Agora sees recovery

By Timothy Sifert

The advertising market will begin to pick up in the second half of the year at the same time that television stations gradually increase their recently cut ad rates and new ad opportunities trickle down to the ailing print media sector, Wanda Rapaczynski, president of Agora told the Business Journal.

Total advertising revenues for 2003 will remain flat compared to last year's €913 million (zł. 4 billion) net, but Rapaczynski said Agora estimates that next year the entire ad market will grow by as much as 5% on assumptions of a growing GDP and the overall positive effects of markets moving out of recession.

This should also be a boon for print media, which recorded an 11% year-on-year decline in the first quarter of this year.

"We'll see the beginning of (the rebound) in the second half of this year and next year we expect growth," Rapaczynski said, adding a note of optimism to previously measured forecasts. "In print this year we still expect decline. And next year we expect that the total advertising market will grow four to five points," she said.

Rapaczynski said she did not have information at hand to estimate which advertising segments - print, TV, outdoor - would fare better next year. That is a particular concern for financial analysts who note that the flagging market share for advertising in print media, especially in Agora's flagship Gazeta Wyborcza.

Earlier this month Agora estimated that the country's total advertising market declined 1% year-on-year in the first quarter of this year. In addition, Agora cut its 2003 revenue outlook, following a €1.1-million (zł. 4.8-million) net loss in the first quarter due to a general slowdown in the ad market and losses at its recently acquired businesses. Agora expects the newspaper ad market to fall 8.8% this year. But the company is sanguine on 2004.

Andrzej Szymański, analyst at Millennium brokerage, said that Rapaczynski's 2004 predictions could be sound for overall advertising.

"It's a quite reasonable (assumption)," Szymański said, adding that Agora could receive a net benefit from the 4%-5% market uptick.

"This year has been very bad for Agora," he pointed out. "(But) it's very possible that television will upgrade prices."

Such a move could enable Agora to regain some advertisers who migrated from its print media business. Rapaczynski said that TV has trimmed its rate cards as much as 85% in some cases over the past couple of years.

She also said that it is natural in an economic recession for television stations to cut prices the most severely, thus drawing new business previously excluded from TV ads because of prohibitively high prices. Thus newspapers and radio lose out.

"But in Poland this effect is much bigger because of public television," Rapaczynski pointed out. "It exacerbated the recession. A public television station has an excess of advertising inventory and, because it is also supported by public aid, it has every incentive to dump advertising inventory into the market."

But she claims that advertisers, many of those new to TV spots, are beginning to develop an aversion to TV that could drive them back to print. This is because they don't feel they're getting the exposure they paid for. "So these advertisers, who were pissed off because the advertising was not effective when there (were) so many ads, will slowly filter back to print," Rapaczynski said.

Millennium's Szymański has doubts whether this industrial cycle can be so clear-cut - especially in Poland.

"(Here) the market is different," Szymański said. "Television has 60% of the market. It's too much. In other countries it's 30%-40%." He said that makes for a steeper hill to climb for Agora's print business to get out of the slump.

Furthermore, Rapaczynski does not believe that Gazeta Wyborcza's - or her own - association with the Rywingate bribery scandal has injured the reputation of the company.

"We have to look back and ask, 'Did we do the right thing?'" she said. "To this I say firmly, 'yes.'"

She said the issue is not that Gazeta Wyborcza waited months to report that movie producer Lew Rywin solicited a bribe from her that would halt an anticonsolidation law.

"What this (investigative) commission revealed is that there was an attempted attack on free media here by the government," Rapaczynski said. "You can see that there's a certain group in the SLD that says 'Hey, we liked it better the other way, when everything (press) was managed from the central committee.'"