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Forecast for Advertising Expenditure in FY2009 and FY2010 —Double-digit 14.3% Drop Year-on-Year in FY2009; Sluggishness to Continue, with a 4% Decline Year-on-Year in FY2010— (appeared in Nihon Keizai Shimbun, January 26, 2010, morning edition)
NARI has issued its advertising expenditure forecast for FY2009 (April 2009–March 2010) and FY2010 (April 2010–March 2011). Advertising expenditure for FY2009 is expected to drop by 14.3%, slightly less than the forecast announced in July 2009 (−15.0% vs. previous year), but still a double-digit drop and an unprecedentedly poor showing. The slump will continue in FY2010, with a 4.0% decline forecast. This is because although the economy appears to be getting stronger, no full-fledged resumption of individual consumption, which is closely linked to advertising expenditure, can be expected.
This forecast uses the NIRA/JCER (Japan Center for Economic Research) model developed by the two organizations and is based on total advertising business sales (“total advertising expenditure,” hereafter) reported in the Ministry of Economy, Trade and Industry’s Specific Service Industry Dynamic Statistics.
Large Drop in Corporate Profits: A Factor behind Advertising Expenditure Slump
Past experience has shown that advertising expenditure is affected by ordinary profit trends one or two quarters earlier.
JCER forecast major declines in corporate profit (ordinary profit) for four consecutive quarters: October–December 2008 (down 64.6% vs. same quarter previous year), January–March 2009 (down 70.1%), April–June 2009 (down 53.0%) and July–September 2009 (down 32.4%). A major rebound exceeding 50% is forecast for October–December 2009 (up 55.4%) and January–March 2010 (up 101.1%), but given the scale of earlier declines, JCER expects total advertising expenditure vs. the same term the previous year for the second half of FY2009 to drop 13.8% for October–December 2009 and 10.7% for January–March 2010. The extent of the decline is smaller than in the first half, but a double-digit drop will continue. As a result, advertising expenditure for FY2009 as a whole will also post a double-digit decline.
Weak FY2009 Advertising Expenditure Affected by Larger Drop in Non-mass Media than Mass Media Outlays
Total advertising expenditure for the first half of FY2009 was down 16.4% vs. the previous year. Whereas the drop for the four mass media—newspapers, magazines, television and radio—was 16.2%, non-mass media—Internet, transit and outdoor advertising—advertising expenditure dropped 16.5%, a higher decline than the four mass media. In the second half of the year, total advertising expenditure is also expected to register a double-digit drop (−12.3%), reflecting the continuing worldwide economic downturn. Advertising expenditure for the four mass media will drop by 11.2% and by 13.1% for the non-mass media, a situation similar to that in the first half. Growth in Internet advertising, which had pulled the market along so far, has been leveling off, and outlays for sales promotion advertising and transit, outdoor, flyer and other advertising are being affected as numerous companies hold back from spending on advertising as the economy has rapidly worsened.
In terms of trends for FY2009 by media, advertising expenditure is expected to fall 18.9% for newspapers, 26.6% for magazines, 10.6% for television and 15.3% for radio, all double-digit drops. The drop in advertising expenditure for magazines is particularly notable but can be attributed in part to more magazines suspending or ending publication.
FY 2010: Smaller Decline for Advertising Expenditure in the Respective Media but Sluggishness Will Continue
For FY2010, total advertising expenditure and advertising expenditure for the four mass media and for non-mass media in the first half is forecast to drop 4.3%, 4.5% and 4.1%, respectively, vs. the same term the previous year. For the second half, declines are forecast to be 3.7%, 4.1% and 3.4% vs. the same term the previous year; once again, the decline in advertising expenditure for the four mass media will be larger than for the non-mass media. For FY2010 as a whole, declines of 4.0%, 4.3% and 3.7%, respectively, are forecast.
By media, single-digit declines—9.9% for newspapers, 7.1% for magazines, 2.3% for television and 7.0% for radio—are forecast, but the drop in advertising expenditure for newspapers will be continue close to the double-digit range. The decline in outlays for television advertising, which accounts for the largest ratio of advertising expenditure, will be relatively small. Declines in outlays for advertising in magazines and radio, which were substantial in FY2009, will be smaller due to the rebound effect.
