The media and marketing worlds keep morphing at fantastic speed. 2010 was a dervish of activity in terms of changes in content and advertising, technological advances and the ever-looming specter of government regulation.
Expect 2011 to be just as chaotic, challenging and intense, as major players—and startups unknown at present—blaze new trails and seemingly everyone everywhere strives at all times (and by any means possible) to stay digitally connected.
Our editors take a look at what's ahead in key industry sectors:
FORECAST 2011: REGULATION
FORECAST 2011: VIDEO
FORECAST 2011: DIGITAL
FORECAST 2011: PRINT
FORECAST 2011: AGENCY
FORECAST 2011: REGULATION
By Katy Bachman
It could be game-changing time on Capitol Hill. Congress and regulators are scrutinizing a host of issues affecting both new and traditional media, any one of which could force advertisers, media and Internet companies to alter business models. Some have suggested that because they include potential rules to regulate the Internet and broadband, old rules regarding media, and emerging privacy concerns, that it's time for Congress to take a comprehensive approach. "The grinding you hear are the gears churning as policy makers try to fit fast-changing technologies and competitive markets into regulatory boxes built for analog technologies and monopoly markets," says Tom Tauke, evp of public affairs, policy and communications for Verizon. Here are five keys issue in play in 2011.
No legislation yet, but this is one issue that both sides of the aisle can support, so watch for bills to come early and often in the new year. The Federal Trade Commission set off a firestorm with a Dec. 1 report in which it floated the idea of a Do Not Track practice. Commerce is set to deliver its own report in the coming weeks. The ad industry, ahead of both reports and a House hearing, began rolling out its self-regulatory system last October.
The FCC is dead set on reclaiming a good portion of the broadcast spectrum to fill an impending wireless spectrum crunch. To compel some TV stations to voluntarily give up spectrum, the FCC voted 5-0 to explore a proposed rule to allow two or more TV stations to share spectrum currently held by a single station. But first, Congress has to act and free the way for incentive auctions.
Everything about this Internet issue is controversial: the timing, the concept and the FCC's authority to regulate the Internet. (Not to mention its use of the term "net neutrality" is an oxymoron, in that it means regulating Internet traffic so that Internet providers can't block or slow down legal content). It's all headed for a vote at the Federal Communications Commission on Dec. 21 (a date when Congress will be recessed) and a turf war in Congress. If Congress doesn't stop it, expect a company such as AT&T to file a lawsuit.
Media ownership rules aren't high on the FCC's list of priorities, but the FCC is expected to take up the rules next year per the quadrennial review mandated by Congress. Broadcasters and newspapers would like to see the commission grant more TV duopolies and allow cross-ownership in markets outside the top 20. Don't hold your breath: Chances are nothing will change. In the meantime, the FCC is closing in on the review of Comcast's $30 billion deal with NBC Universal.
Retransmission consent negotiations between cable companies and broadcasters don't often end in signal blackouts, but when they do, it causes a ruckus. The most recent standoff (16 days) between Fox and Cablevision brought renewed vigor to advocates of retransmission reform. Sen. John Kerry (D-Mass.) drafted legislation and held a hearing. The FCC just announced it will open a proceeding, likely to happen in the new year.
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FORECAST 2011: VIDEO
By Anthony Crupi
Consider this the thrown gauntlet. Tear out this page and keep it within easy reach. Bookmark the Web page, print the pdf. All divinations 100 percent accurate or your money back.
FACT: People are watching more TV than ever before. And while atomization has served to further wizen the Big Four, advertisers remain so bewitched by the prospect of reach that they poured $8.26 billion into the 2010-11 broadcast upfront.
FACT: Barring catastrophe, the 2011-12 TV upfront will be the most lucrative in history. Clients are buying scatter inventory at prices between 20 and 30 percent over upfront rates. Despite buyer claims that there would be no Q4 scatter market, the broadcast and cable nets are on a tear.
FACT: Anyone pushing the "cord-cutting" angle is patrolling the wrong border. Until live sports are widely available for online streaming and consumers can watch live prime-time fare on their computers and smartphones, cord-cutting will be limited to the very young and the very broke.
