Torin Douglas: ‘It’ll be okay,’ says the Ghost of Downturns Past

The ad and media industries are feeling sorry for themselves, as they did when war and recession combined in 1991. But look how well they did later, says Torin Douglas

Amid the economic gloom it may be of some comfort to recall that we have been here before. Not in most media people’s working lifetime, of course – the industry is such a young one – but within the past ten years or so.

Clearing out some files last week I came across a speech I’d made at the opening of Marketing Week’s TV ’91 conference in Monte Carlo, and it carried curious echoes of the current situation. It was, of course, at the height of the Gulf War and I’m afraid my tone was no less flippant and cynical in those days than it is now.

“Good morning, and welcome to Monte Carlo. I suppose I should congratulate you all on getting here in these difficult times. It’s a dangerous period to be travelling. You may not have a job when you get back.

“Some people have been saying that the worst recession in recent memory may not be the most appropriate time to be in Monte Carlo. Others have been asking ‘What better time?’

“But let’s look on the bright side. Things could be even worse in two years’ time. TV ’93 will take place a few weeks after Channel 3 has gone on the air. Some of you may have lost your franchises. The ratings may have plummeted, like they did the last time there was a major ITV shake up, in 1968. And the satellite and cable channels may have found something that viewers actually want to watch…”

The title of the conference was “A New Order – or Chaos?” Of course, WPP Groups’s Sir Martin Sorrell remembers those times. He’d over-extended himself dramatically, but he lived to tell the tale, managing his way out of the crisis with the backing of his bankers. Ten years on, the City has been entertained by the spectacle of Sorrell trying to persuade the Takeover Panel that he should not have to go ahead with his bid for Tempus, on the grounds that ad revenue has plummeted all over the world. But the City will be looking very closely at WPP’s third-quarter figures this week for the latest clue to the scale of the damage. Sorrell has already described the recession – if that’s what it should be called – as “bath-shaped”, rather than “V-shaped”, with advertising unlikely to recover until the end of next year.

Rupert Murdoch also nearly came a cropper in the early Nineties, betting his entire global empire on Sky Television and its battle and subsequent merger with British Satellite Broadcasting. The bid to establish satellite TV in the UK had left both companies “haemorrhaging red ink” as Ted Turner gleefully observed. While the Gulf War continued in early 1991, Murdoch was involved in a massive restructuring deal with dozens of banks, any one of which could have scuppered his plan and plunged him and his many companies over the edge.

Could the current downturn take other media companies to the brink or beyond? The parlous state of ITV Digital and the downturn afflicting its owners Carlton and Granada have prompted some observers to predict that the company could go to the wall, taking with it the entire digital terrestrial TV platform. This weekend, in The Sunday Times, Carlton chief executive Gerry Murphy denied this was an imminent possibility, though he admitted that all options were open in the long term. It is worth remembering that, as a result of the Sky-BSB merger, an earlier platform went out of business. BSB’s Government-licensed “Direct Broadcast by Satellite” system was abandoned in favour of Sky’s Astra service. Such things happen.

So far, the media has been hit as hard as anyone could have predicted. Though Murdoch has insisted that business is holding up – after taking an instant &£60m hit in lost advertising – hiring at News International has been frozen and expenses cut by 25 per cent, including the abolition of free tea and coffee. Trinity Mirror is cutting 800 jobs, Reuters is losing 500 and cutting its dividend for the first time, and advertising agencies are laying off people by the hundred.

But it was last week’s figures from Pearson that really shocked. They showed how badly the crisis has affected the FT, which has often seemed immune from the worst aspects of economic downturns. Pearson chief executive Marjorie Scardino revealed that ad sales at the group – which includes FT Deutschland and France’s Les Echos, as well as the FT itself – had taken a nosedive in the past month. Sales had fallen by more than 40 per cent since September 1, a fall expected to be echoed in next year’s profits.

TV had been expected to be the hardest-hit medium, partly because it requires the largest budgets and so can yield the largest savings. If the FT is suffering (runs the argument) won’t TV – which was already well down before September 11 – be hurting harder? Airlines and financial services companies – which Pearson cited as the key sectors pulling out their advertising – are also heavy users of TV.

But looking on the bright side, as we started off doing, not all sectors of the economy are likely to be hit as hard as advertising. And it is reassuring to recall how strongly the industry recovered from that earlier recession.

But some figures from 1991 make depressing reading for ITV. That autumn it took a 44 per cent share of peak-time audience, beating BBC1 by an average of ten points a night, almost unprecedented in those days. Even World In Action averaged more than 7.5 million viewers.

And ten years ago this week, 29 ITV programmes had audiences of over 10 million.

Torin Douglas is media correspondent for BBC News

Recommended

Brochure makes Diary somersault

Marketing Week

Spare a thought for the Diary’s editorial assistant, who had the bejeesus scared out of her this week by direct marketing agency Somersault. The hapless company sent a brochure with a spring-loaded butterfly inside, which flew out when the brochure was opened. Bearing in mind that for the past few weeks the threat of anthrax […]

Comments

    Leave a comment