A report from investment banker Morgan Stanley says that French TV advertising trends remain downbeat.

“TV ad spend continues to be under pressure,” says the bank’s note. “Some campaigns which had originally been frozen are starting to get cancelled, suggesting a soft year-end. [Commercial network] M6 is expected to make its commercial policy much more flexible as it has lost net market share to TF1 in Q2 / Q3 despite having delivered much stronger audiences. The arrivals of Canal+ and the new DTT channels are seen as highly disruptive. Media buyers strongly suggested that the incumbents’ pricing power would remain under strong pressure in 2013 and beyond.”

The bank’s analysis of the current situation in France makes depressing reading for broadcasters. “Our contacts are calling TV advertising spend down between -5% and -7% in Q3. The more robust month of July was offset by a dismal August while cancellations have started to come through in September. Food, Telcos, Beauty and Cleaning products are reducing budgets. A material number of frozen budgets are increasingly starting to get altogether cancelled. Instead of ‘late money’ or ‘add-on bookings’, advertising agencies are expecting further cuts in the last four months of the year. The ‘Mondial de l’Auto’ (car exhibition) that starts on September 29th is one of the few bright spots that may stimulate Auto advertising in Q4.”

The role of Canal+ in the French broadcasting mix is also causing concern to the free-to-air players. “In anticipation of the acquisition of Direct 8 by Canal+, media buyers are currently drastically cutting their commitments on Direct 8 to establish a very easy comp for next year. The idea is that, in 2013, agencies can then go to the new owner, Canal+, increase significantly their commitments from a very low level, and in turn ask for attractive deals. This means that Direct 8 will gain market share in 2013,” added the bank.

And the future is not looking positive, says Morgan Stanley. “Agencies are worried about the negative impact of upcoming tax increases on 2013 advertising budgets. Tax increases will hurt the purchasing power of the French consumer as well as corporate profitability. The first impact will not be felt before 1Q13. Our contacts have told us that their clients were already planning to trim ad spend in order to protect their bottom lines. The absence of any sort of major event in 2013 (no major sporting event, no ‘Mondial de l’Auto’ etc.) is also seen as a damper. The combination of higher taxes, no sporting event and fiercer competition between broadcasters is currently leading our media buyers to expect a decline in TV ad spend for next year.”

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