The publishing industry has long been grappling with sinking advertising revenue, and the recent global economic meltdown has worsened the situation. This comes in the wake of a longer-term secular decline as more readers choose to get news free online, thereby making the print-advertising model increasingly irrelevant.
Circulation Falling Prey to Internet
Newspapers have fared far worse than magazines, as web-based news options have proliferated in recent years. The two-decade-long erosion in newspaper circulation reinforced the decline in advertising revenue.
Most media observers viewed 2009 as a watershed for the industry. Circulation has also fallen prey to budget cuts with newspaper companies reducing the number of print pages and newsroom staff to combat the downturn.
The slide in newspaper circulation, which ran through the 1990s and through the 2000s, is accelerating. Earlier, the circulation of newspapers was falling by less than 1%, but the rate of decline jumped to 2% in 2005, 3% in 2007 and 4% in 2008, with more and more readers migrating to the Internet.
However, the recent data issued by the Audit Bureau of Circulations (ABC) indicated that the rate of decline in circulation is easing. Newspaper circulation tumbled 8.7% for the six months ended March 31, 2010, reflecting an improvement over a decline of 10.6% registered for the six months ended September 30, 2009.
Despite the fall in newspaper circulation, some companies are reporting higher revenue from circulation due to the increase in subscription and newsstand prices. At The McClatchy Company (MNI), circulation revenue climbed approximately 2% in first-quarter 2010.
While the increase in prices for print editions is generating more circulation revenues, it is also resulting in subscriber losses due to the shift in preference for free online content.
Newspaper Advertising Trend Improves
With the improvement in the economic scenario, positive trends are being witnessed in both print and digital advertising with advertiser spending improving its pace. Consequently, the rate of decline in advertising revenue is decelerating.
According to the data released by the Newspaper Association of America, total advertising revenue for U.S. newspapers dropped 10% in first-quarter 2010 (January to March) to $6 billion, signifying the best quarterly performance since the third quarter of 2007, just before the recession began. The trend reveals a gradual improvement in the advertising environment. Print advertising declined 11% to $5.3 billion with classified advertising revenue down 14% to $1.3 billion.
Total advertising revenue at The New York Times Company (NYT) dropped 6% in first-quarter 2010, as against a fall of 15% in fourth-quarter 2009. At Gannett Co. Inc. (GCI), publishing advertising revenue dropped 8% in first-quarter 2010, after plunging 18% in fourth-quarter 2009.
In the span of four years, the newspaper industry has incurred substantial losses. Advertising revenues had declined by 46% from the level of $11 billion achieved in first-quarter 2006.
Print advertising revenues tumbled 14% and 8% in first-quarter 2010 at McClatchy and The Washington Post Company (WPO), respectively. Publishing advertising revenue dropped approximately 13% at Journal Communications, Inc. (JRN). Newspaper advertising revenues, excluding online advertising at The E. W. Scripps Company (SSP) fell 13%.
Online Advertising Gaining Traction
The Internet-based advertising model, which also fell prey to the economic downturn, is now gaining traction. According to the data released by the Newspaper Association of America, online advertising revenue climbed 5% to $730 million, registering the first quarterly gain since first-quarter 2008.
Advertisers are migrating to the Internet driven by increasing online readership and lower advertising prices online than print. According to Nielsen Online, data released by the Newspaper Association of America, newspaper websites registered 74.4 million unique visitors per month on an average in first-quarter 2010, an increase of over 72 million unique visitors recorded in fourth-quarter 2009.
Revenues from Washington Post’s online publishing activities, mainly washingtonpost.com and Slate, rose 8% to $23.7 million in first-quarter 2010. Display online advertising revenues jumped 17%, but online classified advertising revenues on washingtonpost.com dropped 13%.
Online advertising revenues at McClatchy rose 2% to $44 million, helped by retail and national advertising, but were offset by classified advertising, including auto, real estate and employment as major categories. Online newspaper advertising revenues at E. W. Scripps slipped 8% to $6.7 million in first-quarter 2010, as most of the online advertising is tied to print classified advertising, which remained weak during the quarter.
However, revenues purely generated from the Scripps' newspaper websites, soared 23% in the quarter. The company has also entered into strategic partnerships with Yahoo! Inc. (YHOO) and zillow.com to gain a major share of local online advertising.
Efforts to Mitigate Losses
In an effort to offset declining revenues and shrinking market share, publishers are scrambling to slash costs. This has compelled many newspaper companies to undertake cost-cutting measures, such as trimming of headcount, pay cuts, furloughs, suspension of dividends and matching contribution to employee 401(k) funds, voluntary retirement program and closure of printing facilities. Asset sales, even at trough valuations, have proven to be a less viable option in the midst of tight credit markets.
The Tribune Company, owner of the Los Angeles Times and Chicago Tribune, had filed for bankruptcy. Newspaper companies such as McClatchy, Gannett and The New York Times Company have trimmed their headcount.
To curb shrinking advertising revenues and improve market shares battered by the recent economic downturn, the publishing companies are now even considering charging readers for online content. Newspaper companies have been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications.
The publishing companies are adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its fold.
Publishers now do not concern themselves about the total number of copies distributed, but focus more on whether copies reach the target audience. This strategy helps newspaper companies attract advertisers and, in turn, generate more revenues for each copy sold.
Year 2010: Pay As You Access
Throughout 2009, newspaper companies transformed their business models to better position themselves in a multiplatform media universe. Although the U.S. economy is witnessing signs of recovery with a sluggish improvement in the advertising environment, we believe 2010 will not mark the resurrection of the publishing industry. However, it is expected to fare better than 2009, as steps taken to curb the mayhem start paying off.
With steadying newspaper budgets, we could see fewer layoffs, more focus on web and local content, reduction in print pages dedicated to business or sports content, increase in subscription and concentration on profitable circulation.
News Corporation (NWSA) has taken a leap towards an online subscription-based model for general news content. News International, a subsidiary of News Corporation, began charging readers for online content for The Times of London and Sunday Times of London effective June 2010.
Rupert Murdoch, the Chief Executive Officer of News Corporation, has long been pushing for the online subscription model for all general news websites. But newspaper companies have been reluctant to tow the line for fear of losing readership and, in turn, advertisers.
Business newspapers, such as The Financial Times and The Wall Street Journal (owned by News Corporation) have long been following an online pay model. But levying access charges on readers for online access to general news content is a first for any news publication.
Another media giant, The New York Times Company, plans to introduce a ‘pay and read’ model for NYTimes.com in 2011. The company will adopt the Financial Times' metered system, where readers after browsing a certain number of free articles, are being asked to subscribe.
However, we believe, people will be reluctant to shell out if the content is available free of cost elsewhere. To combat this, Rupert Murdoch has been devising ways to prevent Google Inc. (GOOG) from accessing News Corporation’s articles or content through its Internet search engine.
OPPORTUNITIES
Despite the tough times faced by the publishing industry, there are a number of defensive names in the group that can hold their ground. Companies are radically changing their business models to fall in line with industry trends. McClatchy (MNI) is transiting to a hybrid format of print and online. Management has acknowledged that McClatchy’s ultimate business model will be nearly half Internet-based.
New York Times Company’s (NYT) effective cost-cutting measures and increase in newspaper price has resulted in an improved financial position. The company also plans to introduce a paid model for NYTimes.com in 2011, which will bring the media conglomerate on par with The Wall Street Journal and Financial Times.
WEAKNESSES
The newspaper industry has long been grappling with plummeting advertising revenues due to economic headwinds. Although murmurs about advertisers returning to the market are gaining ground as the economy recovers, but the positive effects have yet to be realized. The picture will become clearer as the year progresses.
Weakness persists across the Washington Post Company (WPO). Online classified advertising revenues on washingtonpost.com fell 13% in first-quarter 2010, whereas print advertising revenues tumbled 8%. Washington Post’s magazine publishing division, whose fortunes are tied to the advertising market, is also struggling due to lower advertising revenues at Newsweek. The company announced its plans to further shrink its role as a publisher by announcing the possible sale of Newsweek.Zacks Investment Research
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Newspapers have fared far worse than magazines, as web-based news options have proliferated in recent years. The two-decade-long erosion in newspaper circulation reinforced the decline in advertising revenue.
Most media observers viewed 2009 as a watershed for the industry. Circulation has also fallen prey to budget cuts with newspaper companies reducing the number of print pages and newsroom staff to combat the downturn.
The slide in newspaper circulation, which ran through the 1990s and through the 2000s, is accelerating. Earlier, the circulation of newspapers was falling by less than 1%, but the rate of decline jumped to 2% in 2005, 3% in 2007 and 4% in 2008, with more and more readers migrating to the Internet.
However, the recent data issued by the Audit Bureau of Circulations (ABC) indicated that the rate of decline in circulation is easing. Newspaper circulation tumbled 8.7% for the six months ended March 31, 2010, reflecting an improvement over a decline of 10.6% registered for the six months ended September 30, 2009.
Despite the fall in newspaper circulation, some companies are reporting higher revenue from circulation due to the increase in subscription and newsstand prices. At The McClatchy Company (MNI), circulation revenue climbed approximately 2% in first-quarter 2010.
While the increase in prices for print editions is generating more circulation revenues, it is also resulting in subscriber losses due to the shift in preference for free online content.
Newspaper Advertising Trend Improves
With the improvement in the economic scenario, positive trends are being witnessed in both print and digital advertising with advertiser spending improving its pace. Consequently, the rate of decline in advertising revenue is decelerating.
According to the data released by the Newspaper Association of America, total advertising revenue for U.S. newspapers dropped 10% in first-quarter 2010 (January to March) to $6 billion, signifying the best quarterly performance since the third quarter of 2007, just before the recession began. The trend reveals a gradual improvement in the advertising environment. Print advertising declined 11% to $5.3 billion with classified advertising revenue down 14% to $1.3 billion.
Total advertising revenue at The New York Times Company (NYT) dropped 6% in first-quarter 2010, as against a fall of 15% in fourth-quarter 2009. At Gannett Co. Inc. (GCI), publishing advertising revenue dropped 8% in first-quarter 2010, after plunging 18% in fourth-quarter 2009.
In the span of four years, the newspaper industry has incurred substantial losses. Advertising revenues had declined by 46% from the level of $11 billion achieved in first-quarter 2006.
Print advertising revenues tumbled 14% and 8% in first-quarter 2010 at McClatchy and The Washington Post Company (WPO), respectively. Publishing advertising revenue dropped approximately 13% at Journal Communications, Inc. (JRN). Newspaper advertising revenues, excluding online advertising at The E. W. Scripps Company (SSP) fell 13%.
Online Advertising Gaining Traction
The Internet-based advertising model, which also fell prey to the economic downturn, is now gaining traction. According to the data released by the Newspaper Association of America, online advertising revenue climbed 5% to $730 million, registering the first quarterly gain since first-quarter 2008.
Advertisers are migrating to the Internet driven by increasing online readership and lower advertising prices online than print. According to Nielsen Online, data released by the Newspaper Association of America, newspaper websites registered 74.4 million unique visitors per month on an average in first-quarter 2010, an increase of over 72 million unique visitors recorded in fourth-quarter 2009.
Revenues from Washington Post’s online publishing activities, mainly washingtonpost.com and Slate, rose 8% to $23.7 million in first-quarter 2010. Display online advertising revenues jumped 17%, but online classified advertising revenues on washingtonpost.com dropped 13%.
Online advertising revenues at McClatchy rose 2% to $44 million, helped by retail and national advertising, but were offset by classified advertising, including auto, real estate and employment as major categories. Online newspaper advertising revenues at E. W. Scripps slipped 8% to $6.7 million in first-quarter 2010, as most of the online advertising is tied to print classified advertising, which remained weak during the quarter.
