Live Issue... Taiwan media sector must act fast to get out of trouble

It is also well below half of what it was during the fat, pre-millennial years.

Now, 2009 looks like a replay of Taiwan’s worst year on record. In 2001, Taiwan GDP fell five per cent - until now the island’s first and only negative growth year - and adspend plummeted 26 per cent to NT$62.5 billion as a result. The industry has yet to recover. Even though GDP returned to growth from 2002, Taiwan’s adspend remained mired in a painful slump. Now the economic outlook is even gloomier: GDP for 2008’s last quarter dropped 8.4 per cent.

“The market is unlikely to go back into growth for a couple of years at least, until the rest of Asia recovers, and it could be flat for a lot longer - look at what has happened to Japan,” says Andrew Meaden, leader, North Asia at Mindshare. “Traditional media owners are trying to incentivise clients and agencies with higher discounts and better commissions, but this is unlikely to work.”

In response, media agencies have imposed strict cost controls, with efficiency the order of the day. So far, media agencies claim no layoffs, though how long that might last is in doubt, given the sudden severity of the downturn. “The headcount is frozen,” says Robert Hsieh, CEO of ZenithOptimedia Taiwan. “No one has left the agency for six months.” 

Speaking of media agencies belonging to WPP, Publicis and Interpublic, Hsieh adds: “We can stand this situation for six more months. If there is no improvement by the third quarter, the weaker agencies will have to lay off people.”

That view is backed up by Sandra Yu, chairwoman and CEO of GroupM Taiwan, who recently took a majority stake in local inddependent United Advertising. She believes that adspend this year will contract 20 to 30 per cent. “Looking at Taiwan’s advertising and media agencies, only the big will survive and the smaller ones will find themselves unable to compete,” she says. 

Some media agencies believe now is the time to be offering ‘added-value’ extras for clients as value for money becomes increasingly important. Deryk Tang, MD at OMD Taiwan, believes that plying clients with insights into consumer behaviour and economic trends can give them the confidence they need to invest in media. “One example is research we did on how people used their [Government-funded] NT$3,600 shopping vouchers,” says Tang. 

But the situation, he says, is likely to get worse as the downturn dovetails with ongoing changes in Taiwan’s media industry. The result, says Meaden, could be a fundamental change in business model. “The industry needs to remodel itself by building a future around digital media and production. Clients will be under pressure to justify budgets, and digital will be seen as a way of selling.” 

Taiwan’s media industry is not alone in facing these pressures. But it may have to react faster than most to survive.