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Media Matters | A Sluggish Economy Will Hold Down Media Inflation in 2009 

For more than three decades, Robert J. Coen, senior vice president and director of Forecasting at Interpublic’s Magna unit, has presented 4A's members with his predictions for the coming year.

Consumers will continue to be concerned about high energy costs, the falling values of their homes and job security for the remainder of this year and throughout most of 2009. Consumer spending will be weak again next year and few marketers are likely to spend much more in advertising to chase after sluggish personal consumption expenditures.

Business optimism will not improve until there are clear signs of economic improvement. Business expects little if any corporate profit growth in 2009, and ad budget increase will be rare. Advertising historically has lagged behind the economy and if demand does begin to pick up it will be later rather than earlier in 2009.

There will be little political spending next year and no extra Olympic related campaigns to fuel any significant increase in ad demand.

There should be little media inflation in 2009.

Media Unit Cost Increases
(Percentage Change Over Preceding Year)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(Over (Over (Over (Over (Over (Over (Over (Over (Over (Over (Over
1998) 1999) 2000) 2001) 2002) 2003) 2004) 2005) 2006) 2007)  2008)
Network TV* +2.5 +11.0 -6.5 +2.1 +2.6 +5.0 -1.5 0.0 -3.0 +2.0 -2.0
Spot TV +1.0 +10.0 -8.5 +7.0 -2.0 +10.0 -8.0 +5.0 -10.0 +6.0 -6.0
Cable TV +16.0 +9.5 -1.0 -1.5 +7.5 +12.0 +7.0 0.0 0.0 0.0 +2.0
Network Radio +7.0 +14.0 -6.0 +2.5 +3.0 +3.0 +2.5 +0.5 +1.0 +2.0 +1.0
Spot Radio +7.5 +12.0 -9.0 +1.5 +2.5 0.0 +3.0 -1.0 -3.0 +1.0 0.0
Magazines  +4.0 +3.0 -2.0 +4.6 +4.0 +3.6 +3.5 +2.0 +4.0 +3.0 +2.0
Newspapers +3.5 +3.5 -3.5 +3.0 +2.0 +2.5 +3.5 +3.5 +2.0 +1.0 0.0
Totals +3.6 +8.0 -4.5 +3.6 +2.1 +5.5 -0.4 +1.9 -1.9 +2.7 -1.1

 *Olympics Premium removed for years 2000, 2002, 2004, 2006 and 2008

Media unit prices rose faster than consumer prices during the Election/Olympic years of 2000, 2002 and 2004, but in the last two Election/Olympic years marketers have refused to accept higher prices just because demand may go up.

The broadcast media are more susceptible to volatile shifts in ad demand since they experience little if any reduction in their total expenses if they fail to sell their time at a profitable price. While in some cases the print media can save a little on the cost of paper and other related expenses if ad space declines modestly.

In 2007, a post Election/Olympic year, unit prices declined for most of the broadcast media while prices rose for some of the print media despite weak advertising demand.

2009 will probably be a “Buyer’s Market” and media unit prices should come down.

Media Cost-Per-Thousand (CPM) Increases
(Percentage Change Over Preceding Year)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(Over (Over (Over (Over (Over (Over (Over (Over (Over (Over (Over
1998) 1999) 2000) 2001) 2002) 2003) 2004) 2005) 2006) 2007)  2008)
Network TV* +7.0 +14.0 -1.6 +6.9 +4.7 +7.5 -1.0 +0.5 +2.1 +5.7 +1.0
Spot TV +5.0 +12.0 -4.7 +11.5 -1.0 +12.8 -8.5 +5.5 -6.7 +8.2 -4.0
Cable TV +11.9 +11.5 +1.0 -4.4 +6.4 +9.3 +5.0 -0.5 -2.0 -2.0 +1.0
Network Radio +7.0 +14.0 -6.0 +2.7 +1.0 +3.0 +2.0 +1.9

+1.4

+2.3 +1.3
Spot Radio +7.5 +12.0 -9.0 +2.0 +1.5 0.0 +2.5 -1.0 -2.6 +1.3 +0.3
Magazines  +5.0 +4.0 +1.5 +5.1 +4.5 +2.3 +4.0 +3.0 +5.0 +4.0 +3.0
Newspapers +4.5 +4.0 -3.0 +3.4 +2.1 +3.0 +5.8 +5.8 +4.6 +4.1 +3.2
Media Composite +5.9 +10.3 -2.2 +6.9 +2.9 +6.8 -0.9 +2.7 +0.7 +5.4 +0.6

*Olympics Premium removed for years 2000, 2002, 2004, 2006 and 2008

The general rate of inflation in the U.S. economy has been running above 4% in 2008 because of the sharp rise in gasoline and food prices but media inflation based cost-per-thousand has been even higher. This has been partly due to the fact that 2008 has been an Election/ Olympic year when the balance between supply and demand has shifted to the demand side in some months of the year. This has helped cause a modest increase in unit prices but the main cause of the above average increase in cost-per-thousand has been the decline in audience delivery.

In 2009, we expect unit prices to decline slightly but we also expect audiences to continue to decline for both the print and broadcast sectors. The net result will probably be a very modest increase in the composite media cost-per-thousand change in 2009.

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