The forecast-due to be presented this week at the annual UBS Media Week conference in New York City-calls for a total of $369.7 billion this year, up 6.9% over 2003, then 5% year-over-year in 2005, followed by 5.8% in 2006 and 2007. The U.S., the world's largest ad market, will grow 6% this year, 4.2% in 2005, 5.3% in 2006 and 5.2% in 2007. Europe, the second-largest advertising region, will grow 4.5% in 2005, while Asia will grow 6%. Indeed, Asia's growth is expected to lift it past Europe by the next decade.
The Asian region will be powered by growth in the Chinese market. Japan, the region's largest market, is growing below the region's average. The Chinese market is now the size of Italy, $9 billion, but will grow to $12 billion in 2006 to pass France and will double that by 2011 to pass the U.K. and Germany and become the world's third largest, after the U.S. and Japan.
TV loses some luster
For the U.S. market, Zenith's analysts raised their 2005 projection from 4% growth to 4.2%. The analysis projects TV will lose some of its luster, as commercial ratings go into effect next year, which may lead media agencies to seek alternatives to network TV. Network TV and syndication will both grow 3% next year, while cable TV will grow 9%, and spot TV will show only modest 1% growth after the influx of political advertising in 2004. Spot radio will rise 2% and network radio will grow 4%.
Among print media, Zenith upped its 2005 forecast for magazines to 7% from 6%, given the medium's growth this year, but the business-to-business segment will struggle to show 2% growth. Newspapers, hobbled by this year's circulation scandals, will climb 4% thanks to stable retail advertising and strong banking and pharmaceutical spending.
Separately, Merrill Lynch & Co. analyst Lauren Rich Fine upgraded her U.S. forecast to call for 6.8% growth in 2004 spending outside direct mail, up from 6.3%, but lowered her 2005 forecast to 4.6% from 5.1%. Major advertisers will grow spending at a slower rate next year, and the explosion in media outlets is keeping prices low, she noted.