The COVID-driven advertising collapse has telescoped expected five-year trends into just three months. The result? There are no longer enough dollars to support the traditional media Australia currently has, even after the mass closures of regional and community papers and magazines.
By accelerating the trend line, the COVID-19 shock has left the media with little time to adequately rethink or restructure.
Over the past week, the end-of-financial-year data flooded in: from News Corp, the Standard Media Index (which tracks advertising spend) and reports from commercial television and radio. All show the same picture: advertising is down by more than a third compared to the same period last year. Worse still: advertising spend was already down significantly in the eight or nine months before Australia started to shut down in March.
According to SMI, newspaper ads were down almost half in June and almost a quarter over the year. Free-to-air television advertising was down a third in June and about 15% over the year. Before COVID, these falls were all expected — but as a gentle glide over, say, five years.
Both the advertising and the media industries are keen to call the bottom, pointing to a post-July bounce, particularly in retail ads (thank you, Harvey Norman). But, all the normal economic metaphors apply: is it a V, a U or a dead cat bounce?
Ad spend is always finite. In most years and in most developed countries, it’s about 1-1.25% of GDP — about $16 billion in Australia. In pre-internet days, media could be confident that spend would revert to the norm — and revert to their channels. After all, where else would it go?
Unfortunately, old media mistook its effective monopoly for an iron law of capitalism. Instead, for the past two decades, ad spend has been drifting out of media and into online. Just last year, digital ads passed the 50% mark of total spend, with most of it going to the platform duopoly of Facebook and Google.
Now, that trend has also been turbocharged. Early data already suggests that any bounce back in spend is bouncing all the way over to the tech platforms.
In Australia, digital advertising is down just 8% over the year. But, on global figures at least, the platforms are out-performing. In the June quarter, Facebook’s take from ads jumped by 10%. Google-parent Alphabet ad income dropped about 8%, mainly from search, although media’s more direct competitor, YouTube, was up.
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Compressing these trends hurries on the changes in the way media — and news — is created and consumed. We’ve already seen the losses in regional and community media. The next layer to be impacted will be state-based media.
Within free-to-air television the smaller advertising pool is being shifted from linear (and regional) television to services that allow users to shift viewing times through either subscription services (SVOD) or broadcast on demand (BVOD).
Media that have already built a subscription revenue stream are in a stronger position, like The Australian or Nine’s Stan. In the US, The New York Times has edged closer to being a predominantly digital play, as the first major news company to source more than half its income from its online offerings.
It’s a globally competitive space, but News Corp’s Foxtel figures out last Friday suggest it may have missed the boat and Nine has not released digital subscription figures for its metro mastheads since last year’s merger. Hmm… no news doesn’t seem like it’s likely to be good news.
Traditional media is doing what it’s traditionally done: asked the government for a handout. It’s put on pressure to end Australian content regulations, demanded the tech platforms be forced to share, and put out it’s hand for some cash (like the recent no-strings $10 million grant to Foxtel or the forthcoming Public Interest News Gathering grants).
The big losers are likely to be the downstream content creators. Australian drama production is already slumping and would be gutted by the loss of broadcast content quotas and cuts to ABC funding. Even professional sport is facing cuts as the advertising collapse forces broadcasters to renegotiate overly generous rights deals.