Insight Sector Report: PRESS – 22.11.01
The Long Term Advertising Expenditure Forecasts report also predicts that during the same period, business titles will see a real term increase of between 20% and 40%. Accordingly, revenues are estimated to reach between £1,345 million and £1,563 million by 2013.
Jack Myers Report Jack Myers’ 2002 forecasts for US revenue growth have both a best and worst case scenario. The overall market at best case is expected to retract by 1.7% next year; the worst case puts it down 7.4%.
Amongst this, the newspaper sector is forecast to outperform the overall media market, with a best case figure of 1.0% growth and worst case at -5.0%. Magazines are not as strong with best/worst at -3.0%/-8.0% respectively.
The full set of forecasts is shown below here:
| Best/Worst Case Advertising Spending Forecasts, 2002 | ||
| Best Case Scenario | Worst Case Scenario | |
| Newspapers | 1.0% | -5.0% |
| Broadcast Networks | -3.5% | -9.0% |
| National Spot TV | 1.0% | -9.0% |
| Broadcast Syndication | -6.0% | -12.0% |
| Local Broadcast TV | -4.0% | -10.0% |
| Radio | -4.0% | -5.0% |
| Yellow Pages | -1.0% | -2.0% |
| Magazines | -3.0% | -8.0% |
| Network Cable TV | 5.0% | -8.0% |
| Local/Regional Cable TV | 13.0% | 5.0% |
| Online | 12.0% | 12.0% |
| Outdoor | -2.0% | -3.0% |
| Other | -8.0% | -15.0% |
| Total | -1.7% | -7.4% |
| Source: Jack Myers Report, 16.10.01 | ||
US newspaper revenues US newspaper advertising revenues for the second quarter of 2001 totalled $11.1 billion, a decline of 8.4% year on year, according to preliminary estimates from the Newspaper Association of America (NAA). This compares to US newspapers’ highest Q2 growth ever last year of 6.8%.
Retail advertising showed the smallest decline in the second quarter, off 2.2% to $5.3 billion. National advertising was down 8.5% to $1.9 billion and classified advertising fell 15.5% to nearly $4 billion.
For the first half of 2001, retail advertising was down 1.4% to $9.8 billion; national advertising dropped 6.2% to $3.6 billion and classified dropped 12.2% to nearly $8 billion. Total advertising in newspapers for the first six months was $21.4 billion, down 6.5% from the same period last year.
| US Newspaper Revenues By Advertising Sector (£ billion) | ||||||||
| National | % Change | Retail | % Change | Classified | % Change | TOTAL | % Change | |
| Q2 2000 | 2.1 | 14.3 | 5.4 | 5.2 | 4.7 | 5.5 | 12.1 | 6.8 |
| Q2 2001 | 1.9 | -8.5 | 5.3 | -2.2 | 4.0 | -15.5 | 11.1 | -8.4 |
| Q1 2000 | 1.8 | 18.7 | 4.6 | 0.5 | 4.4 | 6.7 | 10.8 | 5.7 |
| Q1 2001 | 1.8 | -3.7 | 4.6 | -0.4 | 4.0 | -8.6 | 10.4 | -4.3 |
| H1 2000 | 3.9 | 16.3 | 10.0 | 3.0 | 9.1 | 6.1 | 22.9 | 6.3 |
| H1 2001 | 3.6 | -6.2 | 9.8 | -1.4 | 8.0 | -12.2 | 21.4 | -6.5 |
| Total 2000 | 7.7 | 13.7 | 21.4 | 2.4 | 19.6 | 5.1 | 48.7 | 5.1 |
| Source: NAA | ||||||||
US magazine revenues Total US magazine advertising revenue for October totalled $1.6 billion, according to the Publishers Information Bureau (PIB), representing a 9.6% decrease on October 2000. Total advertising pages for October were 23,237, down 16.8% on last year. Year-to-date advertising revenue decreased by 3.4% to $13.3 billion for the January to October 2001 period and ad pages were down 10.1% on 2000.
UK magazines Magazine publishers have seen sales increase by an average of 18% in the three years to October 2000, according to the latest Business Ratio report as analysed by the Periodical Publishers’ Association (PPA).
Global magazine growth According to World Magazine Trends 2001/2002 released in September by FIPP/Zenith, magazine advertising revenue grew by 10.4% in 2000, the industry’s best year since 1989. European magazine ad spend reached $15.7 billion, an 8% increase, and achieved a 20% market share. In the US consumer magazine revenue grew by 13.5%, almost twice the growth rate achieved in 1999.
However, growth for 2001 is forecast at just 0.6%, largely due to the decline in the US ad market, although market share is expected to remain stable.
General newspapers Newspaper groups, particularly in the US, have been hit hard by declining advertising volumes and expensive newsprint costs.
FT Group operating profit forecasts have been cut by 9% and 21% for this year and the next by ABN Amro, due to the declining ad volumes at the Financial Times newspaper.
Dow Jones, which publishes the Wall Street Journal said in October that advertising revenues at the paper were off by 41.2% on a per issue basis in Q3. Q4 forecasts predict declines of anything between 35% and 45%.
US newspaper group Gannett, which owns Newsquest in the UK, reported classified revenues down by 12% in October, on a 2% decrease in ad volume. In the UK, classified property revenues increased by 5% and motoring increased by 2%. Overall, classified results for Newsquest continue to be significantly better than revenues within the US, which is largely true across the board for the US newspaper industry.
In August the New York Times Company saw revenues decline by 17.8%, with technology, media and telcoms advertising particularly weak. Revenues at the New York Times and Boston Globe were both down by over 20%.
Hi-Tech advertising Hi-tech advertising (again particularly in the US) has been very weak over recent months. This is due a broader fall-out in the IT sector which, in turn, was in large part a result of the dotcom fall-out that began at the beginning of this year.
Figures from United Business Media’s (UBM) CMP Media show the extent to which this sector declined in September. During the month CMP saw advertising page volumes decline by 43.8%, slightly outperforming the sector as a whole which experienced a drop of 48.1%.
There is no improvement in the hi-tech advertising market in sight, according to analysts at ABN Amro.
| US hi-tech publishing advertising page volumes, September 2000/2001 | |||||
| 2000 pages | 2001 pages | % Change | 2000 market share | 2001 market share | |
| CMP Media | 4,492 | 2,527 | -43.8 | 26.3 | 28.5 |
| Total market | 17,061 | 8,853 | -48.1 | 100.0 | 100.0 |
| Source: United Business Media, 01/11/01 | |||||
Ad Rates Part of the problem for media owners in the current climate lies in figuring out what rate they should set their ads at. Fixing the rates for Q4 2002 and early 2002 is proving difficult, as reported by the New York Times recently.
The fourth quarter of the year is typically a key advertising period for all media, but the economic slowdown, exacerbated by September’s terrorist attacks in the US, has resulted in significantly diminished demand from marketers. Costs have risen dramatically, but media owners cannot possibly pass all of these costs on to advertisers as it would merely drive them away.
Some publishers choose to raise rates slightly; some are deciding to keep them flat, in anticipation of another difficult year for advertisers. Pushing the rates up in line with readership increases, rather than simply to meet rising costs, is also a dangerous tactic given the market’s conditions, even though it would be a normal course of action.
Readers versus revenues The events of 11 September and the ensuing military action has lead to a boost in newspaper readership. However, this did not correspond to a boom in advertising revenues, according to the Billett Consultancy. The group reports significant losses for the UK national dailies for the period 12-27 September as the need for extra editorial space, coupled with lost advertising from sensitive sectors such as travel and airlines, took its toll on revenues.
The UK daily newspaper market is estimated to have lost as much as 18% of its advertising space in the period from 12-27 September. In the seven days immediately following the attack this figure rises to 20%.
Advertising sectors such as airlines and travel have, not surprisingly, been very badly hit, although the European airline industry’s focus on the home market has meant that the sector has not suffered the losses it might have done.
| Ad Volume Losses, 12-27th September 2001 | |
| Airlines, Holidays/Overseas | -33% |
| Company Notices & Announcements | -49% |
| Finance Corporate | -28% |
| Other Financial Services | -46% |
Sources: Space data: MMS MediaLog Revenue data: Billetts PressTracker
Newsprint costs US newspaper publishing groups could benefit from a substantial fall in newsprint costs in 2002, with a knock-on effect possible for European publishers, according to analysts at ABN Amro. The broker forecasts that print prices may fall by double-digits next year, although advertising visibility remains limited.
A decline in newsprint costs would significantly help the operating profits of publishers that have been hit hard by the downturn in advertising volumes. However, given that advertising itself is not necessarily going to improve in the foreseeable future, the beneficial effect may be a little muted.
Since the beginning of 2001, newsprint prices have fallen by 16% in the US, according to ABN Amro’s figures. This decline is a direct result of the reduced demand for newsprint due to falling advertising volumes.
Analysts say that whilst the structure of the European newsprint market is markedly different to that of the US, patterns in the States may well be indicative of European trends. European costs are negotiated annually, with the 2002 discussions just beginning. The 16% fall of costs in the US may result in a similar decline in the various European markets, aiding the operating profits of newspaper publishers in Europe.
Newsprint fees account for an average of 20% of a publisher’s costs. Taking this and assuming a newsprint decline of 10%, the average boost to operating profits would be around 8.0%, says ABN.
On the stock market over the last three months, companies with press activities have outperformed the media sector as a whole. The total market value (as compiled from MediaTel Insight’s list of Sharewatch companies) declined by 6.7% over the period, whilst press fell by just 3.4%. Television-related companies, by comparison, declined by 8.8% in market value.
This is only a rough indication of the sector performances as many of the media companies listed on the London Stock Exchange have interests in multiple media. The companies included in the press sector analysis were: Daily Mail and General Trust, EMAP, Highbury House, Independent, Johnston Press, Pearson, Reed International, SMG and Trinity Mirror.