FOCUS: YEAR-END REVIEWS - Concerns of media inflation, pricing policies at year-end

The past year has been a good one generally for the Asian advertising industry. Most of the region's economies experienced sustained growth, with marketing budgets returning to pre-crisis levels. Linked to these developments, however, we have seen troublesome media inflation trends this year in many countries. Our annual inflation report showed that media cost increases are now significantly outpacing consumer inflation in most Asian markets, with television inflation being the key driver. Our key concern as 2000 draws to a close is that runaway media inflation - coupled with renewed worries about a slowdown in the US economy - could quickly put the brakes on marketing and media spend growth in Asia. As we pointed out some months ago, it appears that many media owners are assuming the good times will roll on. We're not convinced that will be the case. Most advertisers cannot tolerate media cost increases that are double or triple the rates of their own business growth projections. Nor should they. Advertisers in almost every category are evaluating alternative channels to the so-called traditional media or moving budgets from one channel to another to take advantage of pricing efficiencies and greater accountability. We see many marketers building increased flexibility into their media investment plans as well in the event of a slowdown. Our advice to media owners is that they consider pricing policies carefully going into 2001. Marketers are looking for the best possible return on their media investments, and value is a key component of that equation. Increasing costs without increasing value is a no-win scenario for marketers, agencies and media owners alike.

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