Three fourths of the total advertising revenue of the media in the year 2017 was divided between five media and telecommunication companies. Icelandic advertisers bought advertisements in the domestic media for 14,020 ISK million. From the previous year, the advertising revenue decreased slightly after near a continuous growth in recent years. The media’s advertising revenue are still one fourth lower than when at the highest in 2007, a year before the collapse of the financial system, or some 4,500 ISK million in fixed 2017 prices. Newspapers are the most important advertising medium, retaining nearly 40 per cent of the total advertising revenue. The Icelandic advertising market displays some important and country specific traits compared to Nordic countries and elsewhere. Newspapers and radio in Iceland capture substantially higher share of the total advertisement revenue at same time as the share of the web is more limited than generally is observed in the neighbouring countries.
There is a noteworthy concentration in the Icelandic advertisement market as observed in the distribution of advertising revenues between media companies (see table 1). On average each company earned 130 ISK million from advertisements, while half of the 108 companies earned less than 20 ISK million from advertisements.
|Table 1. Distribution and concentration on the advertising market 2017|
|ISK million||Share, %||Thereof RÚV||HHI**|
|Top 5 largest||10.660||76||22||2.164|
|Top 10 largest||11.550||82||20||2.172|
|Top 15 largest||12.160||87||19||2.176|
|Top 20 largest||12.630||90||18||2.178|
Notes: Advertising revenue of 108 domestic media operators and companies. Revenues are rounded to the next decimal.
* 88 media operators and companies.
** Herfindahl-Hirschman Index. It is defined as the sum of the squares of the market shares of the firms within a given industry. The index ranges from 0 to 10,000. Increases in the index generally indicate a decrease in competition and an increase of market power, whereas decreases indicate the opposite. It is common to interprete the index as thus: scores below 1,000 is a indication of a diversified market; scores between 1,000 to 1,800 is a indication of a medium concentration; scores above 1,800 is an indication of high market concentration.
Roughly three fourths of the revenue fell into the hands of only five companies. The share of the ten largest companies was 82 per cent, the top fifteen 87 per cent and the top twenty 90 per cent of the total. The share of the public service broadcaster, The Icelandic National Broadcasting Service (RÚV) on the advertisement market was 17 per cent on the whole and 22 per cent of the five largest.
The Herfindahl-Hirschman Index (HHI) confirms unequivocally that the distribution of advertising revenues between media companies is greatly unequal. In general, the reference value of the HHI used by media market inspectors and competition authorities for great market concentration is 1,800. In 2017 this index was above 2,000 points in most cases, thus showing high market concentration.
Advertising revenue of the media slumped 42 per cent in fixed prices from 2008 to 2010, in the wake of the collapse of the Icelandic financial system. Since then, revenue has slowly increased per annum except for a mild recession between the years 2016-20171. The advertising revenue of domestic media in 2017 was almost the same as it was in the year 2004. Overview of the trend of advertising revenue of the media in the years 1996–2017 is shown in Figure 1 as indexes in current and fixed prices.
Nearly every other ISK paid for advertisements in the domestic media in 2017 went to the print media (dailies and weeklies and magazines and other periodicals), or 6,280 ISK million. Dailies and weeklies were the most important advertising medium, with 38 per cent of the revenue (5,480 ISK million) (see figure 1). Second most important was television with 21 per cent share (2,890 ISK million), then radio with 17 per cent (2,370 ISK million), and the web with 13 per cent (1,870 ISK million). Share of other media was significantly lower, but six per cent of the revenue went to magazines and periodicals (800 ISK million), three per cent were spent on outdoor advertisements (360 ISK million), and two per cent went to cinemas (250 ISK million).
Over a period of twenty years, the division of the advertising revenue share between different kinds of media has changed, largely at the expense of the print media whose share has lowered from 60 down to 45 per cent of the total. The share of the dailies and weeklies has slumped from 51 per cent down to 40. This can largely be explained by two related factors, the advent and increased importance of the web media on one hand, and to the general downturn in circulation and reading of newspapers on the other.
