DIGITAL TV's growing popularity will increasingly eat away at advertising spending on pay TV, according to a new report that also warns of volatile times ahead for the advertising and marketing sectors.
Media specialists Fusion Strategy found that while consumers were still showing some caution in their spending, media markets were recovering rapidly, currently growing at two to three times the rate for most other key retail sectors.
Fusion has joined a growing number of analysts revising upwards predictions for this year, forecasting growth in advertising and marketing spending across all media of 9.14 per cent.
But the Fusion report warns that the current boom cannot be sustained and is ''largely a one year, recovery year … phenomenon''.
Fusion's director, Steve Allen, said the industry was in catch-up mode. ''A lot of clients have been holding on to their funds and now they are investing them, so this is playing catch-up, but things will moderate,'' he said.
This year's unexpected growth can be partly explained by the cash boom from the state and federal elections later this year and early next year, with governments already increasing their ad spending. The report estimated that the elections, federal, Victoria and New South Wales, will be worth more than $300 million in advertising and marketing.
Other one-off factors influencing the sector this year include the soccer World Cup, expected to be worth about $25 million in advertising spending, and the Commonwealth Games in India, worth an estimated $35 million.
Mr Allen said despite pay TV such as Foxtel being heavily promoted, digital TV was growing in popularity and this would not go unnoticed by advertisers.
''Most advertisers will keep their eye on the size of the audience as well as the reach. The simple fact is that some digital channels are performing well above pay TV.''
The report predicts modest growth in the future for pay TV.
The report found online advertising would continue to grow at a faster rate than other media, with its share of the market to grow from the current 18 per cent to 20 per cent in 18 months and 25 per cent in five years, clawing business away from traditional media.
The growth rate for TV, magazines and outdoor advertising will all be similar in the next three to five years, with each of them being affected from the growth in online, the report said.
Mr Allen said there would be increasing competition between the different media next year. ''We are getting to real competitive selling, one medium over another - the outlook is for much more serious battles in the strategy and selling of each medium.''
