| 2008 Magazine Advertising Forecasts in Asia Pacific by Country: |
Source: Zenith Optimedia Forecasts - June 2007
JAPAN
Growth over
previous yearMagazine Advertising
(in million Yen and
at current prices)
2006
2007
2008
-1.5%
-1.1%
-0.5%
388,700
384,500
382,700
Japan's economy expanded at an unexpectedly healthy pace in the third quarter and its Gross Domestic Product (GDP) could possibly grow by 2.6% in 2007 - a strong rebound from the April-June period when the economy contracted by an annualised 1.6%. Even if domestic consumption does grow slightly this year, Japan is still a nation where advertising spending remains at best flat. Japanese magazines have actually experienced a decrease in spending (at current price) every year for the last 13 years. The pattern is expected to continue in 2008 and 2009, with magazines facing a steady erosion of their share to about 8.2% of all media advertising. Although it collects 50.2% of the magazine advertising spending in the Asia Pacific region, the second largest economy in the world now ranks fourth in the value of its magazine advertising after the US, Germany and France.
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AUSTRALIA
Growth over
previous yearMagazine Advertising
(in million A$ and
at current prices)
2006
2007
2008
7.0%
5.0%
5.0%
778
817
858
With a 3.75% GDP growth expected in the current financial year (ending in June 2008), the Australian economy will experience its 16th consecutive year of expansion. Although putting pressure on interest rates, inflation is contained below 3%. Unemployment reached a three-decade low of 4.3% and the nation’s foreign debt has been eliminated. This new prosperity has pushed the Australian stock market to outperform the global market by approximately 5% annually during the last 10 years. Despite a modest population base (20 million people), this performance has created a new level of wealth with consumers enjoying high disposable income. The new Labour Government elected in November is expected to continue the conservative policies of the previous administration.
These conditions are exactly what advertisers like and the mood among clients and advertising agencies remains up-beat. The chairman of Australia’s largest media buying agency, Harold Mitchell, predicts 6% growth in advertising spending for 2008. However, several recent magazine acquisitions by private equity companies in Australia are forcing the A$2 billion industry to concentrate on its already high margins with more acquisitions than organic growth.
In the last fiscal year, which ended on June 30th 2007, the largest magazine publisher ACP –owned by Publishing & Broadcasting Ltd. – generated a profit of A$248 million on revenue of A$794 million. In other words, an earnings margin of 31.2%. Meantime, Pacific Magazines, owned by the Seven Network, earned A$44.5 million on revenue of A$263 million - a margin of 16.9%. These two companies control 78% of the Australian magazine market (52% for ACP and 26% for Pacific Magazines).
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CHINA
Growth over
previous yearMagazine Advertising
(in million RMB and
at current prices)
2006
2007
2008
23.7%
20.0%
14.3%
3,077
3,693
4,221
After growth of 11.1% in 2006, China’s economy expanded at an annual rate of 11.5% in the third quarter of 2007. On the down side, its consumer price index climbed to a 10-year high of 6.5% in October and Chinese officials face a major challenge to meet the predicted inflation level for the full year of around 4.5%.
China now sits on the world’s largest foreign exchange reserves of US$1,330 billion. Disposable income is growing fast and is starting to influence domestic consumption and individual investment spending. The Shanghai Composite Index was below 2,000 a year ago. Today, it is around 5,000. Significant advertising growth also is expected over the next two years during the build up to the 2008 Beijing Olympics and the Shanghai World Expo in 2010. Magazine advertising is expected to increase by 14.3% in 2008, following a 20% increase in 2007. ZenithOptimedia points out: “The most dynamic adspend growth is coming from online, estimated at just over 45% in 2006, generating revenues of US$759 million. The number of Chinese internet users now exceeds 100 million, concentrated primarily in the main urban centres.”
Separately, GroupM in its Worldwide Media and Marketing Forecasts predicts magazine advertising spending in China will grow by 28% in 2008, after the 22% forecast for 2007.
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SOUTH KOREA
Growth over
previous yearMagazine Advertising
(in million Won and
at current prices)
2006
2007
2008
8.1%
5.0%
3.0%
360,974
379,023
390,393Marking its 18th consecutive quarter of expansion, the Korean economy grew by 5.2% during the third quarter of 2007 (compared with the same period in 2006). Goldman Sachs recently revised its GDP growth estimate for 2008 to 5.3%. Inflation and unemployment are stable at 2.5% and 3.2%. Meantime, to the delight of advertising agencies and local publishers, domestic consumption has regained strength (+7.2%) and luxury products are experiencing record sales. ZenithOptimedia predicts: “The presidential election, set to take place in December 2007, is expected to give a boost to advertising expenditure in the latter half of the year”. Hence, the major free to air and cable TV operators have increased their rates – replacing a bonus system – by 20 to 30% since January. Therefore, Media Convergence estimates magazine advertising spending should grow in 2008 far in excess of ZenithOptimedia’s low annual forecast of 3.0%. Early bookings for the first and second quarters 2008 are already showing a healthy trend.
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TAIWAN
Growth over
previous yearMagazine Advertising
(in million NT$ and
at current prices)
2006
2007
2008
-2.8%
-6.0%
4.5%
6,359
5,978
6,247
Taiwan’s economy grew by 6.9% in the third quarter of 2007, the fastest quarterly growth since early 2002. The 2007 GDP growth is now expected to reach a three-year high of about 5.5%. Although the economy is doing well, the domestic magazine advertising market does not receive its fair share of investment because advertisers are putting an increasing amount of resources into mainland China. Taiwan already is a mature magazine market - like Japan, Australia and Hong Kong - with its magazine advertising share of up to 11.7%.
