Ad Forecast 2010: Q1 2010 is last quarter of suppliers’ decline.

MAGNA, a division of IPG’s Mediabrands, released an updated US Media Advertising Revenue Forecast.

With continued improvements in expectations on economic recovery, MAGNA forecasts that the first quarter of 2010 will represent the last quarter of decline for the US advertising economy during this recession. Among major economic measures, Industrial Production (IP) and Personal Consumption Expenditures (PCE) have the highest correlations with advertising, and forecasts of these variables inform our predictions of advertising revenue growth and decline. As expectations for IP have improved and should post positive year over year growth by the second quarter of this year, we believe this will mark the turning point in media suppliers’ recovery. As a result, we are modestly upgrading our 2010 full year forecast and now expect normalized advertising revenues (excluding local TV political and national TV Olympic revenues) to effectively be flat this year, only -0.1% below 2009 levels. This compares with our previously published expectations for a decline of 1.3% during 2010. In total, we expect suppliers to generate $161 billion of normalized advertising revenue this year.

Political and Olympic Advertising Add to Totals, Bring Additional Growth to the Industry

For the first quarter of 2010, MAGNA forecasts that US media suppliers will collectively generate 3% less advertising revenue on a normalized basis than they did when compared to the prior year period, even accounting for the very weak economy experienced in early 2009. Industry revenues will fall from $38.0 billion in the first quarter of 2009 to $36.8 billion during the first quarter of 2010.

These figures reflect a moderating pace of decline compared to estimated revenue reductions of 7% during the fourth quarter and a15% decline during the third quarter of 2009.

In 2010 the advertising economy will also benefit from the presence of political and Olympic advertising. We include these figures separately to avoid skewing our analysis of year-to-year underlying trends.

We estimate that political advertising will account for approximately $2.7 billion in advertising revenues for local television suppliers (both broadcasters and local cable) during 2010. This contrasts with the $2.4 billion in revenues the sector generated in 2008 and 2006, and represents a 15% increase over those years. We also measure the impact of Olympic advertising on an incremental basis (supplier revenues which we estimate would not have otherwise occurred were it not for the Olympics – an important distinction as many advertisers alter their creative to represent Olympic themes but would not otherwise change their budgeting) and estimate $488 million in incremental revenues this year. This compares to the $650 million incremental total we estimate was generated during the 2006 Winter Olympics.

Our longer-term forecasts have also been modestly increased to reflect higher confidence in economic recovery. MAGNA now forecasts total normalized media supplier advertising revenues will rise by a compounded annual growth rate (CAGR) of 2.3% between 2010 and 2015.

To view charts CLICK above on ‘More Images’.

Courtesy of http://www.magnaglobal.com