Uk Media Market Report Q2 2021 Analysis and Q3 2021

Distribution: external brand owners Territory: UK Date: 27.05.21

UK MEDIA MARKET REPORT ONLINE

PRINT Q2 2021 ANALYSIS AND AUDIO

Q3 2021 FORECAST OOH

CINEMA

TL;DR TOO LONG; DIDN’T READ

The fantastic sporting schedule and the return of flagship programming bring the potential for significant viewing figures and plenty of must-watch TV moments. However, the continued proliferation of how and where we watch, combined with increased demand from brands, mean taking advantage isn’t straightforward. Early-mover advantage could determine the winners and losers come the autumn. SEE FULL REPORT

ONLINE

We’re expecting a jump in pricing over the next few months, though to a lesser extent than originally anticipated (we’ve not seen the same rush back to the market as after the first lockdown). As restrictions ease budgets will increase and dormant advertisers will re-enter the market, growing the demand for addressable audiences. SEE FULL REPORT

With encouraging signs of recovery and innovative opportunities arising, the outlook is positive for publisher brands as they continue to adapt to changes in consumer behaviour. And while millions of us are still likely to be (at least partially) working from home in Q3, we’re expecting brands to continue making the most of this through letterbox media campaigns. SEE FULL REPORT

AUDIO

Listenership soared across radio, podcasts and digital audio over the past year. With post-lockdown working habits likely to be slow to change, we expect audio to continue reaching more audiences than ever before. RAJAR hopes to return later this year in what would be the most widespread and robust research into radio listening in over a year.

SEE FULL REPORT

OOH

After a challenging 14 months for the out of home industry, audiences are back and so are advertisers. Our advice is to brief early to avoid disappointment. The latest forecasts expect to see roadside audiences return to pre-Covid levels by 21st June, with transport reaching around 75% by the start of September. SEE FULL REPORT

CINEMA

While admissions aren’t forecast to return to their pre-Covid levels just yet, early signs are promising. With a slate of postponed blockbusters to come, this channel is likely to go from strength to strength.

SEE FULL REPORT AV

Q2 market conditions • A recent AA/WARC report carried some heartening news for marketers, with the overall UK ad market set to grow by 15.2%1. Within this, TV is forecast to grow by 8.8%, which (while impressive) would still see the year track behind 2019 spend levels overall. • What we’ve seen in Q2 so far would both appear to confirm this but also leave open the possibility that 2021 might reach the same overall levels we saw two years ago.

• We are currently expecting revenue for Q2 to finish anywhere from +70% to +80% vs 2020. While this figure comes with the caveat of a much lower than normal base, there’s no doubt that the easing of lockdown restrictions and growing optimism has fuelled increased spending.

• A return to growth has been further aided by the policies of all main saleshouses regarding late money and the more relaxed 4-week AB deadline (which continues to operate). • While positive in many regards, this makes forecasting a trickier business. The results can sometimes be significant: in some places, the price of TV in May rose by 20% compared to initial release only a few weeks prior. • In our last report, we wrote that there would “likely be high levels of inflation in Q2” and have been proven correct. In addition to revenue, impacts across many audiences have seen double-digit decline vs the same period in 2020. 2020’s high base partially explains this (creating somewhat of a false perception). However, advertising revenue is indeed returning to market at the same time as viewing is beginning to return to pre-Covid levels. • June is a significant month for the nation as we wait to see if lockdown will truly end or if restrictions carry on beyond the 21st. From a TV perspective, we expect to see a surge in viewing around the Euros and Love Island (both were postponed in 2020). As well as being must-see TV for many, meaning a higher chance of live viewing, they are a healthy source of 16-34 impacts in a traditional linear space.

