The continuing COVID-19 outbreak means a less-than-rosy outlook for media owners’ net advertising revenue forecasts. Media suppliers’ total linear ad sales, previously expected to hold steady this year, are now projected to decline by nearly 12% in 2020, according to a revised ad forecast from the IPG Mediabrands-owned Magna Global. Full-year ad sales are expected to drop by 2.8% across all media, when they had previously expected to grow nearly 7%.
The impact will be most severe for print media, which is expected to be hit with a 25% loss in advertising sales in 2020 compared to the previously forecast 17% decline.
It’s not just print, though: Magna is forecasting losses nearly across the board. National TV sales are expected to shrink by 13% this year, compared to a less than 1% drop previously forecast. Out-of-home advertising is forecast to decrease by 12%, when it had been previously expected to grow 4%. Radio is projected to shrink by 14% instead of by 3%.
“This is a different type of crisis because it’s not a normal economic downturn,” said Magna evp, global market research Vincent Letang, who authored the report. “There was always a possibility to have an economic downturn this year or next year, and we got that, but we also got a health crisis as well. While a traditional economic downturn is demand-side, now we also have a supply issue, and also some changes in media consumption. For our purposes, it’s three-dimensional.”
Letang said the closest historical equivalent would be a combination of the 2008-2009 financial crisis and September 11, 2001—a combination of an economic downturn and a national disaster. Magna’s previous December forecasts represented a far more positive outlook on advertising spend across the board.
The impact will be severe for some sectors like the travel, restaurant and the theatrical movie industries, which have already begun pulling advertising spend as their businesses are hit hard by shutdowns and shelter-in-place orders. Retail, finance and automotive are also expected to be significantly affected as production halts, malls temporarily close and consumer confidence drops. Packaged food, drinks, personal care, insurance and pharmaceutical marketing activity is also expected to drop moderately, Magna said; ecommerce and home entertainment, however, may go up as demand increases more than anticipated.
Digital media ad sales are expected to remain more resilient throughout the crisis, although they will still see smaller growth than previously expected. Digital ad sales are forecast to grow 4% this year, with the biggest gains in social and digital video. Local TV’s nonpolitical ad sales are expected to be hit hard as well, but local political spending is expected to stabilize full-year revenues to about 1% growth. That will still be lower than the nearly 13% growth previously forecast by Magna.
Election-year political advertising is expected to grow by 26% compared to the same timeframe in 2016, and is projected to reach an estimated $4.9 billion in advertising spend—a considerable figure that nonetheless had to be lowered to account for the current crisis, Letang said.
There is some good news: Letang said a recovery is expected to occur more quickly than previous economic downturns in recent memory. Magna expects to see some stabilization in the second half in 2020 and a larger recovery in 2021. Data from China and Italy showing stabilizing infection rates “means that quarantines work,” Letang said; a huge stimulus package may also aid in stabilization.
“It’s not unrealistic to believe business can gradually reopen in the second quarter, and that we’ll have stabilization and some recovery in the second half,” Letang said.
Because many industries may be delaying ad spend instead of canceling it entirely, Magna is anticipating some recoveries in 2021. The firm increased normalized advertising spending in 2021 slightly to account for the postponement of the Summer Olympics and the advertising spend that will eventually accompany that event; in fiscal year 2021, national TV ad revenue is expected to grow by nearly 1%.
Magna anticipates some market stabilization and rebounding to occur in the second quarter before some moderate growth in 2021. Total media ad revenue is projected to grow 2.5% in 2021, higher than previously forecast, although total linear media ad sales are still forecast to be down in 2021 by 6%.
Letang said that previous crises show that marketers’ decision-making during recessions and crises matter, and that “resilience” has historically paid off for brands’ stock prices in a year’s time.
“Statistically, the companies that didn’t go dark, that kept investing to support their brands, typically performed better,” Letang said. “If your brand goes dark while others don’t, you can lose market share when consumption restarts—and it could cost you a lot more to recover from that.”
Much about the coming weeks and months remains uncertain, and the latest forecasts on the macroeconomic outlook and corresponding advertising spend remains subject to change. Magna will reassess its 2020-2021 outlook in early June based on new macroeconomic outlooks, information from media companies’ Q1 ad revenues and additional epidemiological information.