepared to be more upbeat. He says: "Anecdotally, speaking to clients and to media owners, I think there is some evidence that we are bottoming out. I'd agree there's a big question about how quickly we are going to come out - and I think there are indications that it won't be as fast as we've seen in past downturns. I'm convinced, though, that next year will be better than this."

However, Jonathan Barnard, the head of publications at ZenithOptimedia, feels that it's too early to tell. He adds: "Some things are getting better; some are getting worse. But I suppose you can say that even where things are still on the way down, they're not going down as quickly as they were. That's always the case with recessions. You never really reach a point where you can say everything has reached the bottom. I'd say that, maybe, in the UK, the second quarter may be more or less on a par with the first."

Paul Curtis, Sky Media's deputy managing director, believes that the impact of recession will be felt by media owners beyond the downturn because advertisers are expecting more for less. He says: "There are cyclical factors and structural factors at play here and, in our judgment, you can attribute 50 per cent of the downturn to each. The structural aspect is that advertisers (due to an increase in audience supply) generally expect to pay less for the same weight of communications."

NO - Mike Hughes, director-general, ISBA

"It may well be true that the decline is starting to get shallower. But I don't know of anyone in any sector who'd be prepared to make a call as to whether the downturn has bottomed out with any certainty."

YES - Robert Horler, managing director, Carat

"There's not the wholescale slashing of budgets taking place anymore. I'm not looking to increase our headcount by 40 per cent next year - but I believe there are grounds for cautious optimism."

MAYBE - Jonathan Barnard, head of publications, ZenithOptimedia

"The general economic indicators are mixed. But I would agree that there are higher levels of optimism out there. And that might be significant - a large part of any downturn is due to a lack of confidence."

MAYBE - Paul Curtis, deputy managing director, Sky Media

"You can argue that the cyclical factors are bottoming out, but they will be with us for a while. The worry for the media sector is that, because of more structural issues, when the cyclical factors dissipate, we'll still not get back to where we were before."

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