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HONG KONG
Growth over
previous yearMagazine Advertising
(in million HK$ and
at current prices)
2006
2007
2008
4.3%
6.7%
9.5%
2,835
3,024
3,311
In 2008, the Hong Kong economy and its domestic magazines should continue to enjoy the steady expansion of the last two years. The market offers good growth prospects for established magazine companies, but few opportunities for potential newcomers to a market which has a small population (7 million) and is already well-covered in all categories. Hong Kong’s magazines still enjoy the highest share of advertising spending among all media in the region with 13%.
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INDIA
Growth over
previous yearMagazine Advertising
(in million Rupees and
at current prices)
2006
2007
2008
57.5%
19.9%
20.2%
9,506
11,400
13,700
Although GDP growth reached 9.4% last year, the Reserve Bank of India has projected a growth rate of 8.5% for the fiscal year 2007-2008 (ending in March). Inflation remains an economic challenge and a series of measures to curb credit growth and lower short-term interest rates pegged inflation to 4.27% in mid-2007 – down from a two-year high of 6.73% in January.
Although India’s magazine advertising is still minuscule compared with the newspaper and TV industries, it appears to be better measured than a few years ago. Hence, magazine advertising spending seems to be growing at a faster rate than the other media in India, with the exception of the Internet. After an annual growth rate of close to 60% in 2005, magazine advertising spending is now increasing at about 20% annually - faster than China (yet from a much lower base) and the most rapid rise among magazines in the Asia Pacific region.
The huge disparity of wealth in India is reflected in the country’s advertising spending. Within its 1.1 billion population, on the one hand, 300 million poor people are living on an income of less than one US dollar a day and, on the other hand, close to two million households are earning more than one hundred thousand US dollar a year. In the next five years, India can expect its magazine market to grow at least four times faster than the rest of the world. However, for the time being, the market remains small. Hence, for the Comité Colbert - the association of the 68 most recognised French luxury brands – India provides only €70 million in revenues compared with €30 billion of business worldwide. If you take the 10% to 25% of revenue usually spent on advertising by these luxury brands and affect a generous 40% allocation invested in magazines, you are left with just €3 and €7 million a year which will find its way to the advertising pages of Indian magazines.
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NEW ZEALAND
Growth over
previous yearMagazine Advertising
(in million NZ$ and
at current prices)
2006
2007
2008
-3.5%
-2.0%
2.0%
251
246
251
Real GDP growth has been disappointing over the last two years, although the second quarter in 2007 showed the fastest pace in 2½ years and topped the 2.6% increase expected by economists. ZenithOptimedia points out that TV cost inflation is becoming a major issue in New Zealand where “younger audiences are in decline, with a notable decrease in TV viewing in the 25 – 34 age group.” This situation does not appear to benefit the magazines which, despite a large share of local advertising spending (11.7% estimated in 2007), remain concentrated among a few owners.
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THAILAND
Growth over
previous yearMagazine Advertising
(in million Baht and
at current prices)
2006
2007
2008
-0.4%
2.5%
7.0%
6,748
6,914
7,398
Higher public spending is fuelling economic expansion, but the steady appreciation of the Thai Baht has lowered export growth. Thailand’s Finance Ministry has maintained its 2007 economic growth forecast at 3.8% to 4.3%. Thailand’s robust series of magazine launches over the last three years has increased the share of media spending in magazines to 7.1%.
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INDONESIA
Growth over
previous yearMagazine Advertising
(in billion Rupiah and
at current prices)
2006
2007
2008
2.9%
25.2%
20.0%
1,247
1,561
1,874
Despite the impressive performance of the magazine industry, the Indonesian Government has taken a series of conservative measures which are not attractive to foreign media investors. Beyond the existing ban on foreign ownership, in April 2007 the Ministry of Information and Communication issued a 25-page decree demanding that all advertisements must be produced by local companies. Severe restrictions have been imposed on the use of foreign talent as well. These measures - along with the US$106 million court order against Time Inc. for its reporting in Time magazine about the former dictator President Suharto – make Indonesia less than compelling for international magazine publishers.
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SINGAPORE
Growth over
previous yearMagazine Advertising
(in million Sing$ and
at current prices)
2006
2007
2008
26.0%
6.6%
4.7%
121
129
135
While housing prices rose, triggered by a sales tax increase, Singapore’s consumer prices were up by 2.6% last July - the biggest leap in 12 years. However, the luxury segment benefitted from the boom and it is believed this is spreading to magazines. In its Worldwide Media and Marketing Forecasts, GroupM predicts magazine advertising spending in Singapore will grow by 10.1% in 2008, following the 7.3% forecast in 2007.
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MALAYSIA
Growth over
previous yearMagazine Advertising
(in million Ringgit and
at current prices)
2006
2007
2008
-2.5%
1.3%
2.5%
156
159
164
With just a 2.9% share of a very small advertising market, Malaysia finds it a challenge to develop a real magazine industry. The country remains the smallest market in the region, along with the Philippines and Vietnam, with annual magazine advertising spending below US$50 million.
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