Tuesdata: Media market faces a chilly Christmas

September 25, 2023 10:50

Welcome to Tuesdata, our weekly analysis for Unmade’s paying members.

Below, we examine marketer sentiment leading into the Christmas retail period, and what trading directors of Australia’s leading media agencies make of the state of consumer and client confidence ahead of what should be the busiest time of the year.

Further down, the Unmade Index outperforms the ASX.

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A soft market, unsold inventory, and cautious marketers: The lead-up to Christmas is making everyone nervous

A Christmas firestorm for media owners? | Digital art: Midjourney; Prompt: “A Christmas tree in a modern shopping mall. The tree is burning”

Seja Al Zaidi writes:

Shaky economic conditions have led marketers to tighten the pursestrings and exercise greater caution leading into Christmas – that’s the consensus from trading directors and bosses of the country’s leading media agencies.

The period is typically a spending bonanza for consumers and marketers alike, but inflationary jitters are creating concerns that shoppers may hold back. Meanwhile marketers are seeing their own budget challenges in the fourth quarter, which has translated into far more vacant inventory for media owners than usual.

Below, we talk to some of those closest to the market including Zenith’s chief investment officer Elizabeth Baker; Hatched Sydney’s chairman Mike Wilson; Atomic 212 chairman Barry O’Brien; iProspect’s national head of investment Ken Lam; and Standard Media Index MD Jane Ractliffe.

“At this point in time, we are definitely seeing a reduction in Q4 ad spend, and December is included within that,” says Zenith’s chief investment officer Elizabeth Baker.

“We’re getting client sign offs, release of budgets and approvals coming a lot later than they normally have been,” Baker added.

“I think that it’s due to the nature of the market, they’re demonstrating cautious behaviour. The visibility isn’t as good as it normally is at this point of time of the year around ad spend. The decline I’m seeing is across all channels. But TV and radio is back more than average.”

Zenith’s Baker: Decline is across all channels

The decreased visibility of ad bookings was corroborated by Standard Media Index managing director Jane Ractliffe, who tells Unmade that forward bookings are well down compared to the same time last year. She says: “The ad market remains relatively short, with SMI’s forwards early data showing total bookings equal to 71% of last year’s total for September.”

However, Ractliffe suggests spending commitments may simply be coming late, rather than off the schedule altogether. “It’s not all bad news, as the ad spend is still coming through, just later than usual, and turning small negative declines in ad spend into positive results.

“For example, the July figures are now in positive territory to be at a record high. But last year, ad spend for the months of September and October was also at record levels and that creates a high hurdle against which to report positive ad spend for those months this year.’’

Atomic 212 chairman Barry O’Brien agreed that the market is weaker, but makes a clear distinction between consumers who could (and would) spend, and those who wouldn’t.

“My general consensus, is it’s going to be a pretty tough market leading into December,” O’Brien says. “There’s quite a variation in terms of the haves and the have nots. There’s a number of people who, as consumers, the interest rate thing has really hit. That potentially has slowed things down. But then there’s others on the flip side for whom nothing’s changed.”

O’Brien: A ‘tough market’ leading into December

Zenith’s Imagine Consumer Panel, which speaks to 2,750 Australians aged 18+ every month, found 42% of consumers are expecting to spend less on Christmas food and entertaining this year, and 46% expect to spend less on Christmas gifts. It also identified that 68% of Australians are ‘very concerned’ about food prices and 65% are very concerned about utility prices.

The only age bracket group that was least likely to be cutting back this Christmas were people aged 65 and over – they still have plans to treat their kids and grandkids.

“There’s a sense of caution and prudence in the market and I expect this to run to the end of the year, says Mike Wilson, chairman of the Sydney office of independent media agency Hatched. “It’s been a soft few months. It’s unlikely to be a bumper Christmas for advertising spend this year.”

Westpac’s September 2023 Consumer Sentiment Index slipped 1.5 percentage points to 79.7 in September from 81.0 in August. The report mentions that sentiment has “languished at deeply pessimistic levels for more than a year now’” and “since the survey began in 1974, the only comparable period of such sustained weakness was during the recession of the early 1990s when even weaker levels held for more than two years”.

“At the end of the day, Christmas is Christmas and people will spend, we’ll buy presents, we’ll do all the trimmings. They’ll be out there spending money. But I think the retailer is going to have to work very, very hard to be able to entice people to spend,” O’Brien added.

