Regional media needs a Government advertising boost

Regional media needs a Government advertising boost

TLDR version: Last week we released our advertising expenditure forecast, predicting a 5.0% drop in total AdEx in FY24. We stated that most media are structurally well-placed to weather this storm, but there are important exceptions. The most important is regional media, which will be hit harder than metropolitan media due to its higher dependence on small and medium business clients.

Plunging government advertising isn’t helping. Federal and State Governments need to strengthen their support for regional media in order to protect localism and diversity.

Regional media feeling the pressure of government ad contraction

The problem is particularly acute for print media which has also been hit by rising printing costs, but also affects regional radio and television. We have highlighted the pressure that regional television is under in several reports in the past; some of that structural pressure has been relieved by the Seven West takeover of Prime, and the ever-tighter links between Nine and WIN.

But regional media generally remains exposed to the current macroeconomic headwinds because of its higher exposure to small and medium sized advertising clients in regional markets who are more likely to cut ad expenditure in tough times. National brands, in contrast, are less likely to advertise in regional media.

This increases the dependence of regional media on government advertising, but both Federal and State Government advertising spend is declining in the wake of the pandemic, as highlighted in media reports in the last week.

The importance of government ad spending right now is reinforced by SMI’s May ad spend growth figures, which show that the year-on-year decline in May was almost entirely due to lower government spending. The figures also highlight the outsized importance of government advertising to “traditional” media like FTA TV, radio, and print. This will have a compounding impact on the regional industry because it comes as business and consumer confidence decline with a slowing economy.

There is also concern that some governments are committing a larger share of their advertising budgets to digital media, notably Victoria which is abandoning the metropolitan print market. While growth in digital advertising is inevitable, this shouldn’t come at the expense of regional communities that rely on traditional media to remain informed and to support localism.

This danger was highlighted in the recent “Media Innovation and the Civic Future of Australia’s Country Press” report, which drew together three years of research into regional print media in an Australian Research Council project led by Deakin University in partnership with Country Press Australia and RMIT University. The key finding of the report is that “quality, respected local news is essential to the democratic health and social fabric of communities. It has been clear from our study, however, that there are many factors that, when combined, threaten quality news and information flow in regional and rural Australia”. The report sets out 22 recommendations for the support of print media in regional areas, though many of these could just as easily apply to regional radio and television.

Why does this matter?

Government, particularly the Federal Government, cannot be indifferent to this situation. The Broadcasting Services Act 1992 sets out a framework of objectives covering television and radio (and by implication print). Concepts that stand out are:

• Availability
• Efficiency, competition, and responsiveness
• Diversity of both control and content
• Australian content and content of local significance
• Community standards

Regional media faces an underlying revenue decline driven by digital advertisers and BVOD substitution, threatening policy objectives like content of local significance, diversity and ultimately availability of services. These pressures are becoming more acute.

It is the Federal Government’s own policy objectives that are at risk in regional Australia, and it is the Government that is responsible for their achievement. The Federal Government is therefore the last resort if the market should fail to deliver these outcomes.

This is also one of the occasions that State Government action can be decisive in the media industry, because the States are also important sources of advertising revenue.

Some states, e.g. Victoria have committed a share of their advertising budgets to regional media because they are committed to similar objectives to the Federal Government to support local communities. For example, Victoria targets 15% of ad spend for regional areas; in practice it delivers over 20%. The new Minns Government in NSW has committed to spend a minimum of $3 million in regional areas. But 28% of Australia’s population resided outside major metropolitan areas in 2022 according to the ABS, and these targets would benefit from review.

In addition, a recent Parliamentary Inquiry recommended that 20% of Federal Government advertising expenditure be directed to regional and rural news organisations – at present, the Federal Government has no target.

With economic risks on the downside, it is time for Federal and State Governments to reform these measures to ensure that regional media is getting a fair share of the remaining Government advertising spend.

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