International TV advertising revenues will continue to see a recovery this year, according to industry experts, following the trend set in the U.S.
TV program buyers feel the upswing in the advertising economy will surely mean a stronger marketplace for their existing library of programs to be sold — as well as new channels that are starting up, especially in the Asia-Pacific region.
MagnaGlobal, a unit of ad agency company Interpublic Group of Cos., estimates worldwide TV ad revenue for 2010 will see a 7.2% gain to $152 billion (in constant U.S. dollars), rising another 4.5% to $158.8 billion in 2011 and 7.4% to $170.6 billion in 2012 — all this after a depressing 2009 in which global TV ad revenues sank 8.1% to $141.8 billion.
Gary Lico, president and chief executive officer of CableReady, who sells U.S. programming such as Bravo’s “Inside the Actors Studio” and TruTV’s “Forensic Files” to many European markets, says evidence of the improved TV ad health in many markets comes from the type of programming investments being made now.
“There are more original, firstrun productions, which have greater program costs,” he says.
Adds Peter Iacono, managing director of international television for Lionsgate: “We have seen resurgence in program (purchasing and production) budgets. But they are a bit more sober; budgets are cautious.”
Indeed, the business isn’t totally out of the woods. According to Brian Wieser, global director of forecasting for Interpublic’s MagnaGlobal group, TV advertising gains in usual bellwether markets will be modest — growing, for example, 3.2% in Europe in 2010 to $35.2 billion and at about 2.5% for each of the next five years.
“In Western Europe,” says Adam Smith, futures director for media-agency holding company Group M, “we are still a long way from making up the ground lost in 2009, though there have been isolated examples of rapid TV revenue recovery, often accompanied by price inflation (U.K., Sweden, Denmark).”
One notable example is in Spain — where there will be higher TV program prices but little overall revenue growth. That’s because TV commercials are no longer permitted on state-owned TV channels.
TV analysts agree the bigger growth areas will continue to be in the Asia-Pacific region — moving up 5.5% in TV ad revenues gains this year to $35.5 billion, according to MagnaGlobal, and averaging 7.9% for each of the next five years.
Big reasons include India and China, two healthy markets that were not hit by the recession in 2009, growing 9% and 8.1%, respectively. Both will continue strong, with 14%-15% gains over the next five years. Recently, CBS said it would start up a joint venture in India called Big CBS Networks, launching three networks in that country.
In any emerging territory, “Market growth is the presence and creation of new (consumers and business) brands,” says Wieser. “Creation of new brands and categories creates competitive intensity. Competitive intensity leads to advertising for differentiation.”
All this will push the Asia-Pacific region for the first time into second place, ahead of the European region. North America — thanks in large part to the U.S. — will remain the top market. U.S. TV ad revenue is expected to climb 10.4% to $56.4 billion this year, according to MagnaGlobal.
Eastern Europe will also be pegged for improvement this year thanks to a few improving countries, says Group M’s Smith: “In Eastern Europe, we have seen ad demand push up revenues and prices, notably in Turkey and Russia.”
In Russia, new laws putting a ceiling on the amount of TV advertising inventory one company can control at 35% will shift markets dramatically next year. The dominant player, Video Intl., has controlled 65% of that country’s TV advertising inventory, selling 13 different networks.
Russia is estimated to see a 4.5% hike to $3.7 billion in TV ad revenue this year. Turkey will be one of the fastest-growing TV markets — pegged at a 32.7% growth rate to $1.2 billion. Turkey’s turbulent market saw a decline of 28.3% in 2009.
Worldwide TV advertising percentage growth will be the highest at new global pay TV satellite and cable channels.
Discovery Communications’ international channels, for example, skyrocketed with more than 30% higher ad revenue in the first half of 2010 — this after a 4% gain in the first half of the troubled 2009 marketplace and a mid-teens hike in the second half of that year.
For the near term, MagnaGlobal’s Wieser says old-style revenue streams remain the chief tools for growth: “For many European broadcasters, advertising is still the only source of revenue.”