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Tag: year
2009-01-06 01:38:53| Influential Interactive Marketing
2009-01-05 01:44:38| Advertising Age - Homepage
Right now, it is hard to write any real happy endings -- especially about the state of diversity in advertising -- when tough decisions are being made daily, budgets are being cut, accounts are being lost and, with them, jobs.
2009-01-05 01:04:45| Guardian Unlimited Business - more business news
Normally around this time you wish everyone a happy new year and think of reasons to be cheerful. But that is a tough one given that the economy in 2009 is facing its worst year since the second world war.While we are off the map as far as where we are going, we can be confident, unfortunately, that a million people are going to lose their jobs. A million.The economy began to turn down in earnest last year amid collapsing house prices and banks but this year is going to be a whole lot worse as the credit crunch exacerbates and gives way to a deep recession and lengthening dole queues.We are in uncharted territory because we have never had such a credit crisis in the middle of a recession. Usually recessions are caused by a leap in oil prices or a jump in interest rates but this time is not the same at all so we don't know how bad it is going to get. Unemployment rose from 1.6 million to almost 1.9 million between January of last year and October - the latest month for which there is data available. It is likely that when the December figures are released in February, they will show a total of 2 million unemployed. Many experts think that will rise to 3 million in the current recession.After all, it did in the recessions of the early 1990s and 1980s so there is no reason to think that won't happen this time. Friday's manufacturing survey from the CIPS showed employment in the sector falling at its fastest pace in the report's 17-year history.It is anyone's guess how long this recession will last but, given the high levels of household and financial sector debt, it could last longer than usual. We have already had two quarters of contraction - the third quarter of 2007 saw the economy shrink by 0.6% and the fourth quarter will doubtless show an even bigger fall when the first estimate is released this month, confirming what we already know - that we meet at least the technical definition of a recession as two consecutive quarters of contraction. British recessions of the postwar period have typically seen five consecutive quarters of contraction. So, on an optimistic view, we could already be half way through this one. But you shouldn't bet on it. Many economists are pencilling in a contraction of 2-2.5% for 2009 as a whole - twice what the chancellor, Alistair Darling, forecast in November's pre-budget report.There is only one year in the postwar period that can match that - 1980 when the economy shrank by 2.1%. So we could easily be entering the worst year since records began in 1948.And we could well suffer more than five quarters of loss of output, especially with Barclays' chief executive John Varley warning that bank lending may not return to normal for another two years.Free-flowing credit Modern economies - especially Britain's - depend on credit flowing freely through the economy and that is still not happening more than a year after the credit markets froze in August 2007 and a month later brought down Northern Rock.So the question is, what on earth can be done about it?The good thing is that the Bank of England, prompted by monetary policy committee member David Blanchflower, has woken up to how bad things are. Between October and December it cut interest rates sharply to a joint, all-time low of 2% and is almost certain to cut them again this week, probably to 1%. Many analysts, who have also finally woken up to how bad things are, expect rates to be cut to zero or thereabouts in the next couple of months. The Bank and Treasury are also working on non-conventional measures to reflate the economy, known as "quantitative easing". This is born out of a concern that reducing the cost of credit is all well and good but it may not make much difference if that credit is not available.This is likely to involve the purchases of instruments such as government or corporate bonds from domestic holders of those bonds, thereby pouring extra cash into the economy.The Treasury, which is panicking about a so-called "liquidity trap", is leading the way on this new kind of policy, in addition to Darling's tax cuts in the pre-budget report.All of which means that policymakers are throwing the kitchen sink at this recession in order to bring the economy back from the brink. They may also have to take further actions to fully nationalise several banks if lending remains frozen.The budget deficit and national debt are blowing out as Darling risks everything to stop Armageddon. The government may well have to launch a US-style fiscal stimulus worth, say, £100bn to try to prevent a depression. It is already urgently considering measures to stop unemployment going through the roof.There will be a hangover in the future as the deficit and national debt have to be brought back under control but in the short term that is not the issue.One good thing as far as hard-pressed consumers are concerned is the fall in the price of oil. That has brought petrol prices down and will also eventually be reflected in lower gas and electricity bills, putting some money back in people's pockets.Prices of many goods in shops are also being slashed as shops try desperately to persuade us to part with our cash. The effects of falling oil and goods prices threaten to push us into deflation this year - something else policymakers are desperate to avoid, knowing how harmful the Japanese deflation of the 1990s was.Firms, particularly exporters, are in theory being helped by the big fall in the pound's value over the past year. The problem is, though, that world demand is so flat it may not help them