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April 4, 2008

Have you seen the price of bread lately?

By Peter Kirwan MM blog

As if the credit crunch wasn’t enough, Marketing informs us that Premier Foods, the company that makes Hovis bread, has cut its marketing budget in response to a doubling of wheat prices during 2H07.

The cost pressures have been caused by a rise in demand in Asia; substitute farming of biofuel crops; and poor harvests.

Premier Foods doesn’t feel like it can pass on the entire increase to consumers. Presumably, retailers won’t allow this, either. So the media is taking some of the heat in the form of budget cuts and yield cuts.

Add this to the frightening spectre of banks that don’t want to extend mortgages — they too can safely cut their ad spend — and we’re looking down the wrong end of a nasty correction.

I never did buy the Advertising Association’s prediction that spending on TV ads would rise by 0.8% during 2008.

And when the Institute of Practitioners in Advertising recently published a report underlining the benefits of maintaining ad spend during a recession. . . well, that felt a bit like trying to hold back the contents of the Grand Coolie Dam by reciting your four times tables.

Nope: TV is going down. And national press advertising is going with it, too.

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Marketing quotes one ad agency buyer who suggests that this year’s TV ad revenues might be 3% down on last year. Another suggests 8%. Helpfully, Marketing predicts a shortfall of £100m.

Ad buyers have an incentive to talk down the market: it helps to panic media owners into softening their rates. But I don’t doubt that one or both of Marketing‘s sources will prove to be correct.

£100m? You could produce a lot of local news bulletins with that. Or a lot of web content.

Presumably it’s a coincidence that ITV.com this week bade farewell to head of broadband Annelies Van Den Belt.

Van Den Belt only joined the company a year ago after a successful stint running new media at the Telegraph and News International. Now she’s off to Moscow to run LiveJournal, the blogging platform recently acquired by Russian publisher Sup.

Simultaneously, Five has just announced that it’s shutting down its interactive TV service — that’s the stuff that becomes accessible during programmes by pressing the red button. Apparently, it’s not “cost-effective”.

Five has struggled to make its red-button investment pay since 2004.

In a recession, once-daring initiatives rapidly start to look like tacky baubles. The process of Big Media retrenching back to its core assets — print, TV and those bits of the web that generate proven profit — has started in earnest.

As for the rest: if your office building currently contains a large proportion of thirtysomething blokes who wear Joe 90 glasses and have the words “business development” in their job titles, rest assured: it will contain a lot fewer of them in a year’s time.

Once the ad budgets start to contract, it’s only a matter of time before the digital business development executives feel the edge of the Reaper’s blade.

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