BigShinyThing

Unsurprisingly, Standard & Poor’s ratings services’ outlook for the media and entertainment industry in 2006 in the US is rather pessimistic, with online advertising the only bright spot.

Bright yellow canaries for the UK market are as follows:

Broadcast and Cable Networks
S&P expects broadcast-network revenue to grow in line with, or slightly faster than, GDP in 2006. We see the effects of potentially ongoing auto ad spending weakness, competition from alternative media and sponsors’ cold feet over ad fast-forwarding as together balancing the benefits of elections and Olympics in that year …. Cable networks, as much as broadcast networks, will be subject to fears of ad zapping and persistent programming price pressures.

It’s unclear whether new technologies will represent genuine opportunities for either broadcast or cable networks. Advertising revenue streams will still be miniscule from transmission to mobile phones, video on demand (VOD), video iPod, and Internet efforts, and their long-term potential is uncertain. Some opportunity exists for secondary digital channels, such as the digital CBS channel expected in late 2006 or early 2007, and from broadband networks being launched by cable channels.

TV Station Groups
Total spot revenues are forecast to grow between 6% and 8% in 2006, according to the Television Bureau of Advertising (TVB). Factors that could influence growth in 2006 include the impact of oil prices on consumer spending, the strength of the automotive and political categories, the pressure from non traditional media, and advertisers’ call for enhanced measurement of effectiveness of their ad spending.

Radio Station Groups
Radio ad demand is under pressure from competing media such as the iPod and satellite radio as well as from excess commercial loads.

Online Advertising
S&P expects that online ad growth in 2006 will exceed 20%, reflecting the continued strength of both search and brand advertising. Marketers appear to be gaining confidence in the Internet’s ability to reach consumers. For example, Yahoo! indicated that its brand-marketing revenue from the top 200 US brand advertisers grew more than 45% in second quarter 2005 and Ford Motor has allocated about 15% of its marketing budget to online initiatives. Furthermore, some marketers have begun to incorporate search advertising as part of their overall branding campaigns, which could spur more online ad spending.

Even assuming that growth decelerates somewhat, Internet advertising is likely to exceed magazine advertising in 2006. Spending on Internet ads could potentially surpass spending on radio in 2008, assuming 1% to 2% growth in radio ad spending and a minimal contribution from satellite radio.

Advertising Agencies
Advertising spending is expected to grow 5% in 2006, slightly faster than the 4.7% that we expect for 2005. This will be mainly driven by the exceptional events of the election and Olympic ad spending.

Marketing services growth in 2006 will likely vary depending on the niche. Customer relationship management and Internet ad services are likely to experience more robust growth than other niches, such as recruitment and direct to consumer health care advertising. Increasing fragmentation of the media landscape should steadily increase the value of and revenue potential in media planning.

Via BusinessWeek.