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Global And US Ad Spend Forecasts Are Up, But US Newspaper Revenues Are Still Dropping And Moody’s Remains NegativeTwo big international ad agencies have revised up their US and global ad forecasts, US consumer magazines increased their Q3 ad pages by 3.6% over a year ago, US TV ad revenues are forecast to rise 9% this year and the Internet is expected to be higher by some 13% with display picking up and mobile ad spending rising a whopping 80%, but US newspapers still have not found the bottom and the Moody’s Rating Agency remains down on the sector.Indeed the Q3 revenue reports from the two largest US newspaper companies – Gannett and McClatchy – were very disappointing because the general feeling had been that while ad revenues would continue in decline the curve would get flatter with drops of around 3% expected, but at Gannett the ad revenue decline was 5.1% with warning that a changing economy may mean not much improvement for Q4, and at McClatchy it was off 6.4% with an added warning that September was a bad month (down 7.3%). Wall Street did not take kindly to that, punishing the shares in both companies so it seems that newspapers are about the only sector not seeing an overall revenue increase. Mind you, at Gannett the ad revenue drop for its US newspapers was around 3% which was in line with expectations, but Its British Newsquest subsidiary saw a 7% revenue drop. The company has as much as admitted if it could dump Newsquest for a decent price then it would, but given recent UK newspaper prices, that is far easier said than done. Digital revenues for Gannett and McClatchy rose – at Gannett they are now about 12% of total revenue and for McClatchy a substantial 19% which sounds great until you figure that it needs to be around 50% to make up for lost print revenue. And with newsprint pricing on the rise – up $111 per tonne for standard 30-lb paper this year, that’s near 22% – and with increased interest payments to make on renegotiated debt that gave more breathing room but higher interest rates, and with circulation revenue also dropping, it is still not a rosy picture in newspaperland. And if newspaper publishers don’t like to read such words from pundits they do pay attention when a major ratings agency such as Moody’s delivers its verdict because that can directly affect what it costs to borrow money. Moody’s expects newspaper revenues to be down 5-6% this year, and down again next year although perhaps a bit better performance than this year, and it therefore says any real improvement in the bottom line will still have to come from continuing focus on structural cost changes. Which probably goes to explain why some McClatchy newspapers have recently announced more cutbacks. But cutting more is not as easy as it sounds. Sure, if you have to reduce numbers then you reduce numbers, but there has been so much cutting over the years that even publishers now realize the editorial quality is a real concern and there are journalists that editorial really needs to keep and they may even need incentives besides just having a job in order to stay, so it’s getting real close to the bone now. And other departments aren’t in much better shape. Moody’s says aggressive increases in home- delivery prices are helping, but are they? Gannett ‘s circulation revenue is down 5% compared to the same time last year and at McClatchy it is down 1.5% from the same period a year ago, but perhaps more ominous Q3 was down 3.9% over the same quarter a year ago. Less newspapers does mean less cost but only the accountants really know whether it is worth much more than a wash. The possible game changer in all that starkness may be how tablets and mobile phones might help newspapers. If publishers and Apple can come to some sort of agreement over iPad subscription revenue and advertisers continue their love affair with tablets then that could be a big game changer. And with eMarketer reporting that mobile ad revenues will be up 80% this year then shouldn’t newspapers be getting a substantial portion of that new pie? But in today’s reality, one can’t help but wonder why newspapers are still doing so poorly while US consumer magazines, for instance, are reporting a Q3 ad page increase of 3.6%, the second quarter in a row where the ad pages grew. What’s really more important, of course, is how that translates into dollars received and on a rate card basis it means about a 5.3% increase, but as everyone in the magazine business knows the rate card went out the door long ago and there are huge discounts available behind closed doors – some have been estimated as high as 60% or so – so increased ad pages don’t necessarily translate into increased revenues. Overall, Zenith Optimedia forecasts the US advertising figures will improve 2.2% this year (double what it had forecast last quarter) and the global increase will be 4.8% while Magna Global says the US spend will increase 4.1%, up from its previous forecast of 3%, while globally the increase will be 5.6%, up from its previous 5% forecast. Where is the increased spend coming from? Mostly automobiles, which is up some 27% to $4.4 billion for the first half of 2010, according to the Nielsen Company, which says the total US ad spend for the first half was $54 billion, up 3.82% over the same period a year earlier. It doesn’t look like much of that auto advertising increase, however, is funneling to newspapers. For now at least, the advertising purse strings are opening a bit more in this uneven economy but the sad news seems to be that there are no real signs that US newspapers are participating in that growth. See also in ftm Knowledge...Advertising – New and ImprovedThe advertising people are spending again. But things are different now and media people are feeling it. New media attracts attention and advertisers want to be where the action is. This ftm Knowledge file looks at the paradox of media and advertising. 92 pages PDF (September 2010) Media Business Models EmergingAfter a rough transition media business models are emerging. Challenges remain. There are Web models, mobile models, free models, pay models and a few newer models. It makes for exciting times. This ftm Knowledge file examines emerging business models and the speed-of-light changes. 123 pages PDF (May 2010) |
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