Broadcasters are likely to feel the commercial brunt of last week's
tragic events in the US after a disintegration in ad revenue pushed
worldwide media stocks toward their lowest levels for five years.
Media owners lost millions of pounds in revenue in the eight days after
the atrocities in Washington and New York as television ad breaks were
scrapped and newspaper pages cleared of ads to provide blanket coverage
of the events.
Now the loss of advertising from those sectors most closely affected,
together with the shattering effects on consumer confidence and retail
spending as the public blockade themselves in front of their TV screens,
are threatening to push the media industry into recession.
Lorna Tilbian, a media analyst at Numis, said: "It feels exactly like
1990, when adspend was falling and the wider economy seemed to stay
intact - then the Gulf War and the Gorbachev coup tipped us into
recession. Had we not had the World Trade Centre it might have delayed
the day of reckoning, but it would still have happened."
WPP's share price dropped 35.5 per cent to 558.5p on the day following
the attacks and yesterday fell another 3.84 per cent to 513.98p. In the
US, Interpublic's price fell 8.17 per cent to $23.05 after
re-opening on Monday. Yesterday Omnicom's share price fell 3.076 per
cent to $64.6.
Viacom, the US media conglomerate that owns CBS and MTV, yesterday
released a severe profit warning, ruling out the double-digit growth for
the year that it had predicted in July.
"Some advertisers believe their campaigns are inappropriate and are
working to revise their forecasts," Viacom's president and chief
operating officer, Mel Karmazin, said.
Catastrophic falls in the share price of UK commercial broadcasters have
paralleled the effects on their US counterparts. Shares in Granada fell
10 per cent to 91.5p, their lowest level since 1993. Carlton shares
dropped 17 per cent to 178p.
A note released by the City analyst Merrill Lynch on Tuesday said that
broadcasters are likely to suffer worst from the short-term effects of
last week. The statement also argued that newspapers will benefit from
the mitigating circumstances of dramatically increased circulation.
Merrill Lynch remained neutral on the outlook for ad agencies but
pointed out that the suspension and delay of campaigns will exacerbate
the recessionary influences operating before last Tuesday.
The immediate effects of share price declines may be felt in the
takeover battle for Tempus Group, the share price for which fell from
565p the day following the disaster to about 552p yesterday. Against
this background, WPP moved to increase its stake in the group from 22
per cent to 26 per cent.