By David Turner (Head of Investment)
The media market is changing at an alarming rate, and this will only continue throughout 2018 and beyond. We can expect to see improvements in technology, more transparency, a greater focus on content and increased flexibility, but there will inevitably be a few surprises along the way – so strap yourselves in, it’s going to be an exciting ride!
The television world remains extremely competitive. Though TVNZ continues as the market leader, MediaWorks had a year that cannot be ignored. After many years of static performance (resulting primarily from their television and OnDemand offerings), instability in executive positions and disconnected internal systems, MediaWorks are now in a strong position to challenge their competition. They made 2017 their year with strong-performing local reality content such as The Block and Married at First Sight; an intensified focus on Newshub and their news offerings, both online and off; and a strong radio survey with the latest results showing MediaWorks’ share lifting 1.7% against AP 25-54.
These factors have clearly had a positive impact on the business, both from a revenue and internal culture perspective. SMI (agency expenditure) shows that MediaWorks TV achieved solid growth YOY +1%, while MediaWorks Radio also continues to deliver strong revenue growth. We can now sense some honest positivity and excitement from their representatives which will drive the business further in 2018.
The entire out-of-home (OOH) sector has experienced phenomenal growth and this will continue into 2018. While all suppliers benefited, Adshel stood out in particular, consistently punching well above their weight and delivering exceptional results – especially when you consider they’re only located in four regions. 2017 SMI shows Adshel revenue at +23% and nipping at the heels of QMS, who leads the category. What drove this growth? That’s simple: the continual development of their product. What was once a static poster is now so much more.
The roll out of digital has opened up the product to a number of advertisers who had not considered Adshel in the past. Digital offers greater flexibility, from dynamically changing out creative (based on weather, time of day, or even real-time change outs relative to stock levels or competitive offers) to live feeds (such as the recent Ford and Black Caps campaign), and they’re now even stepping into the automated buying arena. These guys are a slick team who will not sit back—they continue to strive for change, and will again achieve growth in 2018. Adshel will be the ones to watch for new technology and opportunities this year.
Last year was a rocky period for digital, which felt the brunt of tough questions around transparency, reporting, brand safety, viewability and Bots – not to mention a number of high-profile personalities asking global online media giants to be held more accountable. Although still experiencing growth in expenditure YOY, this began to slow throughout 2017, decreasing from +26.4% YOY in 2016 to +7.1% YOY in 2017 (SMI). Digital expenditure will continue to increase, and as we all become more connected, a brand’s digital presence is more important now than ever.
Greater interrogation of the way digital is planned and bought will be a core focus across the market in 2018. This, of course, is the optimal outcome for advertisers as it leads to greater accountability, ensuring the right metrics are being monitored, optimised and reported on. It also opens the door for New Zealand-based sites who produce local content and can offer quality, trusted inventory. Metrics beyond CPMs will be a core consideration in 2018, requiring continued work by publishers to ensure success against quality metrics.
2017 was the year of the non-mergers: SKY/Vodafone and NZME/Fairfax. The latter has the potential to significantly impact the market in the coming years, and we will be watching closely to see the implications of this. There were a number of reasons for the final decision, but the Commerce Commission’s primary reservation was their belief that a combined company would hold too much of a share of the New Zealand journalism market. While this would have been true of the printed medium, print is no longer the only way we consume news – the likes of TVNZ, Newshub and Radio New Zealand were more than capable of keeping the local competition fierce.
At present, the biggest challenge faced by these companies is the increasing frequency that New Zealanders are getting their news from global sources, shopping via international retailers, and using worldwide services every day. The High Court has now agreed with the Commerce Commission and we have already seen some titles being earmarked for closure or put on the market for sale (e.g. Cuisine magazine). The merger would have resulted in some job losses; however, the result of this decision will be far greater and reach further into the regions.
Unfortunately for one of these businesses the picture is significantly more dire than the other and current financial results for Fairfax show the latest six months ending December 2017, down -24% YOY. Another appeal is significantly more beneficial for Fairfax, however that said both these companies will again combine and continue their fight in the Court of Appeal, a decision which I applaud, as they’re sticking to their guns and fighting for an outcome which will ultimately bring about great benefits. We wish them luck with their coming uphill battle.