What to expect in Q3 • Q3 will start very much in the same vein as Q2, with the Euros and Love Island continuing throughout summer. The Euros will be into the knockout stages come July, and the hope is that all or at least some of England, Scotland and Wales are still in with a chance. Should this be the case, we can expect a surge of late money into market (not forgetting that some games will be exclusive to the BBC). • This is not to say that only ITV will benefit (although clearly, they are the main beneficiaries): both Channel 4 and Sky will be hopeful that their flagship programming sees an upturn in non-linear viewing over the summer. Given the importance of BVOD in the coming years, a strong performance here will be warmly welcomed. • Looking further ahead, we could see further investment in market from the Olympics and Paralympics partner brands (assuming both go ahead). Savvy planning will be essential to create an association with the Olympics as the lion’s share of viewing will be delivered on the BBC. The Paralympics on Channel 4 offer an excellent chance for brands to be associated with this content. At the same time, the return of Premier League and other club football in August will see Sky look forward to a strong end of Q3.

• All three main broadcasters share a deserved sense of optimism surrounding their non-sports scheduling. We’re beginning to see the return of new TV content after the pause in production over the last year. It’s hoped this will mean viewers who fell back in love with TV in 2020 don’t abandon it in 2021. Given the planned lack of restrictions in Q3, it’s highly possible that viewers choose to enjoy this content in increasingly non-linear formats.

• In Q3, we should see the return to more normal indices when analysing revenue performance. By July last year lockdown had begun to ease and thanks to increased optimism and government support (e.g. Eat Out to Help Out), the market was much more buoyant. That means that Q3 is likely to show some growth of circa +5% vs 2020, but the higher base than we’ve seen in Q2 means it will be a challenging period for TV trading.

Advice for brands • Book early. Revenue looks to be strong for Q3 so saleshouses are in a better position to put premiums on late spots or turn money away • Try something new. The market is going to be challenging, and you could be at risk of delivering a lower share of voice than usual. Maximise your 1+ cover by diversifying your AV approach to include BVOD and CTV as well as traditional linear - these channels are experiencing strong post-lockdown growth • Audience first. Don’t look at AV in binary terms; it isn’t linear or VOD, it should be a balanced view of who you want to reach and in what content

1 AA/WARC Expenditure Report April 2021 ONLINE

Q2 market conditions • Last quarter we projected an imminent uptick in the CPMs required to win auctions on the open exchange. This has happened, but more slowly and to a lesser extent than anticipated. • Average CPM rates have remained lower year on year throughout Q1 despite signs of gradual recovery. However, as we now move into the second year of Covid, year on year changes become less helpful in identifying what’s happening. • What’s clear, looking at effective CPMs from across our pooled data, is that we’ve not seen the same rush back to the market as we did at the end of the first lockdown. While costs are now trending upwards, they’re doing so more slowly than we might have expected.

Pooled eCPMs vs Covid-19 Cases

1,400,000

1,200,000

1,000,000

800,000 CPM 600,000 eported cases R 400,000

200,000

Jul-20 J an- 21 Feb-21 Apr-21 Mar-20 Apr-20 May-20 Jun-20 Aug-20 S ep- 20 Oct- 20 Nov-20 Dec- 20 Mar-21 May-21* Jun-21*

Average eCPMs Reported Covid Cases (UK)

What to expect in Q3 • We still anticipate a significant jump in pricing over the next few months, though we have revised our expectations as to the extent of this downwards. • Although the increase in costs may be smaller in volume and slower to take effect than expected, the upwards pressure is likely to prove inevitable. As lockdown eases, advertising budgets will increase and dormant advertisers will re-enter the market, increasing the demand for addressable audiences. • The easing of lockdown and return to more typical working patterns is likely to shrink the amount of time consumers spend online, reducing the supply of impressions. An increase in average CPMs seems unavoidable.

• By the end of Q2, we’re anticipating average costs in programmatic advertising to have returned to more or less the same level as before the pandemic.

• Search and social will be subject to similar forces, but this will manifest in different ways. • Search is likely to see a significant uptick in investment from previously dormant sectors (e.g., travel), but this will be localised to relevant keyword auctions. While for travel brands traffic will be expensive and hard-fought, this shouldn’t necessarily be true of other verticals/auction sets. • Social is likely to see the impact of a decrease in audience size driving costs up. Quantifying this however is essentially impossible, especially with the impact of iOS14 still playing out. This is causing fluctuations in investment and performance unrelated to Covid and will cause some unpredictability for the time being.

