Morgan Stanley has a grim take on the future of Australia’s media companies.
As Business Insider reported last week, the investment bank believes Australian media companies face crushing downward pressure on revenues in the coming years as technology-powered global giants – notably Google and Facebook – scoop out an ever-increasing share of the total advertising spend in Australia.
In this scenario, Australia’s domestic media businesses – the major broadcasters as well as magazine and newspaper companies – will be competing for an ever-shrinking pool of advertising dollars in Australia as an increasing proportion of the total advertising spend is ceded to overseas companies. Morgan Stanley calls this “global leakage” and right now believes it is an unstoppable force.
“Where eyeballs go… we predict ad spend will follow,” wrote the Morgan Stanley team in a recent note to clients, before proceeding to set out forecasts for various media platforms – newspapers, magazines, TV, radio, online and outdoor – over the next four years.
They argue that as people allocate increasing amounts of their limited time to online media, the dollars will follow. Central to their investment outlook is the effect this will have on margins for media companies with traditional cost structures, but it is also a fascinating scenario to ponder when it comes to the changing habits of people in daily life.
Aside from the predicted growth in online advertising that you would expect, there are bright spots for outdoor advertising and, to some extent, for the domestic television networks. However, Morgan Stanley Australia analysts Andrew McLeod, Mark Goodridge, and Elise Lansky, together with their international colleagues Brian Nowak and Kevin Liu, believe the overall outlook has “profound negative implications for … traditional media companies”.
There’s more detail on the outlook for specific companies here.
This does raise questions about the ability of Australian media companies to create content, satisfy their audiences, and fulfil their assumed community obligations if global companies are rapidly taking out share of the available money in the market.
A note that these are forecasts, which can, by their nature, turn out to be wrong. But below are the forecasts for the individual media segments, republished with permission.
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