increase sales volumes. But it will, at least, help margins. Taken together, there is a huge easing of policy and monetary conditions to offset the effects of the credit crunch. The playing out of these two opposing forces will determine to a large extent the point at which the economy begins to pull out of this recession.First-time buyers There is another uncertainty and that is the housing market, where prices that are in freefall could have a long way further to fall. A few new year estimates from bodies with a vested interest say we are close to the bottom. That seems very unlikely. Prices have fallen 20% from the peak in the autumn of 2007. Add in inflation at about 6% over that period and you have a real terms correction of a quarter.True, interest rates are now very low. But so are mortgage approvals - at a record low in fact. First-time buyers can't get loans and don't want them anyway because house prices are falling.A year ago I forecast that house prices would fall by a third in nominal terms in this downturn. That would mean roughly another 15% from where we are now. That is now looking conservative - especially as they were so over-valued at the beginning of the fall and because house prices tend to overshoot on the way down as well as on the way up.That is, of course, good news for all those who have been unable to get a foot on the property ladder over the last decade or more. And it is also good because it teaches people that house prices are not a one-way bet - something that far too many people had forgotten in recent times.ashley.seager@guardian.co.ukEconomicsHouse pricesRecessionPropertyUnemployment and employment dataManufacturing sectorBankingMarket turmoilguardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds
2009-01-05 01:02:32| Guardian Unlimited Business - more business news
This year promises to be a watershed in British broadcasting. By the end of this month we will have the options of a rescue package for beleaguered Channel 4, and of relief for ITV from some of its regional commitments and restraints - with Ofcom giving its final policy recommendations to the government from the public service broadcasting review in two weeks' time.The regulator spent the end of 2008 tackling the cuts faced by regional programmes, news, religious, arts and children's programmes. It came up with a public service contestable fund, which would allow providers, including existing broadcasters, to bid for funds for broadcasting in these areas. There are objections to this plan - concerns that it could result in unwatchable content, and that this form of funding is a way of raiding the BBC licence fee, for which support is weakening. But even if topslicing the licence fee appears increasingly unpopular, Ofcom has been looking at using BBC Worldwide to give C4 direct financial relief. This idea has run into even stiffer opposition, particularly from the BBC, which has proposed a range of partnership deals - including sharing the iPlayer - but Ofcom's chief executive, Ed Richards, insists it will appear in the final list of options. This despite a hardening line that C4 should not be given a direct cash subsidy - lobbyists including ITV and Channel Five and critics point to the broadcaster's high salaries and the problems that direct funding would bring to a provocative, independent C4. There are also problems with state aid: an attempt by the DCMS to give C4 £14m of licence-fee money for digital switch-over costs in 2007 fell foul of European Commission state aid rules.This is the final year of Luke Johnson's chairmanship of C4, and he will be hoping for a face-saving deal before a successor is announced by Ofcom. But any Plan B for an independent C4 rests on it shrinking back to a commissioning base and building up assets by owning its programmes. Ofcom is opposed to the privatisation of C4 and believes in its importance in providing plurality to the BBC. The idea of uniting C4 and commercially owned Channel Five to create a broadcaster of greater scale was floated - and abandoned - four years ago. It was unclear how it could possibly work.As if that weren't enough excitement for the new year, around a week after Ofcom gives its recommendations, Stephen Carter, the communications minister, will publish his initial report on Digital Britain. Beyond C4, he will concentrate on accelerating the spread of broadband to every UK household - access that he sees as "potentially transformative". But he accepts there is a serious issue in the future funding of children's programmes, impartial news, and the reduction in real terms in the price of television advertising. Unlike Richards, Carter has political power. But he cannot fix everything. and his review is unlikely, for example, to find a way to fix digital radio.Overhanging all of this is the recession - the woes of broadcasters are dwarfed by those of the rest of the economy. The government, wary of begging, has in any case allocated no time in the current session of parliament for media or communications legislation, required for a change in status for C4. But Carter points out that does not mean inaction - and he will almost certainly draw up the agenda for a communications green paper this year. But that could be sunk by an election in 2010 that the Conservatives could win.Overall the crunch means there is scant chance of extra public money coming into the broadcasting system through, for example, the Ofcom-led auction of freed-up spectrum that will start during the year, as digital switchover accelerates. The proceeds are now expected to go to the Treasury. The option of an industry levy on digital media to support public service content remains open, but there seems little support for this.Ofcom will have a new chairman from April 1 and could see a change of approach. For its part, the BBC Trust faces the challenge of cementing its authority, and updating editorial guidelines after Sachsgate. In February it will propose tougher limits for BBC Worldwide's