As the Chinese say: “May you live in interesting times.” Well, with the Beijing Olympics less than eight months away, it promises to be an “interesting” year in UK media.
For the pessimists (which right now seems to include most of the City but not – thankfully – most advertisers, at least not yet), 2008 looks set to be another year flirting with or suffering recession. That’s certainly what share prices at sector market leaders like ITV and GCap would suggest. This thesis assumes the credit crunch that has affected banking and private equity must inevitably translate into slowing consumer demand, with a soft Christmas for some retailers on the high street (most notably Marks & Spencer) the first sign.
It follows in turn that some of the upside that’s anticipated in an Olympic and European football year may never materialise or merely help paper over the cracks – especially with no home nation qualifying for the football finals this summer. Throw in a continuing focus on the evils of advertising from lobby groups and the likelihood of little relaxation to contract rights renewal (CRR) before the year is out and you’ve already talked yourself into year-on-year decline and revenue loss.
But for the optimists, it all remains to play for. According to the latest IPA Bellwether Report, almost half of all companies plan to spend more on marketing than in 2007. Indeed, some traditional media also enjoyed good trading in the latter half of last year. Commercial radio, for example, grew 5% in Q3 and projects higher still for Q4 and there’s been nothing like the current dynamic environment to concentrate media owners’ minds.
Nevertheless, 2008 promises to be a huge year of structural change.
In television, BSkyB has a new chief executive (with Jeremy Darroch replacing James Murdoch). Sky’s 17.9% stake in ITV will be scaled back, while ITV in turn will challenge CRR. So, busy times for Ofcom. Established players will launch into new areas like IPTV, with new ventures like Kangaroo, and defend old turf, for example with the re-introduction of News at Ten. It will be the first full year for Dawn Airey and Rupert Howell at ITV, and for Jay Hunt as controller of BBC1.
In radio, 2008 is likely to see the reshaping of the sector that was threatened last year but never happened. This year, Channel 4 will launch its new multiplex, EMAP will move into private ownership, Global has already started the new year with a bid for GCap, and each of the sector’s three other major groups – GMG, UTV and SMG – are set to eat or be eaten as the consolidation of the sector takes shape. At the same time, all three major cost burdens on the sector come up for review – regulation (with Ofcom’s confirmation of sweeping changes in the Future of Radio report), transmission (with the Arqiva/NGW deal) and copyright (with licences up for review from mid-year). Interesting times.
In press, EMAP will cease to exist, GMG has a huge new business-to-business arm to digest, Bauer will begin to establish its new huge presence in consumer magazines, Future will continue the second year of its recovery plan under the leadership of Stevie Spring, and Rupert Murdoch will transform the Wall Street Journal to rival the Financial Times.
Online, we all anticipate that the breakneck pace of change will continue. But just as new (unknown) fireworks have been thrown up each year since the turn of the millennium, you can bet that someone new will challenge the orthodoxy – just as Friends Reunited, MySpace, YouTube, Bebo and now Facebook have challenged and been challenged.
While in the music industry, we’ve seen two clear signals of structural change in the last week alone. First, internet radio station Pandora is shutting down its UK service, claiming it cannot afford to pay licence fees being demanded by music industry trade bodies.
As I said in this column last year, the smart guys were lastfm – selling at the top of the market before the irritating issues of no revenue and no licences had got in the way of a top-end valuation. Second, EMI – under the controlling Hands (literally) of Terra Firma is talking tough with artists, who are threatening to go on strike.
The music industry is in trouble: legal (and illegal) downloads are soaring, but not enough to offset falling income from CD sales. The model is broken; 2008 will be the year the industry begins to find a new one.
And what’s true for the music industry is already playing out in film, with the Hollywood writers’ strike the first act that will reshape film-making in the digital age.
So, while trading will be tough – and all our best collective energies will be needed to keep revenues moving forwards – the real excitement in 2008 will be for all of us leading a sector that will feel much stronger and look very different at year-end.
Fasten your seatbelts – it’s going to be a bumpy flight but enjoy the ride to a new destination.