Postponement of the recovery
Swiss media companies expect advertising spending to pick up by mid-2003 at the earliest
Swiss media companies do not expect advertising expenditure to pick up until mid-2003 at the earliestBy Daniel Schifferle Now consumer sentiment and retail sales, the indicators that were previously resistant to the crisis, have also plummeted to their lowest points - in addition to the stock market depression. Swiss media companies are bracing themselves for a prolonged lean period. If advertising expenditure takes another sharp dive, many of them will be in dire straits.
The bad news just keeps coming. Now consumers, who have so far maintained their good mood despite the sluggish economy, are also failing. Last week, the retail sales figures for June were published. They were down by over four percent, compared with growth of over eight percent a year earlier. The consumer sentiment index has also fallen to a five-year low. This news has further undermined hopes of an imminent recovery. The exponents of Swiss media companies are under no illusions that a further, more or less long dry spell lies ahead.
"Too many indicators are pointing downwards," says Ueli Eckstein, Deputy CEO of the AZ Media Group. The media companies agree that the next upturn has certainly been postponed. Fears differ as to the duration of the additional lean period. "I assume that the poor economic situation will be sustainable. I would be surprised if we felt an upswing anywhere as early as 2003," explains Südostschweiz boss Hanspeter Lebrument. Ueli Eckstein is also "skeptical as to whether the upswing will come in 2003." According to Martin Werfeli, deputy CEO at Ringier, "things will continue as before over the next 12 months." Only Beat Meyer, CEO of the Basel media group, is somewhat more optimistic. He believes that the upturn has been "postponed by six months".
In the event of a double dip, it becomes difficult for everyone
The crisis-tested Swiss media companies have already made the adjustments to lower sales. No company has not carried out more or less painful cost-cutting exercises in recent months. "I don't see what's happening now as dramatic. I have already carried out such cost-cutting exercises many times in the past," says Lebrument reassuringly. And Beat Meyer is not yet seeing red either: "If advertising expenditure remains at the current level, no further cost-cutting exercises will be necessary."
However, whether the decline in advertising expenditure is already over remains more than questionable. After all, gloomy clouds continue to hang over the economic future. In addition to the aforementioned slump in consumer confidence, the dramatic downward turbulence on the stock market is also likely to have a more or less severe impact on economic development. There are no illusions about this in the media industry. "Everything is unsettled, so people are saving now. Consumption will develop very cautiously," fears Tamedia spokesman Peter Hartmeier.
If there is a double dip, as feared in the USA, it will be dramatic for the media. Publishing experts also agree on this. "As part of the cost-cutting exercises, what could be saved with a clear conscience was cut - which also limited the scope for further cost reductions," says Ralph Büchi, publisher of HandelsZeitung. "But what could happen now could have a painful impact on the market performance of many companies." Beat Meyer also speaks plainly: "If advertising expenditure were to fall massively again - let's say by 10 to 20 percent - we would have to think fundamentally about the services offered by Basler Zeitung."
Hartmeier is convinced that the current crisis could not only change the products themselves, but also the media landscape itself. "Individual titles will disappear, others will be merged," he fears. Hartmeier sees serious problems ahead for medium-sized regional newspapers. "Because of their cost blocks, they are dependent on national advertising, which they now lack. It will be very tight for these medium-sized titles." Another trend that is coming to a head in the crisis is that the advertising industry will focus on titles that reach clear target groups. "That's why it's now important to be number one either in a certain regional area, for certain topics or in a certain target group. Those who have such media will benefit even before the general upswing," explains Hartmeier.
Price and tariff increases are not an option
What remains is the possibility of generating additional income by increasing the price of advertisements or subscriptions and individual sales. "Everyone has become a little poorer. That's why it might be difficult to push through price increases anywhere," explains Lebrument.
