Magna’s U.S. Advertising Forecast Raised; Strikes, ratings hurt television – The Hollywood Reporter

Media investment company Magna has raised its forecasts for the US advertising market for 2023 and 2024. It cited an improving economic outlook, better-than-expected year-to-date trends and an upgrade to its digital media growth forecasts, partially offset by downgraded advertising expectations for traditional media owners, including on television.

“Total advertising spending increased again in the second quarter of 2023. Sales rose by 4.4 percent
year-over-year, after two quarters of stagnation,” the company said in a new report, citing “an overall improvement in the economy” and easier year-over-year comparisons. “However, only pure-play digital media providers (search, social media, video) really benefited (+8.7 percent in the second quarter), while traditional media companies continued to struggle (-4.1 percent).” The company’s conclusion: “ Digital spending is recovering, but traditional media continues to struggle.”

Total advertising spending is now expected to rise by 7 to 8 percent in the current third and fourth quarters, compared to 2.9 percent in the first half of the year. This brings advertising growth for the full year 2023 to 5.2 percent, above Magna’s previous estimate of 4.2 percent, as announced in June. This means that advertising spending will reach $337 billion in 2023.

The company raised its 2023 revenue growth forecast for digital media owners, including Alphabet/Google, Meta/Facebook and Amazon, to 9.6 percent from 7.9 percent, but lowered its expectations for traditional media owners in television, Radio, publishing and out-of-the-art. Self-promotion from -3.2 percent to -3.6 percent.

Looking ahead to 2024, Magna increased its advertising spending growth forecast from 5.0 percent to 5.6 percent and 8 percent, respectively, including cyclical spending such as political advertising. “Digital media owners will increase their advertising sales by 9.8 percent next year, while cyclical spending will mitigate the decline in non-cyclical advertising sales for traditional media owners (-2.0 percent excluding cyclical, +4.3 percent including cyclical/political ),” the company predicted in its report.

National television networks in particular “face challenges on two fronts in 2024, both in terms of volume and volume.”
Price offer,” Magna warned. Nationwide TV advertising revenue is still forecast to decline 3.9 percent in 2023, followed by a 3.2 percent decline in 2024, compared to the previous forecast of a 2.2 percent decline.

“The ongoing writers’ strike could lead to a lack of new, attractive content in the first half of 2024, potentially further accelerating long-term viewership decline,” says Magna’s new report. “Furthermore, the rating loss will not be offset by pricing as Magna forecasts low single-digit inflation for the first time in 20 years. As a result, non-cyclical linear advertising sales will decline by almost 7 percent next year, but will be offset by the continued increase in AVOD advertising sales (+11 percent) and an additional $800 million in revenue related to the Olympics in Paris is toned down.”

What does that add up to? “Total cross-platform national TV advertising revenue will therefore shrink by just 0.7 percent next year (compared to -3 percent excluding cyclical effects) to $46.4 billion,” the Ad Prognosticator report said .

“Six months ago, the media industry was preparing for a recession, but advertisers remained calm and continued to support their brands and sales through media investments,” said Vincent Létang, executive vice president, global market intelligence at Magna and author of the report. “With both the U.S. economy and advertising spending stronger than expected so far this year and digital media finally recovering from its woes in 2022, Magna is increasing its full-year advertising revenue growth forecast.”

However, its report warned that “advertising revenues for most traditional media owners will continue to stagnate or decline despite continued growth in their digital advertising sales,” with non-cyclical advertising sales reaching as much as 3 percent on national television and falling 5 percent on local television next year on TV. “However, the expenses related to the upcoming presidential elections at the Summer Olympics will mitigate the decline in national television revenue and bring tremendous growth to local television,” Magna emphasized. “Local television advertising revenue is expected to increase +28% compared to 2023, thanks to an additional $5.7 billion generated by political demand and induced spot inflation.”