Fluctuations in Advertising Spending Due to Economic Conditions

「In addition to the strong stock market and rising economic sentiment and housing prices in metropolitan areas, issues facing the Japanese economy, described as “polarisation,” are becoming increasingly evident across regional areas. These issues include widening income disparities between metropolitan and regional areas, worsening labour shortages against the backdrop of a declining birth rate and an ageing population, delays in digital transformation among small and medium-sized enterprises and local governments, and a further increase in corporate bankruptcies.」

「The “polarization” facing Japan's economy is becoming evident throughout the country's regions, including widening income disparities between metropolitan areas and local regions, increasingly severe labor shortages due to the declining birthrate and aging population, delays in DX among small and medium-sized enterprises and local governments, and a rise in corporate bankruptcies.」

「Corporate advertising expenditure is generally adjusted in line with economic conditions and therefore tends to be susceptible to economic trends. Accordingly, a deterioration in regional economic conditions in the areas where our Group operates its media could cause local advertisers to reduce their advertising expenditure, potentially resulting in lower revenue for our Group.」

「However, in regional economies, various local issues, including the digital divide and concerns over intergenerational disparities, are becoming increasingly evident as a result of the vicious cycle of a declining working-age population and regional economic contraction. Accordingly, revitalising business performance through effective sales promotion by local private-sector businesses and revitalising regional economies through public-private partnerships have become important.」

「Corporate advertising expenditure is generally adjusted in line with economic conditions and therefore tends to be susceptible to economic trends. Accordingly, a deterioration in domestic economic conditions could cause advertisers to reduce their advertising expenditure, potentially resulting in lower revenue for our Group.」

「Under these conditions, the business environment for the domestic advertising business improved due to the normalisation of the domestic economy and expectations of a recovery in inbound demand, although the recovery trend has been gradual.」

「Although the seventh wave of COVID-19 infections arrived, restrictions on activities were kept to a minimum in an effort to balance infection prevention with economic activity, and signs of recovery continued, led by personal consumption.」

「During the cumulative third quarter period (1 April 2021 to 31 December 2021), the state of emergency and priority preventive measures introduced due to the fifth wave of COVID-19 infections in the latter half of the first half were lifted from October, and the business environment surrounding advertisers and sponsors of the Company's media began to improve in the third quarter. However, the outlook remained uncertain as a highly transmissible new variant spread in various parts of the world toward year-end.」

「During the cumulative second quarter period (1 April 2021 to 30 September 2021), regional economic activity was constrained, including restrictions on population movement and the operations of restaurants and other businesses in urban areas nationwide. This followed the fourth wave of COVID-19 infections, which peaked in mid-May, and the fifth wave in the second quarter, when the number of infected people and patients requiring treatment reached several times previous levels.」

「As a result, orders in April continued to recover steadily from the fourth quarter of the previous fiscal year, but orders in May fell again under the strong impact of the state of emergency and the declaration of priority preventive measures. Orders recovered in June,」

「During the consolidated fiscal year ended 31 March 2021 (1 April 2020 to 31 March 2021), economic activity remained intermittently stalled due to the spread of COVID-19, which had continued from the end of the previous fiscal year. In particular, advertising demand declined sharply in both urban and regional areas during the first half due to the impact of the first state of emergency declared in April.」

「However, the resurgence of infections overseas from late October and the third wave of infections in Japan in November led to the nationwide temporary suspension of Go To Travel in December and increasingly severe restrictions on travel and economic activity as the year-end approached, making the operating environment surrounding the advertising industry even more challenging.」

「Restrictions on the business activities of many advertisers and sponsors, together with the deterioration in the business environment, led to restrained expenditure on marketing, including advertising, making the operating environment surrounding the advertising industry even more challenging. Although some restrictions on economic activity were eased in the second quarter and the government launched various campaigns to restart the economy, the outlook for the end of the COVID-19 pandemic remained uncertain and the economy did not achieve a V-shaped recovery.」

「As the end of the COVID-19 pandemic and a full-scale resumption of economic activity remained difficult to foresee, advertisers and sponsors increasingly restrained expenditure on marketing, including advertising, and the operating environment surrounding the advertising industry became even more challenging.」

「As measures to improve profitability during the fiscal year, the Company worked to expand the lineup of new Happy Media(R) titles while continuing the temporary suspension of unprofitable magazines and the consolidation and integration of sales offices,」

「In addition to the partial decline in regional advertising demand resulting from growing uncertainty in regional economies amid unstable international and domestic conditions and the shift toward low-cost online advertising,」

「Revenue for the cumulative second quarter period was ¥3,388,172 thousand, down 2.8% year on year, as free magazine advertising orders in major areas remained below the same period of the previous year and lower orders in the sales promotion business continued.」

「The operating environment for the regional advertising business became even more challenging during the current fiscal year, as regional advertisers also began favouring easy and low-cost online advertising.」

「The cautious stance of regional advertisers toward traditional promotional advertising, together with the shift in advertising spend to low-cost online advertising and platforms, particularly in central urban areas, reduced the Company's overall earnings power, including through Media business revenue at its major regional offices falling below the same period of the previous year.」

「As companies generally adjust their advertising expenditure in line with economic conditions, it tends to be affected by economic trends. If domestic economic conditions deteriorate, this could cause advertisers to reduce their advertising expenditure and affect the Company's results.」

「If domestic economic conditions deteriorate, this could cause advertisers to reduce their advertising expenditure and affect the Company's results.」

「As companies generally adjust their advertising expenditure in line with economic conditions, it tends to be affected by economic trends.」