However, revenues purely generated from the Scripps' newspaper websites, soared 23% in the quarter. The company has also entered into strategic partnerships with Yahoo! Inc. (YHOO) and zillow.com to gain a major share of local online advertising.
Efforts to Mitigate Losses
In an effort to offset declining revenues and shrinking market share, publishers are scrambling to slash costs. This has compelled many newspaper companies to undertake cost-cutting measures, such as trimming of headcount, pay cuts, furloughs, suspension of dividends and matching contribution to employee 401(k) funds, voluntary retirement program and closure of printing facilities. Asset sales, even at trough valuations, have proven to be a less viable option in the midst of tight credit markets.
The Tribune Company, owner of the Los Angeles Times and Chicago Tribune, had filed for bankruptcy. Newspaper companies such as McClatchy, Gannett and The New York Times Company have trimmed their headcount.
To curb shrinking advertising revenues and improve market shares battered by the recent economic downturn, the publishing companies are now even considering charging readers for online content. Newspaper companies have been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications.
The publishing companies are adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its fold.
Publishers now do not concern themselves about the total number of copies distributed, but focus more on whether copies reach the target audience. This strategy helps newspaper companies attract advertisers and, in turn, generate more revenues for each copy sold.
Year 2010: Pay As You Access
Throughout 2009, newspaper companies transformed their business models to better position themselves in a multiplatform media universe. Although the U.S. economy is witnessing signs of recovery with a sluggish improvement in the advertising environment, we believe 2010 will not mark the resurrection of the publishing industry. However, it is expected to fare better than 2009, as steps taken to curb the mayhem start paying off.
With steadying newspaper budgets, we could see fewer layoffs, more focus on web and local content, reduction in print pages dedicated to business or sports content, increase in subscription and concentration on profitable circulation.
News Corporation (NWSA) has taken a leap towards an online subscription-based model for general news content. News International, a subsidiary of News Corporation, began charging readers for online content for The Times of London and Sunday Times of London effective June 2010.
Rupert Murdoch, the Chief Executive Officer of News Corporation, has long been pushing for the online subscription model for all general news websites. But newspaper companies have been reluctant to tow the line for fear of losing readership and, in turn, advertisers.
Business newspapers, such as The Financial Times and The Wall Street Journal (owned by News Corporation) have long been following an online pay model. But levying access charges on readers for online access to general news content is a first for any news publication.
Another media giant, The New York Times Company, plans to introduce a ‘pay and read’ model for NYTimes.com in 2011. The company will adopt the Financial Times' metered system, where readers after browsing a certain number of free articles, are being asked to subscribe.
However, we believe, people will be reluctant to shell out if the content is available free of cost elsewhere. To combat this, Rupert Murdoch has been devising ways to prevent Google Inc. (GOOG) from accessing News Corporation’s articles or content through its Internet search engine.
OPPORTUNITIES
Despite the tough times faced by the publishing industry, there are a number of defensive names in the group that can hold their ground. Companies are radically changing their business models to fall in line with industry trends. McClatchy (MNI) is transiting to a hybrid format of print and online. Management has acknowledged that McClatchy’s ultimate business model will be nearly half Internet-based.
New York Times Company’s (NYT) effective cost-cutting measures and increase in newspaper price has resulted in an improved financial position. The company also plans to introduce a paid model for NYTimes.com in 2011, which will bring the media conglomerate on par with The Wall Street Journal and Financial Times.
WEAKNESSES
The newspaper industry has long been grappling with plummeting advertising revenues due to economic headwinds. Although murmurs about advertisers returning to the market are gaining ground as the economy recovers, but the positive effects have yet to be realized. The picture will become clearer as the year progresses.
Weakness persists across the Washington Post Company (WPO). Online classified advertising revenues on washingtonpost.com fell 13% in first-quarter 2010, whereas print advertising revenues tumbled 8%. Washington Post’s magazine publishing division, whose fortunes are tied to the advertising market, is also struggling due to lower advertising revenues at Newsweek. The company announced its plans to further shrink its role as a publisher by announcing the possible sale of Newsweek.Zacks Investment Research
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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