The year of newspapers – 2011,2012?

So 2011 was the year of newspapers… and with the Leveson inquiry and police investigations continuing, it is hard to see “Hackgate” being off the news agenda. In fact, my prediction is that the newspaper industry will continue to be at the forefront of everything we get angry about – and laugh about – this year. The media world is always intrigued by newspapers.

Despite pundits sounding the death knell for the industry, most newspapers continue to publish (I am of course ignoring the amazing anomaly of the shuttering of the News of the World). Admittedly many struggle to be profitable and continue to be published for influence (historically) and vanity (sometimes). But is this all going to change? The phone-tapping scandal touched a nerve and threatened to pull at the very fabric of our morality and ethical standards. The uncovering of the complicity between newspaper publishers, politicians and the police has made many of us more sceptical about what we are told and how we are told it.

Newspapers are in for probably the toughest time (in terms of declines in ad revenue – Carat are forecasting 3.5% decline) in 2012 with the decimation – yes a tenth of what they used to be – of classified revenues. Could the display advertising area also be under pressure now too? The strength for newspapers has been the ability to deliver large audiences quickly – particularly for retailers, especially the grocers. However, we hear that more and more brands are committing to selling their products via Facebook so the continuing reliance of business from grocers could be under threat. Tesco, although extremely profitable, has delivered its worst trading performance in years and it is mooted that it is undergoing a strategy re-think.

DMGT has also forecast a tough year going forward. However, The Daily Mail and The Sun are the real bellwethers of the newspaper market for the strength of retail advertising – so if they struggle this year with the Jubilee, Euro Football and Olympics, then the whole market will be suffering.

The Guardian continues to head faster and faster towards a digital-only world and I predict it might even fall under the 200,000 circulation mark at some point in 2012. And Johnston press, once a 35% margin business (ten years ago a share would cost £2.35), has seen its share price bump along the 6p mark for six months. You would think that the publisher is adopting a similar strategy to GN&M with the appointment of the digital evangelist Ashley Highfield but he is continuing to pronounce that print is not dead – and yet we still don’t know what the big plan is! Expect these shares to still bump along the 6p mark this year.

In contrast, the News Corp share price dipped to US$13.38 last summer at the height of the phone-hacking allegations. Yesterday it closed at US$19.73, its highest since Christmas 2007 – and a rise of almost 50% in 6 months. Investors might be buoyed by the thought that Murdoch will not be buying the remaining BSkyB stake (and crucially not over-paying for it) – as well as the fact that celebrities are striking relatively low out of court settlements for their privacy being invaded. However, News Corp makes most of its money from TV and films so with a cyclical recovery in the US (hopefully), the share price could reach US$24.

I love newspapers and am looking forward to commenting on an industry that never fails to surprise but always feels alive with creativity and passion. We need to hear some good news in 2012.