In the beginning, the weight of the web media as advertising medium was limited. From the 2010s the importance of the web as an advertisement medium has increased slowly but surely. Today they retain 13 per cent of the total advertising revenue. Nearly 80 per cent of the advertising revenue of the web media goes to media’s web sites, with independents receiving 22 per cent.
Advertising expenditure to foreign web sites is excluded in these figures. Cautiously it can be estimated that Icelandic advertisers spend between one fifth and one fourth on foreign websites, derived from various information (The Media Commission and Statistics Iceland). This is substantially lower than in the neighbouring countries, which in turn can be attributed to specific traits of the Icelandic media market.
One of the more obvious characteristics of the Icelandic media market compared to with the neighbouring countries is related to the division of advertising revenue shares between different media. The share of advertising revenue by kind of media in the Nordic countries and in the European Union is shown in table 2.
|Table 2. Share of advertising revenue by kind of media in the European Union and the Nordic countries 2017, %|
|Print media, total||21||23||37||42||19||20|
|Magazines and periodicals||7||6||6||5||3||4|
|Cinemas and video||1||1||1||2||1||1|
Notes: Less catalogues and directories, direct marketing and direct and multiple mail. Sponsoring is included for Iceland only.
* Estimated total market share on domestic and foreign advertisement expenditure.
Sources: adapted from Danske Medier, Rapport over Det danske Reklamemarked: Rapport 2017, www.danskemedier.dk/maalinger/reklameforbrug/; European Audiovisual Observatory, The EU Online Advertising Market: Update 2017, https://rm.coe.int/the-eu-online-advertising-market-update-2017/168078f2b3; IRM-Institutet för reklam- och mediestatistik, Reklaminvestering 2017, www.irm-media.se/om-statistiken/arsstatistik/reklaminvestering-2017; IAB Finland, Mediapanostuksista kolmannes digimainontaan vuonna 2017, www.iab.fi/ajankohtaista/digimarkkinoinnin-uutiset/kvartaalitiedotteet/mediapanostuksista-kolmannes-digimainontaan-vuonna-2017.html; medienorge/IRM-Institutet för reklam- och mediestatistik, Netto reklameomsetning i norske medier, www.medienorge.uib.no/statistikk/aspekt/okonomi/362.
The stronghold of the print media, especially newspapers, as an advertising medium is much higher in Iceland than elsewhere. In 2017, the share of the print media in the advertising revenue of the media was 42 per cent, thereof 37 per cent of belonged to newspapers, compared with 37 and 31 per cent share of the Finnish print media, respectively.
Moreover, particular traits of the Icelandic market are obvious when share of radio and the web are reviewed. Radio in Iceland is much stronger than in the neighbouring countries and conversely, much lower share of advertisement expenditure goes to the web in Iceland than elsewhere.
This discrepancy owes much to different historical circumstances and developments. The public service broadcaster, RÚV, has from its inception in 1930 been allowed to carry advertisements, first in radio and later in television as well, contrast to what happened in most European countries.
Likewise, unequally strong position of newspapers on the advertising market in Iceland can be related to the fact that the daily national papers cater to the population mostly independent of residence. This is in contrast to the typical situation in more highly populated countries many of which are heterogenic and diverse in cultural matters. Moreover, free newspapers are much more important in Iceland than in most other countries, both as regards distribution and reading (see Newspaper Innovation), which in turn increases their importance as a courier for advertisements.
1This can partly been attributed to effects of the European Soccer Tournament 2016 and participation of the Icelandic National Team in the semi qualifier. Television events like these have shown to induce advertisement expenditure, especially on TV.
About the data
Information about advertising revenue of the media are derived from annual accounts and according to information from The Icelandic Media Commission from 2011 and onwards (previously from Statistics Iceland). In the instances when information is missing from media operators the advertising revenues are estimated from VAT tax reports. Hence, it must be kept in mind that the figures are partly based on estimates. The data do not include catalogues and directories, direct marketing, and direct and multiple mail, or advertising on non-domestic web sites. Sponsoring is included.
Certain limitations should always be kept in mind concerning comparison and interpretation of international advertising market data. Methods of collecting and measurements vary highly between individual countries and are thus based on estimates and an educated guess. This applies particularly to the web.