Advice for brands • Be prepared. Accessing relevant inventory might become costly with little warning, so having close control of budgets and clear sight of KPIs is vital • Flexibility is key. Rather than having fixed CPAs in place as targets, consider having flexible ranges – what’s achievable in April may be unrealistic in May. Make the decision now as to what a minimum acceptable return on your ad spend is, because things may be about to become more challenging • Look to your website. Make the most of the traffic you generate. Invest in landing pages and conversion rate optimisation as the relative cost of each potential customer arriving at your website is likely to increase over the coming months PRINT MEDIA

Q2 market conditions

• Print media continues to evolve, with many publishers fast- forwarding their digital strategies. This is alongside acquisitions, amalgamations, restructures, and title reviews taking place in Q2.

• The latest newspaper ABC results from March saw signs of recovery with month-on-month circulation increases across all daily titles. The entire market was up 4.7% compared to Feb, with the Mail seeing the highest rise at 2%.

• Commuter titles have been making huge gains, with the Metro (UK) rising by 15.9%. With London beginning to reopen and more people going back to work in the office at least part-time, we saw the London Evening Standard and Metro (London) increase by 10.7% overall month-on-month. • In a move unthinkable a few years ago due to rivalries between newsbrands, Telegraph Media Group has outsourced its print advertising sales to Mail Metro Media (owners of the Mail, Metro and I). The idea is to provide an easier route to market while allowing the Telegraph’s in-house team to focus on growing partnership and content opportunities. • Future continues to grow its media footprint both in the UK and USA. Since purchasing TI Media (formally Time Inc) last year, it’s now acquired price comparison site GoCompare. This will give them a wealth of first-party data to target users across their portfolio of sites. They have also just announced the purchase of Marie Claire in the USA. • Hearst have reviewed their print titles and reduced the frequency that some of them are published. This is in the context of digital growth of +31% unique users year on year and social media audiences continuing to grow. • In the first lockdown, we saw record levels of interaction with mail and positive increases in commercial actions (a JICMail study showed a 50% increase in door drop response rates and an 11% increase in direct mail open rates). In a recent study it was reported that 18-34s say they’re engaging more with mail, something typically associated with an older age group.

24% of 18-34s reported engaging more with mail.2

• Provisional data from HMRC shows that almost double the number of house sales went through in March than were recorded a year earlier3. This is good news for brands targeting consumers looking for deals on utilities, home furnishings and insurance. The data Royal Mail collects on home movers can be used to reach this audience as part of a letterbox media campaign. • Paper merchants are issuing warnings of potential price increases from June due to the increasing cost of consumables (pulp, energy, chemicals and transport). Pulp has seen dramatic increases since the end of 2020 and this trend is continuing. Negotiations between paper merchants and paper mills continue to minimise the effects of any increases where possible.

What to expect in Q3 • We expect national press circulations, particularly in the commuter market, to continue growing as restrictions ease

• As we enter the summer period, we’re expecting to see more short-term deals become available. This is likely to include digital display as well as press and inserts

• Expect to see publishers offering more opportunities in e-commerce and affiliates on their sites as it becomes a key part of their emerging revenue strategies • Publishers will continue to focus on advancing their audience insights and gaining first-party data, giving brands more opportunities for highly targeted digital advertising in a post-cookie world • Q2 and Q3 are traditionally the quieter periods of the year for inserts in national press and magazines due to fewer advertisers being active during the summer months. Having said this, we’re seeing some ecommerce brands make the most of the increased availability and softer pricing by testing inserts for the first time

• With millions of us still likely to be (at least partially) working from home in Q3, we’re anticipating advertisers will continue making the most of this new way of life through letterbox media campaigns

• As we start to trade with Mail Metro Media across a broader portfolio of titles, it will be interesting to see what new opportunities arise and the benefits of cross-title trading • On the back of last year’s record year-on-year growth for ecommerce’s share of total retail sales4, we’re seeing more and more ecommerce brands accept advertising within their parcel deliveries. We have several ecommerce brands that have newly opened their parcels to advertisers from Q3 onwards, and we expect this trend to continue

