CEOs, Analysts See European TV Ad Trends Improving
Viacom CEO Philippe Dauman recently spoke of a "stabilization of the European economy and particularly in Continental Europe," which should boost financial momentum.
LONDON – Entertainment industry CEOs and analysts have turned somewhat more optimistic on the economic outlook in European countries and their TV advertising markets.
During third-quarter earnings season and recent investor conference appearances, CEOs and analysts commented on how things seem to be looking up in the more mature Western European markets that were in recent quarters often affected by weak economic trends and challenged ad markets.
"Economic conditions are improving across several European countries and the EU as a whole finally returned to positive GDP growth earlier this year," Janney Montgomery Scott analyst Tony Wible said in a recent report. Estimates, including those by the European Central Bank, point to 1 percent GDP growth in 2014. While there is still reason to be cautious, improvements could quickly pour into TV advertising after estimated declines of 5 percent and 2 percent in 2012 and 2013."
He added: "A turnaround could happen quickly given the lack of an European upfront ad process."
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Ad forecasters have highlighted all year that Western Europe has been the main decliner amid an otherwise growing global ad market.
Digital TV Research recently predicted TV ad growth in North America, Latin America, the Asia Pacific region, the Middle East and Africa, as well as Eastern Europe this year. That will leave Western Europe as the sole region of decline, driven by the weak economic state of Southern European countries, such as Italy and Spain.
Western European ad spending would decline from $30 billion in 2011 and $27.7 billion in 2012 to $27.2 billion this year, the firm's projection said. "However, 2014 – and onwards – will be better, with only Croatia and the Czech Republic declining in 2014," predicted Digital TV Research founder Simon Murray.
Discovery Communications CEO David Zaslav was one of the entertainment industry CEOs who faced questions about European trends during third-quarter earnings season.
He said he was recently in Madrid, Munich and London. "And you read about things getting better. Candidly, the buzz is better," he said. "As you go into those countries and you meet with the advertisers and you sit down with the government and you ask what are they seeing, what do they expect, everyone seems to think things are better."
But Zaslav concluded: "Having said that, I would say it's pretty stable. Italy is still really struggling, France is struggling. Spain, they're saying that maybe they're going to make the turn…We'll have to wait and see. I would say it's certainly not getting worse."
Discovery has continued to grow its European business and is "in great shape," Zaslav said. "If a year from now, two years from now, three years from now, you start seeing Western Europe improving, then you're going to see a ton of energy [working for] us because our market share is growing in those markets."
Similarly, Viacom CEO Philippe Dauman said on his company's latest earnings conference call last month: "The stabilization we are seeing in the European economy, coupled with our strategic development, should return us to a path for substantial growth in our international results."
He added: "2013 was really a year ,which was difficult for us in Continental Europe. And we used that time to extend our footprint."
Reviewing Viacom's fiscal year ended in September, Dauman also said: "Despite challenging macroeconomic conditions in Europe, we made several strategic moves in fiscal 2013 to position ourselves well for the international growth. We aligned our cost structure, while launching a number of new channels, including the Paramount Channel in France."
Looking ahead, the Viacom CEO said: "I feel that with the stabilization of the European economy and particularly in Continental Europe, the U.K. has actually held up reasonably well for us, we're seeing improvement. So, we expect to see high single-digit growth in this quarter in international ad sales and we expect to have a solid year."
After the earnings report, Maxim Group analyst John Tinker told investors in a report: "International operations – recently a weak point in Viacom results – are beginning to turn," thanks to improvements in Europe.
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