Media sector on high, but softer ad spend uplift threatens outlook

Media sector on high

Business activity in the UK media sector recorded its fastest year of growth since 2007, but the final quarter of 2015 showed a marked slowdown, according to findings from the latest KPMG Media Tracker. There was, in addition, a significant loss of momentum in ad spend signals.

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Business activity in the UK media sector recorded its fastest year of growth since 2007, but the final quarter of 2015 showed a marked slowdown, according to findings from the latest KPMG Media Tracker. There was, in addition, a significant loss of momentum in ad spend signals. 

The headline UK Media Tracker Index1 posted an average of 52.5 in 2015, which represents a third successive calendar year of growth and the longest sustained period of improvement since the 2007/08 global financial crisis. Business activity in the sector also expanded at the fastest pace since 2007. Survey respondents noted that resilient consumer spending patterns, the low inflation backdrop, and efforts to pursue new revenue streams had supported overall business activity in 2015.  

However, the media sector’s wave of recovery slowed at the end of 2015, with the headline index falling to 51.9 in the final quarter. This was the weakest quarterly figure since Q1 2013. Survey respondents suggested that heightened economic uncertainty was a key factor that dampened overall growth in the final quarter. Around a quarter of UK media sector companies recorded a rise in business activity in the final quarter of 2015, compared with 20 per cent that experienced a decline.

Meanwhile, just over 18 per cent of UK marketing executives reported a rise in their media ad spend budgets during the final quarter of 2015, while around 15 per cent noted a reduction. In the corresponding quarter in 2014, 21 per cent reported a rise and only 12 per cent experienced a fall. Respondents suggested that increasing cost consciousness at the turn of the year, as well as uncertainty about the UK economic outlook, had acted as a brake on ad spend budget setting. 

David Elms, Head of Media at KPMG, said: “Trading conditions for media businesses improved over the past year, and companies reported their fastest year of growth since 2007. However, growing uncertainty dampened growth towards the end of last year.

“Ad budgets are reflective of market confidence and the general consumer appetite that underpins the economy. There was a marked slowdown in growth momentum for ad spend that suggests marketing activities are being reigned in as belts tighten again and fears over future economic turbulence return.”

Job market for media employees

The report also sounds a note of caution, as it reveals that pay pressures continued across the wider media sector at the end of 2015, broadly mirroring overall UK trends.

Despite reporting weak pay trends, in terms of perceived job security the latest report indicates that media professionals fared better than those in other sectors at the end of the year. In fact, the number of media/culture/entertainment employees reporting a rise in job security exceeded those suggesting a fall. This was the first instance of rising job security among UK media sector professionals since the index began in 2009, suggesting that employees have become more sanguine about the near-term outlook for the media sector. 

“The media sector faces many of the same challenges as the rest of the economy, but it appears that employees within the industry remain upbeat about their prospects and confident in the future stability of their roles. Although pay inflation is weak, media professionals are faring relatively well, in terms of job security, compared to peers in other sectors,” concluded Elms. 

ENDS

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Media Tracker

Media Tracker

Media Tracker is a joint report released by KPMG and Markit which looks at the health of the UK Media sector

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