Advice for brands • Think publisher brand and not just print. Publisher brands continue to evolve, and there are various ways you can work with them across the whole marketing funnel. Please speak to your client director for more information • Be prepared for short-term opportunities. Across July and August, we’re expecting short-term opportunities across print and digital display. Have your base artwork ready and let us know you’re in-market to receive deals. For inserts, you should consider printing additional volume to take advantage of increased availability and softer pricing in national press and magazines • Re-engage with commuter titles. If you exited the commuter title market, it might be time to start thinking about re-engaging. Rates will always be negotiated based on current circulations, but the product/service you offer should be considered when thinking about re-entering (as not everything will be relevant to all readers just yet) • Make the most of home mover data. This data has increased significantly due to the recent housing boom. Brands who want to reach consumers on a furniture shopping spree, signing up to new utility providers and buying things like home insurance should think about using this data for direct mail campaigns. Royal Mail has several discounts available to encourage new direct mail advertisers; please speak to your client director for more information • Get prepared to print. To reduce the chance of increased print prices later in the year (because of increased paper prices) now is the time to get forward orders in to secure current market rates for Q3 and Q4 activity • And do it sustainably. Consumers are actively looking for brands that care about the environment and make ethical choices. A study from Nielsen reported that 66% of people say they’re willing to pay more for sustainable brands and another from The Carbon Trust reported that 55% of young people in the UK say they would be more loyal to brands seen to be reducing their carbon footprint. If you’re interested in carbon-neutral printing or offsetting carbon emissions completely, please speak to your client director

2 Royal Mail MarketReach, Coronavirus Research, Trinity McQueen 2020 3 HMRC, April 2021 4 Office for National Statistics, 2020 AUDIO

Q2 market conditions • With radio consumption buoyed since the pandemic began and key verticals such as travel back in-market, there’s been a surge in demand from advertisers. This translates into pressure on availability across key networks, including Heart, Capital, Radio X and Virgin, and across talkSPORT and sports podcasts throughout the Euros. • Bauer has just announced a premium, ad-free service across Scala Radio, Jazz FM, Planet Rock and Kerrang! for £3.99 per month. It’s an innovative move that looks to draw in those who are brand loyal but put off by commercial advertising. It’s unclear whether the demand is there for this kind of offering, but definitely a case of ‘watch this space’.

What to expect in Q3 • While normality is slowly returning to the UK, it appears home working is here to stay (KPMG reporting that just 31% of businesses expect their working operations to return to normal this year). • The impact of this on audio is likely to be the continuation of the listening habits we picked up in 2020, which saw: • A staggering 66% increase in online listening hours and 142% increase in smart speaker listening5, increasing the potential of platforms like DAX and Octave • The boom of podcasting, which grew 45% in 20206, driven by a desire for premium content and an increasing number of celebrities (from Michelle Obama to Louis Theroux) taking the mic • Spotify going from strength-to-strength with a 33% increase in monthly active users in 20207

• With widespread international travel unlikely to happen this summer, we’re expecting unusually strong listening during the summer holidays

• Radio’s measurement body RAJAR has been unable to undertake its quarterly listenership studies since the start of the first lockdown, with the channel being traded on historical data. • However, preliminary research is launching now with the hope of a return later this year. This would be the most widespread and robust research into radio listening in over a year and would become the updated currency for station listening numbers

Advice for brands • Plan and book campaigns early. Particularly if you are looking to align with the most in-demand stations or cultural or sporting events • Tailor creative. With more advertisers using digital audio and podcasts alongside radio, brands must tailor creative for the environment. The intimate and one-to-one nature of podcasts and the more distracted and fast-paced nature of radio are worlds apart. We have in-house creative teams with a wealth of experience that can advise • Leverage the gap. There’s a lag between announcing listenership numbers and trading upon them. Please speak to your client director for more information on how to maximise the value of your campaigns in the interim period

5 Bauer internal data 6 Acast 7 Spotify internal data OOH

Q2 market conditions • Since the government announced the roadmap, we’ve seen mobility return – with some environments at their highest levels since the pandemic started.

