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Traditional Media to Struggle, Internet & Overseas to Soar during Recession

If the U.S. is indeed in a recession, as some analysts are already saying, it is the online companies and companies that are diversified overseas that will survive and perhaps even thrive. Broadcasters, magazine publishers, newspapers and cable operators may be in for stormy seas.

Expecting that a recession will cause further cutbacks in advertising spending - which saw its slowest pace in five years during Q4 07, according to Bernstein Research - Goldman Sachs has adjusted its price targets for big media companies from 12 months out down to six months, presumably because the market does not have enough clarity for analysts to make a year-long call, writes Fortune. It also cut price targets for top media companies by 10 percent.

But while advertising growth overall was anemic in Q4, online advertising grew by 27 percent in 2007, to $25.5 billion, according to International Data Corp. During a recession, when advertisers will need to be sure that their (possibly reduced) budgets are being spent in the smartest way possible, growth in online advertising - where advertisers can immediately measure and assess the effectiveness of their ads - is expected to continue.

eMarketer predicts that online adverting spending will be up 23 percent over 2007 spending.

Though Goldman Sachs analyst Ingrid Chung expects a recession to hurt large-cap media and entertainment stocks, Cowen and Company analyst Doug Creutz says Viacom and News Corp. may weather a recession well. Viacom’s cable networks can rely on subscriber and affiliate fees to offset a slowdown in advertising, while News Corp. could fare well because of its global operations. “We believe international markets offer, 1) lower near-term risk in the event of a recession, and 2) better long-term growth opportunities,” he wrote in a note to investors.

Some studies from within the advertising industry do not predict such a gloomy outcome. According to a new report from Informa Telecoms & Media (via MarketingCharts), for example, TV advertising net revenues worldwide will reach $123 billion in 2008, up 5.8 percent from 2007, thanks in part to the impact of the Olympics.

In 2007, global TV ad revenues were up 3.5% from 2006, Informa said.

North America is expected to account for the majority of the 2008 revenue - nearly $46.3 billion - followed by Western Europe at nearly $32.2 billion.