commercial expansion, demanding it focuses on BBC programming. Ofcom will also decide how to spend the £68m once earmarked for local video news to bolster its most important public service strands.For advertising-funded channels, the crisis looks set to worsen - and Michael Grade's performance as executive chairman of ITV is coming under scrutiny. ITV is expected to confirm it cannot maintain its £1bn a year investment in original British content.Ofcom and the Office of Fair Trading will pronounce shortly on the future of the contracts rights renewal (CRR) mechanism, which holds ITV's ad prices to 2003 levels. Abolition seems out of the question, but ITV expects to get some relief, perhaps by being able to raise rates for spot adverts in blockbusters. The downside could be that its digital channels are included in CRR.BSkyB and presumably its subscription services mark 20 years of broadcasting on 5 February, and the chief executive, Jeremy Darroch, with 9 million subscribers, appears relatively bullish. But BSkyB has not faced a recession so deep before. It believes bargain broadband will help to stabilise subscriptions. It also intends to fight to keep its 17.9% stake in ITV.Along with Setanta, it will watch with huge interest the government's review of listed sports events - the culture secretary, Andy Burnham, is thought to be keen to add to the list, regarding the loss of test match cricket to subscription services as a mistake.TelevisionOfcomPolitics and the mediaAndy BurnhamChannel 4ITVITVguardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds
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2009-01-04 01:07:49| Guardian Unlimited Business - more business news
After the orgy of spending and overeating that is Christmas, for many the new year is about losing weight. But this year, recession has put the high street on a crash diet too.In the closing stages of 2008, the shortage of credit set in train a domino effect that sent 10 big retail chains from Woolworths and Zavvi to The Pier and furniture giant MFI toppling into administration."So far the retail failures we have seen have all been companies with a history of poor profitability," says Robert Clark, director of Retail Knowledge Bank. "Gift chains like Whittards are always vulnerable as in a recession people trade down or don't buy the gift at all. But from now on it will be quite different because administrations will be retailers that have failed in the short term after missing Christmas sales targets."Analysts say this enforced diet will see the high street lose its looks, at least in the short term. Research group Experian predicts that 30,000 stores - 10% of the country's shops - will lie empty by next Christmas, up from 7% now.But the high street had grown fat and something had to give. Over the past two decades 88m sq ft of new stores were opened. Retailers were lulled into a sense of security as every year for the past decade Britons spent more, with retail sales by value growing at an average of 4% a year. The weak dollar, coupled with cheap goods from China made by its low-wage workers, meant price deflation was also a key part of the picture, enabling consumers to buy more from a greater number of retailers. Indeed, retail sales volumes climbed 4.4% between 1998 and 2007 compared with just 0.8% between 1968 and 1977.But that was then. Last year, food price inflation returned with a bang, with sales volumes in the final quarter expected to have been at their lowest level since 1995. Unemployment is now rising at the fastest rate since the recession of the early 1990s- 100,000 people lost their jobs in November alone - and Investec economist Philip Shaw predicts worse to come: "The crisis has hit consumers hard, especially the reduced availability of credit. At the same time the soaring costs of food and energy, plus sterling's weakness, has eaten into consumers' purchasing power."The pinch is even being felt in the supposedly more resilient luxury goods market. Last month Mulberry said sales of its handbags, some of which cost upwards of £500, had fallen sharply since September. Likewise, Chanel is cutting 200 jobs as the feelgood factor that had kept fashion, perfume and cosmetics sales buoyant evaporates.While some shoppers are just being sensible and curtailing expenditure, others are facing harsh financial realities, having entered the downturn already laden with debt. In the first quarter of last year, household debt amounted to an estimated 160 per cent of disposable income while the savings ratio, which measures the proportion of take-home income that households save, had turned negative for the first time in 50 years. Asda chief executive Andy Bond says: "You can already feel the pressure to be more prudent, more humble, when the less fortunate are losing their jobs and their homes."Although the crisis in the retail economy did not become obvious until the end of last year, many retailers, particularly those that rely on people moving house to generate sales, had been surviving on starvation rations for most of the year. It was only in the final months of 2008 that the excess weight - read Woolworths, Zavvi and Adams - fell away at an unhealthy rate as credit conditions tightened further and consumers thought twice about buying.Asda polled 10,000 shoppers and found that shoppers were seeking either small or bumper packs - if the latter delivered a cost saving - buying more frozen food and scouring shelves for the longest sell-by dates. Meanwhile sales of hair dye kits had jumped nearly 30% over the past three months as women bypassed expensive trips to the hairdresser. Demand for ready meals also dropped as cooks went back to basics, while Asda said that sales of its own-brand tonic jumped 46% as drinkers economised on their G&Ts.Indeed since the last recession Britons have become less bashful about picking the cheaper option - and some upmarket retailers are worried. The middle classes are now happy to shop at discount grocery store