South Korea’s media and advertising industries that had been weighed down by uncertainties from political insecurity and economic slowdown are expected to recover thanks to improving business sentiment following the launch of a new government and increased ad sources through the proliferation of Internet and mobile platforms.
According to financial information provider FnGuide on Wednesday, CJ E&M, one of Korea’s largest entertainment companies, is forecast to earn an operating profit of 91.9 billion won ($81.7 million) this year, a staggering 228.5 percent jump from the previous year. This is more than four times the latest five-year average of 20.2 billion won. This explosive growth is mostly attributed to the recovery of the country’s advertising market, with commercials making up nearly 73 percent of the company’s revenue.
The rebound in the advertising industry is reflected in the Korea Advertising Index that advanced to 120 in recent months from 100 in December. Korea Advertising Index by Korea Broadcast Advertising Corp. calculates monthly changes in advertising spending of seven major media channels. A number below 100 means a decrease from the previous month.
“Political uncertainties that had mainly put a cap on ad sales growth have eased, with the new government keen to jumpstart the domestic economy and large companies anxious to pump up their ad spending,” said Ahn Jae-min, a research analyst at NH Investment & Securities Co.
The declining influence of terrestrial TV broadcasting is also seen as a boon for the advertising industry, according to market analysts. Terrestrial TV stations, which had secured the biggest ad sales for over five years slipped to third place last year, according to the Korea Federation of Advertising Associations. Instead, cable channels have climbed steadily since 2013 to finally take number one last year. The growth of mobile and cable channels has diversified the advertising media landscape so that there is no longer a dominant player that can control the ad market, said Kim So-hye, analyst at Hanhwa Investment & Securities Co.
Buoyed by the changing trend in the ad market, advertising and marketing agencies are expected to post improved earnings this year. Nasmedia, a digital media marketing agency, is expected to see its operating profit grow by 87.1 percent year on year, with Cheil Worldwide and Innotion Worldwide also poised to record a solid operation profit growth rate of 6.3 percent and 11.3 percent, respectively.
By Lee Yong-gun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]