FACT: At 40 percent penetration, the DVR is devastating to client marketing plans and media margins. If you buy into the odd research report that suggests DVR users are actually watching spots, you're engaging in true folly.
FACT: There will be a 2011-12 NFL season. Talk that the collective bargaining agreement is doomed to fail is hyperbolic; despite the NFLPA advising players to squirrel away their paychecks, the network partners don't seem to be sweating it out. Execs report that there are no contingency plans in place for a lockout, which in itself should go a long way toward dispelling fan anxiety.
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FORECAST 2011: DIGITAL
By Mike Shields
The digital media universe is marked by constant change—and even more constant disruption. Companies like Google, Apple and Microsoft are looking to shake up the 60-year-old TV business. Microsoft is after Google's search throne. Apple has convinced millions to carry around paper-size computers with no keyboards, after convincing millions more to carry around even smaller pocket-size computers that occasionally make phone calls. Even online advertising, while growing, is being thrown into turmoil by the rise of exchanges, data resellers and Wall Street-like trading desks.
While search advertising remains the backbone of that industry, the display market has roared back in 2010, and should continue to show strength, though all is not perfect even there.
"Interactive advertising will continue to be healthy next year," says Howard Bass, senior partner at Ernst & Young. "But there are many initiatives under way to [better] understand the value being delivered." In other words, big traditional brands are still figuring the Web out. And the landscape, loaded with middlemen, is only getting more complex. "Internet advertising is building its credibility," says Bass. "Right now, it's a confusing space."
SOCIAL MEDIA'S MASSIVE GROWTH
Nearly one in four page views in the U.S., or 24.2 percent, took place on Facebook.com in 2010 as of November, per Hitwise.
That's 3.8 times the volume of the No. 2 site, YouTube.com, which generated 6.39 percent.
Last March, Facebook surpassed Google in traffic volume, found Hitwise. Since then, Facebook's page views have surged by 60 percent.
Facebook's U.S. revenue projection: $835 billion in 2010, $1,060 billion in 2011—a 112 percent surge (eMarketer).
Facebook reached 151.1 million unique users in October (comScore).
Twitter.com reached 25.1 million in October-though millions more via other applications.
Three million U.S. broadband households plan to purchase an Internet-connected TV during the 2010 holiday shopping season, according to research conducted by Parks Associates. (The data below is also from Parks Associates.)
Nearly a quarter of U.S. broadband households already own at least one connected TV device.
By the end of 2010, over 40 million U.S. consumers will have a broadband-connected game console.
More than 8 million will have a PC-to-TV connection.
More than 5 million will have a connected Blu-ray player.
More than 4 million will have a networked digital video player like Apple TV or Roku.
"The $70 billion question is how TV services are impacted by the rise of connected TV devices," says Parks Associates' Scherf. "One very important evolutionary path will be the cable provider's use of connected TV devices to supplement and in some places replace their current pace of set-top box deployment. That's a key trend to watch in 2011."
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FORECAST 2011: PRINT
By Lucia Moses
If 2010 was a year of digital innovation, in the form of iPad apps and online paywalls, 2011 will be one of continued tinkering. Publishers will test tablet subscription offers and metered paywalls as they recognize the need to offset shrinking ad revenue and increase their haul from consumers. Four of the biggest magazine companies start the year off with new leadership, raising expectations for transformation at a high level. Expect to see the continued expansion of marketing services, deeper integration of print and digital sales, and creation of digital products driven by consumer needs—steps many would call long overdue. "The biggest thing that needs to happen is a lot of listening to what the client wants, listening to what the consumer wants," says Carolyn Dubi, svp, director of print at Initiative. "It brings us toward the golden ticket, which is about performance."
4 TRENDS TO WATCH
Circulation pricing: Companies like Hearst Magazines and Time Inc. will try to reduce their dependence on ad revenue by looking for ways to charge the consumer more for subscriptions and other forms of content.
