PETALING JAYA: Advertising expenditure (adex) for the media sector is expected to improve in 2021 compared with 2020 due to low-base effect as major sporting events such as the UEFA Euro 2020 and Tokyo 2020 Summer Olympics have been delayed to June-July 2021 and July-August 2021 respectively, and continue to gradually recover due to the easing of Covid-19 restrictions with the usual festive-related adex events.
Another potential catalyst would be in the case of a snap general election where a general uptick in adex is seen historically, according to AmResearch.
“However, media companies under our coverage remain cautious in the near term due to the recently reimposed conditional MCO in the majority of states in Peninsular Malaysia and as the pandemic is yet to be contained globally with the administration of Covid-19 vaccines just beginning in selected countries,” the research house said in its media sector report.
AmResearch maintained its neutral recommendation on the media sector for 2021 as the operating environment has become even more challenging with the Covid-19 pandemic. The outlook remains dismal due to the worsening performance of traditional media such as print, radio and TV subscriptions amid the structural shift to digital offerings; Covid-19 worries might still impact adex sentiments despite two major sporting events to be held in 2021; and the inability of digital revenue growth to offset traditional media declines.
However, the progress of home shopping and digitalisation remains positive on top of ongoing cost-saving initiatives. Furthermore, cheap valuations of the companies make them viable targets for merger and acquisition and privatisation activities.
Citing Nielsen Ad Intel, AmResearch said adex across all media excluding digital stood at RM1.0 billion in Q3’20. Q3’20 adex recovered strongly by 41% across all media types except for magazines, versus the lower base of Q2’20 (which had been severely impacted by movement control order restrictions) and due to the uptick in ads for the Ramadan and Raya festive period.
The recovery was mainly driven by higher adex in TV, newspapers, and radio which rose by 24%, 64% and 152% respectively following the easing of Covid-19 restrictions.
Digital revenues were still positive as Nielsen Media Malaysia reported that digital adspend accounted for 19–25% of all media adspend from January to May 2020. Companies under the research house’s coverage generally reported better digital revenues with increased traffic on digital platforms.
AmResearch noted that travel and event segments were hardest hit, such as Media Chinese’s travel segment revenue was nearly wiped out for its recent two quarters amid Covid-19 travel restrictions and border closures; while Star Media’s events & exhibition segment revenue dove 76% YoY for 9M20 as physical events were barely held amid Covid-19 SOPs. However, home shopping was boosted by pandemic, as Media Prima’s recently rebranded WowShop benefited from higher viewership of its TV channels and a shift in consumer spending habits since the MCO as sales rose 36% year on year in 9M20.
AmResearch noted that it may upgrade the sector to overweight if growth in digital initiatives can meaningfully offset declines in traditional media; consumer confidence recovers and adex catalysts re-emerge, translating to higher ad-spend across all mediums; strong growth and recovery in other non-adex revenues such as travel, events and home shopping, and possible privatisation and M&A opportunities arise.
On the other hand, it may downgrade the sector to underweight if monetisation of digital content remains challenging due to intense competition; longer-than-expected gestation and traction of media players’ digital initiatives; significant deterioration in adex and traditional media revenues.
Its top pick is Media Prima due to benefits seen from its previous Odyssey transformation which focused on commerce and digital revenues.
Traditional media such as print, radio and TV are struggling amid the structural shift to digital offerings. – REUTERSPIX
Source: The Sun Daily
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