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New Media The Winner in a Flat Market
by Wilson Owen, The Independent Financial Review, 5 July 2006

Mainstream media in New Zealand may be experiencing a flat advertising market, but independent media-buying agency Total Media believes the market will grow by 3%-4% this year.

"The overall market is unlikely to be down," chief executive Martin Gilman says. "What happened is that the money is transferring to new media."

He says not only is online media attracting major revenue growth, but direct marketing is also attracting more money.

The market is fragmenting, Gilman says.

He points out online advertising grew by $30 million last year.

"I suspect this year, it will grow by $50 million," he says. "That's equivalent to 5% of the TV market."

Unlike TVNZ it must be a concern for CanWest that it "doesn't have a major foothold in the new media camp," he says.

Across the Tasman, where the advertising market has been soft all year, there is evidence of deep discounting during June by many media companies.

Harold Mitchell of Australia's biggest media-buying operation, Mitchell & Partners, says discounting is particularly evident among Australian TV companies, magazine publishers and outdoor companies.

Kevin Blight, Mitchell & Partners New Zealand chief executive, says there are more opportunities in New Zealand and advertisers are considering them all.

"The market has softened and agreements are reflecting that," says Blight, noting the situation benefits both the advertisers, because they are getting a better deal, and the media companies, because they are still getting the money.

The slowing market makes it easier to do deals for advertising time, especially in the television market, according to media buyers interviewed by The Independent Financial Review.

Total Media's Gilman says there is evidence of discounting going on in television.

"They discount to meet the market – they're not going to go undersold, so the average price is going to vary according to the overall demand."

CanWest last week revealed its revenue was $60.7 million for the three months to 31 May, a 0.5% increase on the same period last year, well down on the spectacular gains of recent years.

New Zealand television and radio advertising revenue in 2005 was $922 million, strongly up from $890 million in 2004 and $816 million in 2003.

"The market is patchy," TVNZ head of sales Lauren James says. "We're finding it tougher. We don't believe is has collapsed, but it has plateaued, and it is running shorter than it has done."

TVNZ's advertising revenue for the year ended 30 June 2005 (the most recent figures available) was $344.1 million. Gilman believes the magazine market is holding up well but says there is "anecdotal evidence that newspapers may be slowing a little.

"Newspapers will be seeing their traditional revenue base in classifieds eroding and growing online," he says. "All the traditional media will be experiencing a soft market at the moment."

Gilman believes the third quarter will see a bottoming out of the market.

He says it is likely the weakening $Kiwi will give some renewed strength to the export sector giving fresh momentum to the economy which will be reflected in advertising spends.