Apps: Determined not to repeat their slow uptake with the Web, publishers rushed out close to 850 apps for the iPad this year, per McPheters & Co.'s iMonitor, many of them replicas of print versions. Look for publishers to experiment more with different formats like utility and standalone apps and interactive features as they learn more about how consumers are using tablets.
Paywalls: The New York Times will reveal its metered paywall early in 2011. Less watched will be dozens of smaller newspapers that also will erect pay meters in the months ahead using Journalism Online. The company's co-founder, Gordon Crovitz, says that those using the meter so far have grown online subs without sacrificing visitors or ad revenue.
Marketing: With print ad pages waning, publishers will step up efforts to grow nontraditional revenue, from developing brand extensions to expanding marketing services. Look for the big guys (Time Inc., Hearst, Condé Nast) to make strides in these areas.
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FORECAST 2011: AGENCY
By Noreen O'Leary
The big surprise in 2010 was the strength of the ad recovery around the world, particularly in the U.S., which was buoyed by a comeback in autos and finance. That momentum is widely expected to carry into 2011, closing the door on the century's turbulent first decade, which has left shell-shocked consumers in developed countries feeling poorer and frightened about their economic prospects. Their job perils translated into more cost-efficient businesses, and marketers are handing over some of that cash to agencies for top-line growth. How much of it? ZenithOptimedia expects a 2011 increase of 4.6 percent in worldwide spending while Group M is more bullish, at 5.8 percent. Here are the forces that will drive spending in the world's three key areas of operation.
Even at a modest forecast of 3.7 percent growth next year, GroupM says the U.S. is expected to add $5 billion in new ad spending, more than China. Q3 corporate profits were at an all-time high, but while that cash is being used to woo consumers, companies are not using it to create jobs. Economic recovery in a country where 70 percent of GDP comes from consumer spending remains stymied by penny-pinching Americans. Whether their new preference to save is a cyclical response remains to be seen. More clear is the impact of the tumultuous economy on the ad industry. Seth Alpert, managing director, AdMedia Partners, says traditional holding companies, with their expensive media underpinnings, are being challenged. Big marketers like Kraft are shifting work from longtime network partners to smaller entities. "Clients, affected by what's happened in the economy...have discovered they are being served in different and better ways," Alpert says. That era of entitlement doesn't just apply to roster relationships. Susan Gianinno, CEO, Publicis Worldwide in the U.S.A., says that while many industry staffers adapted to lower compensation expectations during the downturn, some remain unrealistic about the business' new financial realities. "It's a new world. Everything has been recalibrated," she says. "There was a salary inflation that we're never going back to."
Western Europe will be the industry's slowest growth area next year. Media spending is expected to increase 3.2 percent, less than this year's 4.1 percent gain, according to ZenithOptimedia. (Even the U.K., which hasn't tied its fate to the embattled euro, is seeing cutbacks from one of the country's largest advertisers—the government.) David Jones, global CEO, Havas Worldwide, says the continuing uncertainty in the Eurozone poses the risk of becoming a self-fulfilling prophecy. "You end up with the real economy and a perceptual economy," says Jones. "When people believe things will get worse, they delay purchases and trade down, and [then] companies make layoffs and don't spend on marketing." Given the difficulties and costs in making those layoffs, when those economies come back, employers are slower to rehire.
The BRIC countries will contribute one-third of all new ad dollars next year, predicts GroupM. The media firm estimates that spending in Brazil will climb 9.5 percent; Russia, 14.6 percent; India, 23.9 percent; and China, 10.7 percent. Now the world's second largest economy, China is a global priority in agency expansion. Fears that inflation and overheated property markets could stall China's development have lately stabilized. Not only is that domestic marketplace growing, so is the local ad industry. Western networks face growing competition from Mainland agencies. That's not all bad news. The local industry's growing sophistication presents acquisition opportunities and a training ground for indigenous staff. "There's not a great deal of local expertise, and you're competing against banks and solicitors to recruit the best talent," says Miles Young, CEO, Ogilvy & Mather Worldwide. As a result, he notes that in places like China, staffing is still heavily reliant on more expensive ex-pats from the West.
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