Best of the Week: Economic signals, radio noise and adland prevarication
Welcome to Unmade, written on what will be my last day in London for a while. The entertaining madness of Boris Johnson’s final days made it a perfectly timed trip.
In theory, by the time you read this I’ll be well on the way back to Australia. In practice, QF2 hasn’t had an on-time departure since Qantas switched back to the A380, so probably not.
Happy National Don't Put All Your Eggs in One Omelet Day.
Today: Digesting Tuesday’s radio ratings, adland harassment and more economic signals.
Taming the bear market?
Let’s start this weekend with the business of media.
There are data signals coming from all directions.
On Tuesday, Australia’s Reserve Bank put interest rates up by another 50 basis points. The war to tame inflation and get the cost of living under control is starting affect the housing market.
Optimists think that households have plenty of savings and Australia will get its usual soft landing. Is the housing market in a seperate bubble to the rest of the economy? We’re about to find out.
Mind you, I’m treating the more pessimistic WhatsApp message from my friend in the financial industry - “A hurricane is coming” - as another data point.
Sir Martin Sorrell, the founder of WPP, has long counted as at least a couple of data points all on his own. The economic commentaries he offers in his annual financial reports have been essential reading for decades.
The sweaty queue to watch Sorrell at the first day of the Madfest conference in London was a spectacle of commerce. The organisers reserved the biggest font on the delegate name badges for job titles as the most important networking information. A boring thing like a person’s name was far less important to the networking. My “managing partner” job title was a cloak of invisibility as I watched sales people from tech vendors hover next to anybody who had the word “marketer” in their name, pitching their captive audience as the queue shuffled forwards.
Since his enforced switch from the analogue world of WPP to the digerati-focused S4 Capital, Sir Martin has had a makeover. The 77-year-old has ditched the suit for T-shirt and sneakers. With a deep Cannes tan and sitting in front of a cartoon bear, Sorrell’s main message was that in the next set of financial reports, due out globally over the next few weeks, things are not going to seem so bad. CEOs like to exceed analyst expectations, he explained, so if there was immediate bad news we’d have likely heard it by now. But the outlook going forward is another matter, he seemed to be hinting. It could take another six months before we really know.
Advertising always does badly in a downturn. The share prices of our media companies are a good proxy for what ASX investors see as the industry’s short and medium term future.
So has the worst already been factored in when it comes to share prices, particularly in Australia? This week The Unmade Index, which tracks the ASX-listed media and marketing firms, rose every day, including another 0.95% yesterday.
Admittedly, the index of 649.2 is still 35% off its 1000-point opening at the start of the year, but at least it’s improved a little on its 40% fall.
Rationalised against current profits, most media companies seem to have surprisingly low market capitalisations. Seven West Media looks cheap at a $660m market cap, for instance.
And here’s another human data point: Much of Nine’s value is derived from its majority-owned real estate site Domain, which is still down by 42% for the year to date.
However, it appears to have hit bottom (so far, anyway) on June 17. Since then the price has started to improve, despite its exposure to the falling real estate market.
In recent weeks, Nick Falloon, who is chairman of Domain and deputy chairman of Nine, has been putting his own money into buying Domain shares on the open market.
He has disclosed that he bought $31,000 of Domain shares in May, and a further $1.5m worth of shares in June.
Has Falloon picked the bottom of the market? When directors buy, it’s usually a good sign for the share price.
And there were more data points this week.
Standard Media Index released its figures for May. Overall, media agency spend was down by 0.9% on the same month a year before. However, that had been a record.
But the increased spending of the political parties ahead of the Federal Election also made up for lacklustre performance in other sectors including automotive (down 26%), food, produce and dairy (down 17.5%) and retail (down by 5.7%).
With political and government spending removed, the underlying market was actually down by 9.1%.
So many data points, so little certainty.
Where is commercial radio finding its new listeners?
On Tuesday, industry body Commercial Radio Australia put out a cheery press release to accompany the latest set of radio ratings. The cumulative weekly audience for listening to commercial radio stations has reached an all time high of 12m, CRA said.
In part this is because of more listening via streaming and DAB+. But a major factor has been the continued decline of the ABC.
Last month, I wrote about the shocking decline in listening to ABC Radio National in particular when the third set of radio ratings for the year came out.
While the ABC’s results were more mixed across the board this time, overall things got a little worse again.
Commercial radio’s claim to have reached an all time high in terms of commercial reach comes despite the overall reach of the medium actually declining. In other worse, it was at the expense of the ABC. In Melbourne, radio’s weekly cumulative reach declined by 10,000 listeners to 4.635m. In Sydney, radio’s weekly cumulative reach declined by 4,000 to 4.576m. The number was up by 2,000 in both Brisbane and Adelaide and 1,000 in Perth.
The joint worst performing radio station in the country, in terms of loss of average listening was ABC Brisbane, which saw its Monday to Sunday listening share fall from 8.5% to 7%. This loss of 1.5 share points was equalled only by 96FM in Perth which saw its share fall from 11.9% to 10.4%.
Adland’s safety problem
As I discussed on Wednesday, marketing consultancy Trinity P3 has launched what may yet prove to be one of the more tangible efforts to do something about the issue of sexual harassment in the advertising industry.
The bosses of agencies participating in pitches run by Trinity P3 will be asked to declare, by signing a statutory declaration, whether they are dealing with “any current or unresolved complaints of bullying, harassment and assault in the workplace”; to declare whether they have used deeds of confidentiality to prevent any complaints reaching the public domain; and to declare that they are currently providing a safe workplace for staff.
There’s a detail for me to correct from Wednesday’s email where I said Trinity P3 went it alone after the industry bodies declined to support the statutory declaration initiative. I understand that was incorrect - Trinity P3 was rebuffed in its efforts to get the agency bodies to support an independent reporting system, and the strategy of doing it via stat dec came afterwards.
So how have the industry bodies reacted? The Advertising Council issued a press release this week saying it’s about to publish the results of a survey next week “to drive greater diversity and inclusion”. It’s an admirable initiative for an industry which lags many others when it comes to diversity, but I’m not sure it’s directly addressing the problem that Trinity P3 is trying to solve.
So what happens next? Given the sheer number of pitches that Trinity P3 runs, it won’t be long until its next pitch. In the early stages, the agency bosses will be asked whether they are willing to sign that statutory declaration. If everyone comes back and declines, it would look somewhat fishy. Give it a few weeks, and we’ll know whether this initiative will make a difference.
Up in the air, again
Having spent nearly two and a half hours waiting to get through Heathrow security, 2022 travel feels like rather more effort than 2019 used to. It means I’ve less time to finish this email than I anticipated, so it’s pretty much time to leave you to enjoy your Saturday.
As ever, I welcome hearing from you at letters@unmade.media.
My colleague Damian Francis and I will be back on Monday for Start the Week.
Have a great weekend.
Toodlepip…
Tim Burrowes
Managing partner - Unmade