Some marketers would have to work harder than others to get consumers spending. A common theme that emerged from those we spoke to suggested that certain categories were more exposed than others.

“Retail and grocery in general are going backwards. We are seeing other categories like toiletries, cosmetics and restaurants up, but they’re obviously not offsetting the declines from retail,” Baker says.

She also warns that streamers may be affected by Hollywood’s content stall because of the writers and directors strikes. “The other impact is from an entertainment point of view because of the strikes, it’s impacted some of our entertainment clients as well. Not having as much content that they’ll be able to promote over that period.”

iProspect’s national head of investment, Ken Lam, named ‘retail, fashion, consumer goods and consumer electronics’ as the categories seeing the biggest impact.

“In the last 18 months, year on year, they’re definitely pulling back spend,” Lam says.

For media agencies, O’Brien asserts that the outlook ahead ‘just depends on your client base’.

“There’s a few agencies out there that might be doing it a bit harder than others. It depends on what sort of client base that you’ve got.“

Lam suggested this was a more consequential period for media agencies.

“There’s probably restrictions in terms of what agencies can do because clients aren’t spending,” Lam says, before euphemistically suggesting redundancies may be on the cards at some agencies.

Media agencies with fashion, consumer goods, retail and consumer electronics clients will struggle says Lam

“There’s probably reviews of what their teams look like, we’re definitely seeing how we use resources shift as well.”

Unfilled inventory

Media owners are expected to do it tough over the next few months. What’s ordinarily a time of year where ads are fully booked well ahead of time has devolved into a more frenzied affair to fill inventory.

“I’ve had conversations with some clients and with the media owners. There’s a number of media owners who are very keen to get money in in the short term, which shows that there’s a lack of complete inventory, and obviously we’re hitting a typically lucrative time of the time of the year,” Wilson noted.

Wilson: Unlikely to be a bumper Christmas

“So you’d expect to get to get different signals now if the end of the year was going to be bumper. So I think it’s quite a soft market. And that’s across multiple media owners in different mediums.”

Certain mediums, however, were having more investment directed into them, largely because consumers’ mindsets were so different than usual in the lead-up to Christmas.

“The flighting and architecture of what to say and when is becoming even more important than ever before. It’s this recognition that consumers’ mindsets are at different stages in the lead up to Christmas. So, if you think about the end of November, beginning of December, it’s more about inspiration and branding. I expect we’ll see the screens, the cinema, video and large format out of home kick off then,” Baker says.

“We have seen the TV shift all year, and I think that it’s just following consumption to some degree. Radio just seems to be a very short term channel and I think that it won’t be as far back as I’m seeing right now. But it definitely is something that we will, I think, see ramp up in the last few weeks prior to Christmas.”

“As we get closer to the last two weeks before Christmas, it’s much more about the actual disruption of shopping behaviour. That’s where radio would kick in, retail out of home, retail media and so on. Radio is used for that last push to disrupt behaviour.”

Lam noted that channels which were more likely to trigger sales growth rather than brand awareness were being prioritised by clients.

“What we’re seeing in the market is more focus on digital channels, so driving performance and converting demand, and less spend on awareness and broadcast channels like TV.”

With that being said, SMI’s Ractliffe suggested television was looking better for September, in part thanks to the sporting codes.

“The early forwards for television are strong in September – as agencies book early to ensure their campaigns get spots on the AFL and NRL finals series. 81% of last September’s total ad spend was already booked, with forwards of 82% for metropolitan TV and 86% for regional TV.”

However, Christmas advertising’s trend of starting around the final weekend of November to coincide with Black Friday is set to ‘reverse slightly this year’ according to Baker. “One of the trends that we had seen over the last few years was the early kickoff of Christmas advertising. We used to see it ramp off and kick off around Black Friday. I think as clients’ budgets become tighter, we’ll see some advertisers save their investments for later to make a bigger bang close to time of planned purchase.”

“I think we’ll see the phasing of spending more concentrated in the lead up.”

Unmade Index delivers a mini rally

Most of Australia’s listed media and marketing stocks saw a pick up on Monday, with Southern Cross Austereo leading the way.

SCA improved by 3.42%. Fellow audio stock ARN Media was also on the up, rising by 1.91%

The Unmade Index, which charts the movement of media and marketing stocks, outperformed the wider ASX All Ordinaries which was flat yesterday. The index rose by 0.95% to 633.2%.

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