Huffpost Media

Media Executives Brace For Economic Slowdown In 2012

Posted: Updated:

(For other news from Reuters Global Media Summit, click on
http://www.reuters.com/summit/GlobalMedia11?pid=500)

By Yinka Adegoke

NEW YORK, Dec 2 (Reuters) - Top media executives across North
America and Europe are bracing for a global economic slowdown in
2012, and are already surrendering to demands by advertisers
that they offer shorter-term, flexible deals in case of another
crisis.

After finally increasing advertising spending -- the
lifeblood of the media business -- corporations have yet to show
any sign that they are cutting budgets as they did in dramatic
fashion between 2007 and 2008.

Still, executives who attended the Reuters Global Media
Summit in New York, London and Paris this week said advertisers
have turned more cautious in recent months and want to protect
against uncertainty around the euro zone's future and political
gamesmanship in the United States.

Globally, advertising deals and other business partnerships
are being re-assessed and reworked, meaning deals that would
normally run for six or nine months are now being shortened to
just two or three months -- or less.

"It's very short-term thinking," said David Carey, president
of Hearst Magazines. "There was a time when advertisers would
commit three or four print issues at a time four or five months
out. People are now committing a month or two out."

This fall, markets around the world suffered through weeks
of turmoil as fears of an unraveling of the euro zone mounted
with little sign of a settlement until the last minute. The
result for corporations was a rethinking of previous plans,
including how they would spend advertising money, among the most
economically sensitive parts of any budget.

"You just can't run your business on the basis that
something will turn up, so you have to plan on the basis that it
doesn't turn up," said Sir Martin Sorrell, chief executive
of WPP, the world's largest advertising holding
company.

"So you think about what legally and contractually it is
going to mean. You also say 'I'm going to run my balance sheet
as conservatively as possible,'" he said.

CHICKENS COMING HOME

Jacki Kelley, global CEO of Interpublic Group's
Universal McCann, was among those who said that advertisers had
taken a noticeably "more cautious approach" in recent months.

"Advertisers are still hanging in there," she said. "While
there hasn't been a significant pullback, there has been a
shorter-term, more cautious approach."

Kelley, whose media agency's clients include Microsoft Corp
and Exxon Mobil Corp, is expecting U.S. advertising to climb a
modest 2-3 percent next year, with worldwide spending at a
healthier 5 percent growth rate.

Several European executives, meanwhile, said they had high
hopes the Eurozone issues would be resolved in time.

"Is it the apocalypse? I don't think so, said Maurice Levy,
chief executive of Publicis, the third-largest
advertising holding company in the world. "There are some
serious issues, very serious issues. Can we find a solution? I
am hopeful for a lot of reasons."

One bright spot is that corporate balance sheets in
countries like the United States remain healthy. According to
Federal Reserve data, there is more than $2 trillion on S&P 500
companies' balance sheets which is not being plowed directly
back into the U.S economy.

The question is how to spend the cash: A number of
executives complained this week that solid decisions were
impossible given the bitter atmosphere and political gridlock in
Washington.

"I'm critical in a bipartisan way, it's pretty problematic,"
said Strauss Zelnick, chief executive of video game company Take
Two Interactive and private equity firm Zelnick Media.

Zelnick, who called himself a liberal Democrat, said he
believed that President Barack Obama's administration has
"demonized capitalism."

A number of companies have used their cash to repurchase
stock, and have come under criticism for not investing that
money in growth and hiring. The U.S. unemployment rate has
hovered above 9 percent for much of the past 18 months, though
new numbers on Friday showed it had dipped to 8.6 percent.

Zelnick, however, pointed out that a closer look at the
unemployment picture reveals a growing divide between classes.

"We have some really bad structural issues that are the
chickens coming home to roost, no wonder people are camping out
in Zuccotti Park," said Zelnick.

For more summit stories: )
(Reporting by Yinka Adegoke, additional reporting by Liana B.
Baker, Lisa Richwine and Peter Lauria in New York; Kate Holton
and Georgina Prodhan in London ; Editing by Paul Thomasch, Dave
Zimmerman)

Follow Reuters Summits on Twitter @Reuters_Summits

Around the Web

Print media will struggle in 2012