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Magna Sees Improving Advertising Market

Modest Growth Expected for National Television 5/03/2013 7:52 AM Eastern
 

Media agency Magna Global sees the U.S. advertising market gradually accelerating following a weak first quarter.

Magna says the television market was slow in the first quarter with prices on a cost-per-thousand viewers (CPM) basis showing almost no premium over the 2012-2013 upfront costs, contrary to the double-digit increases cited by media owners during this week's earnings reports.  In the second quarter, prices are up but Magna says that is the result of low supply due to poor ratings, rather than a surge in demand.

In a non-Olympic year, "we anticipate national television advertising to grow modestly, while local TV will be down and television ad revenues as a whole will decrease by -2.8%," Magna said.  Excluding the effect of the Olympics and presidential elections, TV will be up 1.9%."

Magna's report comes just before the start of the broadcasters' upfront week. "Many have called for this dated practice to end, in an age where real-time, data-driven, auction-based, last-minute trading would rule instead," Magna said in its report. "The reliance of advertisers and media sellers on the upfront market, however, has not dissipated, because the predictability and scale that upfronts provide for both the supply and demand side, remains valuable for most market players. Buying on the scatter market has almost always proved more expensive on a CPM basis during the last ten years.

"Not only do the upfront negotiations survive in modern television, but they seem to be winning new converts in digital media too," the agency added. " The creation of the 'NewFronts' marks a whole new generation of digital media owners battling for upfront dollars and supporting a trading model similar to that of television, for some of their inventory (mostly video). The question is how successful these 'NewFront' competitors will be in stealing share from traditional TV or in growing the upfront pie."

Magna expects digital media to be the only category to show significant growth this year at 11.5%. The agency says the pace of digital growth should plateau slightly as a result of deflationary pricing trends affecting display formats.

For all media, Magna projects that ad revenue for core media owners will grow 0.4% this year, or 2.4% excluding political and Olympic spending.

For 2014, Magna raised its forecast to growth of 4.9%, or 3.8% excluding political and Olympic spending.

 

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