We will have to learn to live with the resources available. This will no longer just be about further cost-cutting exercises. "All media companies will be talking about their cost blocks over the next twelve to eighteen months. Are the resources being used in the right place? Are we making the right products and the right content? Where can we be better than the competition with which investments?" - According to Hartmeier, topics like these are now being discussed. Seen in this light, the current difficult phase is not all negative. "It forces us to consider how we can better meet the needs of readers with our resources."
The bad news just keeps coming. Now consumers, who have so far maintained their good mood despite the sluggish economy, are also failing. Last week, the retail sales figures for June were published. They were down by over four percent, compared with growth of over eight percent a year earlier. The consumer sentiment index has also fallen to a five-year low. This news has further undermined hopes of an imminent recovery. The exponents of Swiss media companies are under no illusions that a further, more or less long dry spell lies ahead.
"Too many indicators are pointing downwards," says Ueli Eckstein, Deputy CEO of the AZ Media Group. The media companies agree that the next upturn has certainly been postponed. Fears differ as to the duration of the additional lean period. "I assume that the poor economic situation will be sustainable. I would be surprised if we felt an upswing anywhere as early as 2003," explains Südostschweiz boss Hanspeter Lebrument. Ueli Eckstein is also "skeptical as to whether the upswing will come in 2003." According to Martin Werfeli, deputy CEO at Ringier, "things will continue as before over the next 12 months." Only Beat Meyer, CEO of the Basel media group, is somewhat more optimistic. He believes that the upturn has been "postponed by six months".
In the event of a double dip, it becomes difficult for everyone
The crisis-tested Swiss media companies have already made the adjustments to lower sales. No company has not carried out more or less painful cost-cutting exercises in recent months. "I don't see what's happening now as dramatic. I have already carried out such cost-cutting exercises many times in the past," says Lebrument reassuringly. And Beat Meyer is not yet seeing red either: "If advertising expenditure remains at the current level, no further cost-cutting exercises will be necessary."
However, whether the decline in advertising expenditure is already over remains more than questionable. After all, gloomy clouds continue to hang over the economic future. In addition to the aforementioned slump in consumer confidence, the dramatic downward turbulence on the stock market is also likely to have a more or less severe impact on economic development. There are no illusions about this in the media industry. "Everything is unsettled, so people are saving now. Consumption will develop very cautiously," fears Tamedia spokesman Peter Hartmeier.
If there is a double dip, as feared in the USA, it will be dramatic for the media. Publishing experts also agree on this. "As part of the cost-cutting exercises, what could be saved with a clear conscience was cut - which also limited the scope for further cost reductions," says Ralph Büchi, publisher of HandelsZeitung. "But what could happen now could have a painful impact on the market performance of many companies." Beat Meyer also speaks plainly: "If advertising expenditure were to fall massively again - let's say by 10 to 20 percent - we would have to think fundamentally about the services offered by Basler Zeitung."
Hartmeier is convinced that the current crisis could not only change the products themselves, but also the media landscape itself. "Individual titles will disappear, others will be merged," he fears. Hartmeier sees serious problems ahead for medium-sized regional newspapers. "Because of their cost blocks, they are dependent on national advertising, which they now lack. It will be very tight for these medium-sized titles." Another trend that is coming to a head in the crisis is that the advertising industry will focus on titles that reach clear target groups. "That's why it's now important to be number one either in a certain regional area, for certain topics or in a certain target group. Those who have such media will benefit even before the general upswing," explains Hartmeier.
Price and tariff increases are not an option
What remains is the possibility of generating additional income by increasing the price of advertisements or subscriptions and individual sales. "Everyone has become a little poorer. That's why it might be difficult to push through price increases anywhere," explains Lebrument.
We will have to learn to live with the resources available. This will no longer just be about further cost-cutting exercises. "All media companies will be talking about their cost blocks over the next twelve to eighteen months. Are the resources being used in the right place? Are we making the right products and the right content? Where can we be better than the competition with which investments?" - According to Hartmeier, topics like these are now being discussed. Seen in this light, the current difficult phase is not all negative. "It forces us to consider how we can better meet the needs of readers with our resources."
