PwC: Gloom of recession lifts as advertising insolvencies fall

Published at 14:01 PM on 04 August 2009

But digital enlightenment alone cannot plug gap left by old media

UK advertising companies have suffered a 50% increase in insolvencies over the last year* experiencing more collapses than its media counterparts, PwC revealed today.

However, with Q2 2009 came a brighter spell as the rate of insolvency** for this media subsector (22% from Q1) fell.

This follows a hard 24 months since the summer of 2007, 352 advertising companies have fallen by the wayside, ten per cent more than publishing, and 25% more than TV/film companies.

David Lancefield, partner, PricewaterhouseCoopers LLP, said:

“In the main, we are seeing small advertising companies slide into insolvency. The contraction in advertising budgets is hurting all companies but currently picking off the small independents that do not have deep pockets or the ability to diversify.”

Both advertising and TV/film insolvencies peaked in Q1 with 68 and 22 collapses respectively as the cyclical downturn hit hard.

“TV, film and advertising companies rely on a healthy stream of work coming through the door, with a long lead time from story board to screen. Any extended pauses between contracts, or reduction in budgets in the current climate, could mean the lights go out,” he added.

Analogue dollars but digital pennies

PwC forecasts that digital and mobile media will form 78%*** of growth for the global entertainment & media (E&M) market by 2013.

However, despite this, the immediate future looks challenging. Over 2009/2010, even internet advertising will shrink at a projected rate of 3.2% CAGR, while TV advertising contracts 11% CAGR.

In fact, although both areas will see growth from 2011 – 2013, internet advertising at 11.5% and TV advertising at 3.4% CAGR, by 2013 the UK advertising market will be worth over $3bn less than it did at the height of the market in 2007.

Lancefield explained,

“The combination of a global recession and the structural shift towards digital platforms has accelerated the decline of some traditional media. The considerable growth in digital usage and revenues will not plug the gap left behind over the next few years.”

Fortune favours the bold

He continued,

“Winning in the upturn isn’t just about media companies working harder or doing things better. It’s time for a new paradigm. Having the courage to re-examine organisations, partnerships and pricing structures will mark out the winners from the losers.

"Looking outwards for fresh insights and investing in new skills will distinguish those embracing digital future from those stuck in the analogue past. Searching outside media sector boundaries for this stimulus is a must have. For example, experience from retail and financial services should inform how media companies should leverage the rich data that new media platforms generate.”

Notes to Editors:

TV advertising -10.5% 2009 to 2010 TV advertising 3.4% growth 2001 to 2013 Internet advertising: Wired & Mobile -3.2% 2009 to 2010 CAGR Internet advertising: Wired & Mobile 11.5% 2011 to 2013 CAGR * A comparison of financial year 2008 with financial year 2009. ** The UK insolvency stats cover England, Scotland and Wales but not Northern Ireland. *** All growth figures are projections taken from the PricewaterhouseCoopers LLP Global Entertainment & Media Outlook 2009 – 2013. 

For more information contact:

David Lancefield
PricewaterhouseCoopers LLP 
Tel:020 7213 2263 

Sian. Mannakee
Technology, Telecoms, Entertainment, Media, Hospitality and Leisure, PR Manager, PwC 
Tel:020 7213 2538 
Mobile:07715 484 884 


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