Aldi and fly Ryanair if the price is right. "Consumers have stopped paying for services they don't need and I expect to see structural change in our sector this year," says Grant Hearn, chief executive of Travelodge, the budget hotel chain. "Mid-market hotel chains are already falling into administration. All hotel rooms look the same when the lights are turned out."The lights are already being turned off - for good - in stores around the country. So far buyers have been found for just 300 of the 800 Woolworths stores. Many insolvency practitioners predict the situation will worsen this year with more administrations resulting in the company being wound up. The result will be jobs lost and shops left empty, providing passers-by with a daily reminder that the country is in recession. Eyebrows have been raised at the rash of "pre-pack" administrations that saw chains such as USC and Officers Club swiftly bought back by their owners, minus some stores and in some cases minus their debts - a situation that has aggrieved unsecured creditors such as landlords, who are left with no way to recoup their debts from the newly formed company.But restructuring experts say even pre-packs could dry up this year as buyers are deterred by the grim outlook. "Pre-packs or other successful sales of businesses are likely to decline as a percentage of total insolvencies because the money to buy businesses back is drying up," says Asher Miller, a partner at insolvency firm David Rubin & Partners. "We are seeing less interest from trade and private equity buyers who have financial problems of their own."Recession promises to draw a brutal dividing line down the high street, with the weak on one side and the strong on the other. Well-capitalised retailers with strong brands are expected to fare better during the tough times ahead as weaker competitors fall by the wayside. Insolvency experts claim to have a long - and growing - list of retailers with financial troubles that they say will soon bubble to the surface. Analysts have voiced concerns about the future of quoted players such as JJB Sports, Jessops and Clinton Cards, which, like collapsed childrenswear group Adams, are one-trick ponies in markets that have either suffered rampant price deflation or have been colonised by the supermarkets. There are also expected to be more flashpoints in the household sector - Focus DIY, for example has struck a deal with its landlords to pay rent monthly rather than quarterly to ease cashflow.The retail reckoning has arrived with spectacularly bad timing, coming after a year of unprecedented expansion in which 12 new shopping centres, including London's new mega-mall Westfield in Shepherd's Bush, which brought the equivalent of another 3km high street to the capital, opened. The glut of new mouths to feed presents a challenge to centre owners. "For shopping centre owners the immediate concern is the prospect of more retail failures," says Martyn Chase, president of the British Council of Shopping Centres. He says there will be a "flight to quality" that will put pressure on some retail centres while a "new order" of UK towns is forged: "All this new floorspace may draw trade to the stronger centres at the expense of the weaker, particularly when spending is falling.""We are going to see a number of other failures and more names go," adds one senior retailer. "There will be an evolution - the strong getting stronger and the weak disappearing. But it won't be quick; the gestation period is longer. Over the last 10 to 20 years we have seen significant changes on the high street."Of the £288bn spent at the shops in 2008, more than half - £163.6bn - is classed by analysts as "indulgence" spending and is therefore vulnerable in a downturn. Analysts are gloomy about the sector's prospects this year and are steeled for a slew of grim trading updates this month as retailers such as Marks & Spencer report Christmas trading. Bond says customers are now obsessed with squeezing the last penny of value from every purchase: "We can already see how changing attitudes are affecting customers' shopping habits. I don't see this as a short-term response to the recession but a fundamental shift. The economic outlook for 2009 is like nothing we've seen in our lifetimes. It could mean Britain going back to the thrift and austerity my parents' generation saw during the war and the early 50s."Shoe shops that couldn't lastOh, for the days when cellulite was your biggest problem ... The credit crunch has clearly overtaken dimpled thighs as the biggest source of worry with the demise of specialist shoe chain Sole Solutions, which sold "cellulite-busting" trainers such as the MBTs worn by celebrities like Jemima Khan.Until the financial crisis of last year, a buoyant economy coupled with loose credit conditions provided a fertile environment for retailers. The UK high street has one of the lowest barriers to entry in Europe and during the boom years it was easy for entrepreneurs to secure finance. Specialists expanded, selling everything from childrenswear to designer clothing - such as Adams and USC respectively - or niche goods such as Whittards' tea and coffee paraphernalia. And while shoppers eulogise independents, high street sales have drifted to shopping malls and chains such as John Lewis, Next and Primark. Sole Solutions was not the only shoe shop to go under in 2008: larger rivals Stead & Simpson and Dolcis also failed."When the economy is booming and people feel good they can justify buying £150 trainers," says Asher Miller, partner at insolvency firm David Rubin, which handled the administration of Sole Solutions. "In the current climate it is has become more difficult for stores to survive selling a single product that may only really justify a concession within a bigger store. We have seen a correction in the housing market and are now seeing it in the retail sector."Retail industryHigh street retailersguardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds