Bank: Australia linear TV “shows weakness”
January 23, 2023
A report from investment bank Jefferies says that it is “cautious” on Australia’s overall media sector.
“Visibility is poor, linear TV would continue to show weakness, and while Broadcaster Video-on-Demand (BVoD) will provide an offset, content costs are rising. OML Media is our top pick in the sector as it is recovering to pre-Covid levels,” says Jefferies.
“The media industry is entering a period of uncertainty in 2023 due to the slowing macroeconomic environment. Globally, there is a strong correlation between GDP growth and advertising spend, and our economists are forecasting negative GDP growth in Q3 2023 to Q3 2024. We are starting to see softness in ad spend, with Paramount saying that Q4 is worse than Q3 2022. In Australia, our channel checks suggest that visibility is poor for Jan/Feb 2023. The only exception is JCDecaux, which is seeing healthy booking levels in Q1 2023. Only if Australia could avoid a recession, as it did in the past, that we may actually see some growth in the ad-market,” suggests the bank.
“Regardless of whether we get a recession, structural decline in [Australian] linear TV will continue. Interim SMI data for November 22 shows that metro FTA ad spend fell by 5 per cent YoY. For [technology company] NEC and Seven West Media (SWM), the key debate is whether BVoD could offset this decline in FTA. Our base case is it could, however there is a risk that advertisers may reduce their ad spend when they move away from FTA TV to BVoD. CPM could be higher for BVoD, but because its audience base is very targeted, the absolute dollar amount could be much lower than FTA TV. It is also interesting see that BBC has decided to reduce its linear broadcast services over the next decade, and consolidate all activity under one single brand. In terms of ratings, NEC has fared better than SWM in recent months,” states Jefferies.