Entertainment CEOs Tout International Upside Despite Challenges in Europe

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At a big media investor conference, many top executives acknowledge weak ad trends in Western Europe amid economic problems.

International growth has been a key focus for Hollywood conglomerates in recent years, and CEOs often have touted its importance as a financial engine amid a more mature U.S. market.

At the 40th annual UBS Global Media and Communications Conference in New York this week, many big-name industry executives again highlighted their commitment to pushing further into international markets and further developing their business abroad. But this time, there also were some somber notes.

Many acknowledged that international has been a mixed bag this year. with Western Europe being a drag amid financial and economic challenges in some key markets, particularly in Southern Europe, that have meant weaker advertising trends.

Moguls hardly mentioned specific markets that face challenges, but ad forecaster Adam Smith, futures director at GroupM, set the stage in the first session of the conference. He said euro zone ad spending likely will be down 15 percent in 2012, driven by drops in Southern markets such as Italy and Spain that have discussed further austerity measures to address financial problems.

For 2013, Smith forecasts an unchanged ad performance for Western Europe, down from the 2 percent growth he had predicted earlier this year. "The fundamental problems have not been fixed, and austerity programs will still be prevailing," he explained. Even Germany and France will be only "pretty much" unchanged in 2013, while the U.K. will be a surprise growth area with a projected ad gain of 3 percent-4 percent thanks to its large digital media sector. Other ad prognosticators at the UBS gathering also predicted continued challenges in Europe next year.

The European Central Bank on Thursday seemed to confirm the weak ad outlook, cutting its economic forecast for the 17-country euro zone for 2013. It now forecasts a 0.3 percent economic decline, down from a projection of 0.5 percent just three months ago. The euro zone now has failed to post economic growth for four consecutive quarters. A recovery is expected later in 2013, with a projected return to growth in 2014.

Moguls throughout the UBS conference echoed the theme of a challenged Western Europe.

For example, Time Warner chairman and CEO Jeff Bewkes said, "We're seeing very strong international growth for our networks." And he reiterated that international expansion remains one of the conglomerate's four big priorities. But Europe is seeing "a little bit of a headwind," Bewkes told investors.

He expressed confidence, though, that Europe eventually would rebound and highlighted that it accounts for just 3 percent of the company's revenue.

Viacom president and CEO Philippe Dauman also was asked about the TV advertising outlook abroad. "It's a still challenging environment" in Europe, he said. "Southern Europe is still bad," and economic trends there are "very difficult." Plus, there is weakness in some northern parts of Europe as well, he added.

But Dauman also predicted that the challenges would be temporary. For Viacom, international ad growth will return in the first quarter of 2013 when adjusting for currency effects, he predicted. "For us, we are reaching a point of bottoming out," the CEO said.

Dauman also highlighted India as a big growth market that has remained healthy.

He said that he was happy overall with the company's continuing international growth and development, adding that it would continue to push for distribution of its content into new geographies.

CBS Corp. president and CEO Leslie Moonves also acknowledged weak economic and ad trends in Europe but said foreign buyers continue to pay large amounts of money for his company's content, meaning it isn't affected too much.

In line with Western Europe's more mature media markets and current ad weakness, Disney CFO Jay Rasulo mentioned Latin America and Canada as the conglomerate's biggest growth opportunities abroad.

Discovery Communications president and CEO David Zaslav said ad trends abroad have picked up since the Summer Olympics, with the firm currently seeing a "very good quarter internationally."

Things in Latin America and Asia look "quite good," but Western Europe is still "slow," Zaslav said. However, he emphasized that Discovery is doing better. "We are actually seeing growth in Western Europe," Zaslav said. "When the economy picks up, I think we're going to see a lot of growth."

Discovery also is exploring two deals in Europe that are bets on renewed growth when the economy and ad markets rebound. The company recently said it is talking to France's TF1 Group about an investment in the firm. And it is one of two remaining bidders for the Nordic TV unit of German TV giant ProSiebenSat.1.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai