Madison and Wall: Saturday Summary
For the week ending July 21, 2023
A busy week to kick off the quarterly earnings cycle, with three of the biggest advertising agency holding companies reporting earnings and posting mixed results. IPG was down, Omnicom was up slightly and Publicis was up by a lot. Despite the divergences, there were some common themes, such as reference to marketers delaying their budget commitments in the face of uncertainty and weakness in spending from technology and telecom companies. Principal-based trading came up on both of IPG and Omnicom’s calls, highlighting a useful new revenue stream that is already an important component of results at Omnicom and Publicis.
Underlying trends are consistent with what I’d expect for advertising in the quarter, especially considering the difficult comparables much of the industry faced.
There was also some media owner advertising data provided by Televisa Univision, whose US operations posted 1% growth, while in Mexico this revenue stream expanded by 14% in constant currency trends. However, declines of a similar scale are more likely for many other owners of traditional TV networks around the world this quarter, as we saw with Viaplay whose Nordic broadcasting operations reported a 16% decline in organic terms.
Of course, that wasn’t the worst of it for Viaplay. As I wrote this week, the company I’d previously been pointing out as a great example of a small company rightly and aggressively pursuing a big opportunity in pan-regional and global streaming made a complete strategic U-turn (alongside a CEO change and the recognition that they wouldn’t be able to meet their financial targets). The company said it was going to revert back to a mostly Nordic-only company instead.
However, the vision may not be entirely dead: Vivendi, owner of Canal+ and a company which has conveyed aspirations to operate its video services at a pan-European level, subsequently bought 12% of Viaplay’s stock. Where this goes from here remains to be seen, but I think it’s important for everyone who follows the global video industry to follow.
Of course, the model for Viaplay could have been Netflix, which also had many obstacles to overcome, but with enough investment was able to position itself effectively atop an industry. Netflix also reported its quarterly results, with a solid subscriber gain in light of recent policy changes around password sharing (and, lest we forget, high levels of viewing according to the latest data from Nielsen’s The Gauge. Much like Omnicom and IPG, Netflix disappointed relative to investors’ expectations, but as with those agency groups, Netflix remains very well positioned for the long-run, especially in light of the ongoing writers’ and actors’ strike that is set to lead to substantially greater damage for most of Netflix’ direct competitors.