Roadside Retail Rail 94% 74% 40%

Central London Underground workplaces 53% 38% of pre-Covid levels Source: Department for Transport Data (Driving, Underground – 17th May, Rail – 10th May 21), and Google Mobility Data (POI – 15th May 21)

• Roadside audiences are at around 94% of pre-pandemic levels. • The opening of non-essential retail has seen these environments driving footfall once more (74%). This will likely spike again with indoor hospitality and leisure now open. • Workplace mobility has seen a slight increase in the past week, with around three in four now leaving home for work (to some extent), with this reducing to 53% in central London (which has a higher proportion of office workers). Demand for gyms and pubs may drive further increases in workplace mobility over the next few weeks. • The slowest environment to recover continues to be transport, though with underground mobility at 38% and rail at 40% this is at its highest levels since Covid began.

What to expect in Q3 • The latest forecasts see roadside audiences return to pre-Covid levels by 21st June, with transport reaching around 75% by the start of September

Underground mobility Underground 100

0 1/1/2021 2/1/2021 3/1/ 2021 4/ 1/2021 5/1/ 2021 6/1/2021 7/1/2021 8/1/2021 9/1/2021

Upper Bound Forecast Lower Bound Actual Underground

Source: Rapport forecast / DFT historic (19th May 2021). 7-day moving average, week ending 17th May.

• Whether the shift in working habits means transport will ever reach previous levels is still to be seen (and for agencies to push to reflect in pricing). • With optimism returning to the market, buoyed by a summer full of sports and events, availability is already limited in Q3. • Key static 6 and 48 sheet availability is already very tight, with many incharge dates completely sold out between now and September. While demand starts in these formats, it has already begun to trickle down to digital equivalents (D6s and D48s) as well as bus formats.

Advice for brands • Book early to avoid disappointment. Availability is becoming tight for the remainder of the year; brands should be looking to brief OOH activity four months prior at a minimum • Move fast. With demand beginning to outstrip supply, media owners are pushing for strong yields after a tricky year. While this makes trading more challenging, there are still strong value-led deals to be done for brands who can be reactive with budget and move quickly on creative CINEMA

Q2 market conditions • With cinemas across England, Scotland and Wales back trading as of the 17th May (and Ireland as of 24th May), the doors are open to both the public and advertisers alike. • The latest data from Cinema First shows that 38% of audiences plan to return in the first month of sites reopening, and another 34% within the first few months.

• Early signs that audiences are delivering on these intentions are positive, with 1.2m admissions across DCM’s opening week – a considerable performance compared to the previous Covid peak of 770k admissions in July for the opening week of Tenet.

What to expect in Q3 • As restrictions continue to ease, expectations are that admissions will increase to around half of those seen in 2019, with c.8m admissions forecast for July, and it’s anticipated this will stay level throughout August and September. • In October, admissions are forecast to rise to near 2019 levels as the big-name releases that were held back come to our screens (James Bond’s No Time To Die is locked in for 30th September).

2021 UK cinema admissions forecast

20.0 2019 18.0

16.0 2021

14.0

12.0

10.0

8.0 Industry Admissions By Month(m) By Admissions Industry 6.0 Industry admissions (m) months by 4 .0

2.0 2020

0.0 May Jun Jul Aug Sep Oct Nov Dec

2019 202 0 202 1

UK cinema admissions:

2019 2020 2021 (forecast) 176m 44m 66m

SOURCE: DCM

Advice for brands • Take an audience-first approach. When cinemas reopened from July-October in 2020, the audiences skewed significantly younger, highlighting a potential opportunity to reach 16-34s in a premium environment. With horror films also historically attracting younger audiences, June’s film slate will appeal as two sequels hit the big screen: ‘The Conjuring: The Devil Made Me Do It’ and ‘A Quiet Place: Part II’ • Context matters. There are opportunities to align more closely with content through gold, silver and bronze packages – if there’s a film that has a strong audience or contextual fit with your brand, we can look to build out a bespoke package