More evidence of the growing importance of digital as part of a diverse revenue mix comes in a new report from S&P Global Ratings. “Digital advertising remains the growth engine for the advertising ecosystem,” the provider of business intelligence and credit ratings says in its 2023 Media & Entertainment Industry’s Top Trends report.
It calls 2023 “a year of significant uncertainty” for global media and entertainment companies “with many questions related to the long-term direction of the industry.” That’s especially true for ad-supported media companies, the report says, since it views advertising as “the most economically sensitive revenue stream of any media player.”
S&P’s forecast is for global ad revenues to return to growth as the global economy does. Shifts in advertising “may be manageable for the diversified media companies if they have the right asset mix,” it says.
The report looks at all forms of media and entertainment on a global scale with video streaming grabbing the most attention. But the value of having a diversified revenue stream is something not lost on radio broadcasters. Taking stock of radio’s publicly traded companies based on their third quarter 2022 revenue performance and fourth quarter pacings, Noble’s Media Equity Research Analyst Michael Kupinski recently identified the common thread among the radio companies that grew the fastest as their diversified revenue streams.
Back to the S&P Global report, it predicts “shallow economic recessions in key advertising markets” this year, including the U.S. That will result in a pullback in ad spending and hamper ad growth rates. However the impact on the various media will vary greatly with digital and outdoor likely to continue growing while traditional media declines. Global digital ad revenue is expected to grow at a high-single-digit percentage rate in 2023 after a similar growth rate in 2022. “Digital was the first ad sector to experience a slowdown in 2022 and is likely the first to see a recovery in 2023,” the report says.
S&P Global’s forecast calls for digital video and retail media to be the fastest growing digital channels “as both benefit from the continued shift to online shopping, digital video consumption, and connected TV and better demographic targeting provided by VOD viewing.” Digital's share of global advertising spend is expected to exceed 65% in 2023 (it'll be close to 70% in the U.S.) as advertising’s shift away from traditional media “intensifies” this year.
The report also underscores the importance of media companies having access to first party data. “We expect the media companies to continue investing in data capabilities as first-party consumer data ownership and access to such data becomes an increasing competitive advantage,” the report states. Having first party data also helps media companies and advertisers navigate changes in privacy rules.
Download the S&P Global Ratings 2023 Media & Entertainment Industry’s Top Trends report HERE.