Media predictions for 2012: media business and advertising

Endemol could come up for sale if it can restructure its debt, while the Olympics are expected to prop up the ad market

• Mark Sweney
• guardian.co.uk, Friday 30 December 2011 08.00 GMT
• Article history

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  Media predictions for 2012: media business and advertising

  This article was published on guardian.co.uk at 08.00 GMT on Friday 30 December 2011.

Celebrity Big Brother maker Endemol could find itself up for sale in 2012. Photograph: Ian West/PA

Media business

"There won't be too many willing sellers next year, I wouldn't think," said one city banker, summing up the somewhat downbeat view of the mergers and acquisitions market next year. "With the market how it is why would you sell unless you are being forced?"
The failure of Shameless maker All3Media and Dutch firm Eyeworks, maker of Test the Nation and The Biggest Loser, to find buyers in 2011 is indicative of how tough the market is shaping up to be next year.
Big plays by private equity have all but evaporated due to the difficulty of securing funding – as was seen by the dramatic thinning of ranks in the bidding for EMI, which eventually went against the betting to Universal and Sony – with trade buyers taking pole position in any dealmaking in 2012.
All eyes are on Big Brother maker Endemol, which if it can finally agree the protracted restructuring of its €2.8bn debt, which is widely expected to be put up for sale next year. Time Warner and Mediaset, an existing investor, are already circling with unsolicited bids; if Endemol goes into play expect RTL, owner of The X Factor co-producer FremantleMedia, and ITV to run the numbers on a bid.
ITV will be debt free by the end of the year and has access to £1bn, or more, with chief executive Adam Crozier finally likely to make a major acquisition to boost its production arm.
Facebook's highly-anticipated IPO, which could well dwarf Google's effort in 2004, will send the tech stock buzz back into overdrive after the failure of Netflix, Groupon and Zynga to set investors alight.
Netflix's launch in the UK & Ireland next year will be one of the major strategic business moves of the year (well, that we know about) sparking an intense battle with, among others, BSkyB and Amazon's LoveFilm.
However the biggest potential development of the year is whether Rupert Murdoch will be forced by his board into looking to sell off some, or all, of his newspaper titles.
A forced sale attracts bargain-hunting predators and top of the list is Richard Desmond, owner of Express Newspapers and Channel 5, who has form here, having offered £1bn for the Sun in 2009.
If a sale doesn't happen then all eyes will be on whether Murdoch will green light the launch of the Sun on Sunday to fill the gap left by the News of the World.
"We hope News International will launch a replacement in time for the European football," said Group M in a note on national newspapers recently.
Interestingly Group M notes that Murdoch will have to run a very tight business model as following the shrinking of the market after the closure of his Sunday tabloid there will be "pressure on any NoW replacement to wash its face on copy sales, as the ad revenue pot is unlikely to grow to welcome it".

Advertising

The London Olympics will save the UK advertising industry next year.
Sir Martin Sorrell's Group M reckons that the 3% growth it has factored in for 2012 would be lucky to be flat, at best, if not for the Olympics.
Yet some major media owners seem unconvinced. ITV chief executive Adam Crozier cautioned recently that while the broadcaster will get a "positive reaction" – an uplift in TV ad revenue – from the event it will "not be as much as some people think".
By this he means that comparisons with the uplift in ad revenue seen in other host countries, where the Olympics airs on commercial TV, are misguided because in the UK it airs on the BBC.
Daily Mail & General Trust top brass Martin Morgan and Stephen Daintith, the chief executive and finance director respectively, have also been downbeat on expectations – despite the fact that freesheet Metro is expected to be one of the biggest beneficiaries of millions of visitors to the capital.
Morgan said that investors should not have "expectations of a significant lift'; Daintith added that the event is "not the answer" and that the market "shouldn't be thinking about huge numbers from the Olympics for our titles". DMGT reckons it will see an uplift of about £5m.
The big winner will be the outdoor advertising market - Group M reckons it will be up 6%, the most of any media bar digital advertising - with the £746m ad take pencilled the highest since 2008.
Radio is also expected to do well, with advertisers warming to the moves by players such as Global Radio to have fewer station brands and more national networks.
"Radio has managed to completely replace the major revenue loss from the government scrapping COI advertising," said Adam Smith, Futures director at Group M.
The only media that won't be benefiting from one of Sir Martin Sorrell's fabled "maxi quadrennial" years – when events such as the Olympics, US elections and Euro occur – is, unfortunately the press market.
National newspaper advertising is forecast to be down 3.1% and the regional market down 7.8%.
"Head of the column [of issues] is retail," said Smith. "It is the major category in print advertising and it is being massively affected by the squeeze on household income."