Brexit damage starts to hit Irish media companies
As Brexit continues to cast its grim shadow over huge swathes of the Irish economy, it is now crystal clear that it is also beginning to have a major impact on the Irish media industry - in particular, the advertising budgets that go towards supporting it.
This time last year, media companies throughout Ireland and the UK were all assessing the likely impact that Brexit would have on their bottom lines after the shock outcome of the referendum.
While analysts plucked figures out of the sky and scrambled to make sense of what the UK's vote to leave would mean for the industry, a lot of the early forecasts were wide of the mark.
Indeed, the only certainty was uncertainty. And the marketing and advertising industry hates uncertainty.
Fast-forward 12 months and the prospect of Brexit still hangs like a dark cloud over the industry. Except now there has been no major rethink by the British Government, Article 50 has already been triggered and the prospect of a harsher Brexit seems increasingly likely as each day passes.
Unfortunately, we are also beginning to see some of the more tangible downsides of Brexit seeping through into corporate earnings, advertising spend and even the share prices of quoted media and advertising holding companies. Expect more of the same for the next 12 months.
Now that we are half-way through the calendar year, analysts are already revising their full-year forecasts for advertising spend downwards after a few years of modest growth.
Now is the time to look the other way if you are squeamish.
"We have had to revise our original forecasts for 2017 down from growth of 3-4pc at the start of the year to 0pc growth now," says Craig Farrell, managing director of ZenithOptimedia, the Dublin-based media agency, which is part of Core Media.
"The first six months have seen a decline in spends of 2pc, driven by non-digital media channels having a tougher time than anticipated at the beginning of the year. Although we expect this to pick up toward the end of the year, spends will be disappointing.
"This decline has been in part driven by poor client sentiment and general uncertainty, with Brexit being one such example.
"Brexit, in particular, has impacted in a couple of specific areas. The first is in exchange rates and the strengthening of the euro against sterling.
"The impact was that client budgets which are set in sterling don't go as far in euro land than previously, resulting in less budget investment in Ireland," he says.
"The second area is the rise of short- termism. Clients are taking a much shorter view of their brand profitability and have once again stopped investing in a strategic fashion.
"Week-to-week planning is having an impact on being able to forecast the market and this is at the expense of the future value of the brand. Brexit has made this a challenge some brands can't take on."
Farrell's colleagues in ZenithOptimedia in London have noted that Brexit could cost the UK around £70m (€80m) a year, equating to £1bn by 2030, with most media channels bearing the brunt of this decline.
Zenith cited figures from the UK Treasury that examined the post-Brexit scenario from an economic perspective. If the forecasts for a post-Brexit drop in GDP are correct, growth in the UK's advertising sector would be curtailed over the next 15 years, Zenith said, noting that ad growth closely tracks GDP.
"While the immediate effect would be muted, Brexit would have a long-term cost for the UK ad industry, holding back its growth by £70m a year," says Jonathan Barnard, Zenith's head of forecasting in London.
"It would also threaten to make cross- border accounts in Europe more costly and cumbersome to operate."
Here in Ireland, few media companies will emerge unscathed. In a recent newspaper interview, RTE's commercial director, Willie O'Reilly, pointed out that Brexit would cost the state-owned broadcaster between €5m and €6m in a full year, while the uncertainty has also prompted key television advertisers to rethink their marketing plans.
RTE derives more than €20m of its advertising revenues in the UK mainly from media agencies and brands targeting the Irish market. Given the fixed nature of this investment, any unfavourable movement in exchange rates adversely impacts the bottom line. When RTE publishes its annual report in a few weeks' time, we are likely to get a better picture of how Brexit is hurting large Irish media companies, although 2017 is likely to be much worse.
But the uncertainty that still lingers is not good and this is forcing advertisers to be become very cautious, less strategic and to embrace the short termism that is not good for brands, never mind the media industry itself.
And this development is a lot more worrying than any fluctuations in exchange rates.
Sunday Indo Business