Macquarie: A 'rebound' of sorts in some parts of Australia's advertising market

By Chris Pash | 5 February 2020

Australia's advertising market is expected to pick up in some sectors in 2020 but only compared to a weak performance last year, according to analysis by Macquarie Wealth Management. 

The year to December was "one of the worst in recent history" for traditional media assets, with free-to-air TV down an estimated 6.1%, radio also 6.1% and outdoor up 1.5%, write the Macquarie analysts write in a note to clients. 

The drivers of this included the financial services royal commission, weak advertising activity in banking and finance as well as knock-on impacts to other sectors such as automotive, plus weak retail spend, reduced government spend and lower gaming sector spend.

Media agency bookings fell 5.3% to $6.8 billion over the 12 months to December, according to SMI (Standard Media Index) numbers.

"This sets an interesting backdrop for ... (calendar) 2020," say the analysts. "We expect a rebound in some sectors, even if it is only in the context of very weak comparables."

Housing is picking up, automotive is stabilising, and there is scope for government spend to return to growth for some media.

"While noting that some cyclical headwinds may ease, it is important to flag that ad markets remain structurally ‘short’ in terms of booking windows, and hence forecasting is increasingly difficult," say the analysts. 

The year ahead: "In terms of key sectors, we do expect improving trends for banking & finance, auto and government."

The analysts forecast more moderate numbers for 2020: Free-to-air TV -2.4% (compared to an estimated -6.1% in 2019), radio -3.0% (-6.1%), out-of-home +4.1% (+1.5%).

"Outside of ad markets, we see key themes for the year as including: The rise and rise of BVoD (where sector growth should hold at 30%+); continuation of streaming wars; smaller M&A deals, focussed on operating efficiencies," say the analysts.

The Macquarie analysts favour digital platforms and streaming over broadcast.

And their key share picks are Ooh!Media and News Corp.

"We retain our Outperform recommendation on oOh!media," say the analysts.

"While it hasn’t been immune from a broader market slowdown (as evidenced by a volatile 2019), the OOH segment is well positioned given investment in digital assets, opportunities from data investments, structural audience growth and improved market structure following a wave of consolidation."

Macquarie has also retained an outperform recommendation for Nine.

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