The bright side to a bleak picture
10 June 2009
It is well known that Japan, the world’s second largest economy, is facing challenging economic times. The recession is biting because of reduced demand in some of Japan’s most important markets for manufactured goods, such as the US and the EU.
Japan’s GDP contracted 12% in the last quarter of 2008, and the drop of 0.1% in February 2009 was the seventh successive month of decline. Combine this with increasing unemployment, weak consumer demand and falling prices fuelling fears of deflation, and it’s not surprising that the immediate prospects seem bleak.
So what does this mean from a media perspective? As in other Asian markets, adspend is predicted to drop in 2009 and perhaps not recover until 2011. The extent of that reduction is unclear, but most predictions put it at 2-6% with downside risk. Print media is expected to be the hardest hit, with spend falling by up to 9%.
This overall decline was principally due to decrease across every media type other than online, especially newspapers and magazines, which slipped 13% and 11% respectively. It is too early to see which advertisers are pulling back, but the expected biggest impact is from high involvement categories such as automotive, technology and financial services, although it is possible that some Japanese manufacturers will follow the example of NEC and make a decision to prioritise the Japanese market ahead of others.
However, if the players in high involvement categories do tighten their belts the most, this is bad news as Toyota, Matsushita and Honda were the three biggest advertisers in 2007 (the last year for which figures are available at an advertiser level). It is particularly bleak for print media, where these three and other auto and technology brands have been among the big spenders.
In 2008, advertisers in these categories were already reducing their spend. The only categories to slightly increase their spend were the sporting goods, food and pharmaceutical categories, and this was one of the reasons for the decline in TV spending being less than for other media types. But in auto and finance, year-on-year advertising declined 13% and 11% respectively.
Early evidence is that this trend is continuing in 2009. According to figures released by the seven largest Japanese agencies, Dentsu, Hakuhodo, ADK, Daiko, Tokyu, JR East and Yomiko, spend in the first two months of this year – compared with a similar period in 2008 – was down across all media types other than online. Automotive and financial services advertisers had cut back the most with automotive clients spending 50% less year-on-year with newspapers and those in financial services cutting back their radio spend by 45%.
But adversity always brings opportunity: one trend that is becoming apparent is a lean towards short-term negotiation. For example, TV sponsorships usually need to be committed to for a six-month period, but for this year, shorter-term commitments are available at discounted prices. As for TV spots, it is also more advantageous to negotiate short-term, discounted deals. In the current climate, there are good deals to be had, and media owners will need to be flexible and innovative in their offers.
Guy Hearn is director of communications insights, Omnicom Media Group, APAC