Yesterday, MediaPost’s MediaDailyNews compiled a sample of recent updates to global advertising forecasts. For years, Magna has stood out as one of the most respected of these forecasts.
For decades the U.S. media/ad industry would wait to hear from the legendary Bob Coen of McCann-Erickson. We used to rely heavily on Coen’s forecasts to put directory advertising into a broader ad industry context. That was back when directory advertising was a $15 billion industry in the U.S.
Bob Coen has since passed and his forecasting unit was folded into the bigger IPG Magna entity. So today, that must be considered the gold standard for media/ad forecasting. Therefore, we looked at Magna’s recent forecast update with curiosity and interest. Here’s what we learned.
A Major Downshift
As the chart below shows, Magna is forecasting a 7.2% decline in global ad dollars in 2020. That is a 12.6% shift from 2019 when they had pegged global growth at 5.4%. For the U.S. market, Magna has downgraded their 2020 and 2021 forecasts now a couple of times, once in March and now again in June.
When Magna first recalculated their 2020 forecast in March when the COVID-19 situation was developing, they were anticipating a decline of just 2.8%. Now with more data to chew on, the forecasters have adjusted to a decline of 4.4% for the year. As their view of 2020 become more negative, their view of 2021 becomes a bit rosier with their first revision forecast growth in 2021 at 2.5% and then revising that upward to 4.0%.
A $100 Billion Hit
Taking this all in, Magna’s Vincent LeTang, executive vice president of global market intelligence, said that 2021 will be about $100 billion lower than projected in the original December 2019 forecast. This is a considerable drop, especially given that 2021 should see the return of live sporting events in the U.S. and around the world. This includes the 2021 Olympics.
We would expect 2020 to be even worse were it not for the U.S. presidential election this fall. And if college and professional football fail to get the necessary clearance and we see only the limited return of major league baseball and NBA hoops, perhaps we should expect yet another downward revision from Magna coming just before the beginning of Q4.
The media/ad business will have suffered greatly in any of these scenarios. But there may be a few silver linings. For example, we would expect streaming services (audio and video) to gain considerable momentum. We would expect this to continue well into 2021 and beyond.
Still, a $100 billion hit is a lot for any industry to absorb. We think the human cost will be significant, in the form of perhaps a million industry jobs lost. Something to chew on indeed.