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Ad cuts to cost French public TV €150 million this year
…and EC Competiton Commission approves State aid…
France public TV will post a budget loss of €100 million this year, said France Télévisions Finance Director Damien Cuier to AFP yesterday (July 16). A new 2008 budget “includes projected revenue losses related to the announcement of the elimination of advertising.” Even though the phased-in ad cuts won’t begin until January, it seems advertisers are already bailing out. Cuier said about €152 million in ad revenue will be lost this year. (See article on President Sarkozy's vision for French public television)
The government, said Cuier, promised €150 million in State aid “sometime this summer.”
Et VOILA!
As if by magic, today EC Competition Commissioner Neelie Kroes approved the €150 million “capital injection” for France Télévisions.
“I am closely following developments on the French audiovisual market,” said Commissioner Kroes in a statement (July 17), “and the initiatives aimed at refocusing France Télévisions and enhance its ability to carry out the public-service missions to which French and European citizens, just like the Commission, are justifiably attached. The EUR 150 million capital injection should enable France Télévisions to fulfill its current tasks while the reform measures are under discussion.”
DG Competition reminds one and all that Member States have “prerogative to decide on the best way to finance their public service obligations, provided that there is no overcompensation that could be used to finance the operator's commercial activities.”
“This decision is unrelated to current discussions on possible new types of public financing for France Télévisions, which will have to be notified at a later date to the Commission,” noted the DG Competition statement. In other words, Commissioner Kroes is “closely following”. (JMH)
Google Profit Up 35%; Shares Fall 10%
When Gannett reported net income down 36% in Q2 its shares got bombed 16% at one point; so you might have expected that when Google announced its Q2 earnings were up by some 35% that the shares would soar. And you would be wrong. In fact, their shares got bombed, too, although “only” by 10%. Why down? Because investors had expected even better numbers!
All Google could manage was $1.25 billion in net income for the quarter – that’s $3.92 a share compared to $2.93 for the same quarter a year ago, but it was down from Q1 net income of $1.3 billion equaling $4.12 a share, so there is a somewhat worrying trend.
Chief Executive Officer Eric Schmidt said that Google faces “a more challenging economic environment.'' That translates into it is still doing very well, just not quite as well as it did last year. For instance, click growth on its advertisements grew 19% compared with 47% in the same period last year. But the important point is that in this severe economic downturn it still produced increased ad clicks.
Can Newspaper Companies Continue Paying High Dividends?
With all the news about sinking newspaper shares, there is one bright spot for investors – those shares are paying very high dividends these days. McClatchy is paying around 14%, Gannett is close to 10%, and New York Times Company is more than 7%. So for those looking for high income returns are newspaper shares the answer?
Probably not. Newspaper companies are all looking for ways they can save money these days and one is definitely to take a look at the dividend payout. But there are pitfalls to cutting the dividend. Some shares are owned by funds that must invest in income producing shares – if the dividend is severely cut or disappears then the likelihood is that fund will disappear as a shareholder, too, and the share price will fall even lower.
Take a look at what happened with GateHouse Media. The company this March, with its shares hovering around $6, cut its very generous $1.60 dividend by 50% and it was questionable whether cash flow could even pay that reduced dividend. Thursday the shares closed an even $1. "We think another dividend cut is likely,” says Morningstar analyst Tom Corbett. “Even if GateHouse completely eliminated its dividend, given the combination of its high debt load and our unfavorable outlook for the industry, we think this would provide only short-term relief for equity holders.” The analyst thinks the shares may, in fact, be worthless.
Gannett’s Shares Pounded On Q2 36% Profit Slide
Folks, this is really getting serious. If Gannett, America’s largest newspaper group with a well-earned reputation for good management, very tightly run and known for not spending a penny it doesn’t have to, reports that its Q2 profit fell 36%, that ad sales at USA Today fell 27% in June, and that total print ad sales for the group fell 16%, then what can we expect from everyone else now that the newspaper Q2 reporting season has begun?
Gannett shares got absolutely bombed Wednesday – down 16% at one point before coming back on a NYSE 2.5% upside day, but they still closed down 4.5% on the day at $16.57. Other newspaper companies also had a poor day – McClatchy, for instance, dropped 6.3% before coming back to close down 2.92% at $4.65.
It was just one month ago that Chief Executive Craig Dubow told employees in a staff memo, ““I can’t state strongly enough my belief that our current stock price does not accurately reflect the true value of our company or its potential”. On that day the shares closed at $25.71 so there’s been a 35% drop in just the 30 days since then. It makes you kind of wonder what he thought of Wednesday’s drop that took the shares down to $14.62 at one point. It’s been more than 20 years since they were that low.
Google Boss Says Outlook for Newspapers “Bleak”
As if our item above isn’t bad enough news about the newspaper business, we now have Google CEO Eric Schmidt telling a seminar in Los Angeles Wednesday that the outlook for newspapers is “bleak”. He added that’s "a tragedy," because "investigative reporting is so important for democracy."
"The optimism is that there are more people online than ever, older businesses will discover how to monetize and we will all get through this," Schmidt said. "I would love that to be true. The evidence does not support that view," he added.
Internet Entrepreneur’s Verdict on Traditional Media – Sell, Sell, Sell
Marc Andreessen has made hundreds of millions of dollars off the Internet – he was the co-author of Mosaic that was the first widely used web browser and he was a co-founder of Netscape that eventually sold out for $4.2 billion in 1998 to AOL. So it should be fair to say he knows a thing or two about media although his Internet bias is obvious. So it’s of interest to note what he told the movers and shakers at last week’s media conference in Sun Valley, Utah:
“If you own newspapers, sell; if you own TV stations, sell; if you own a movie studio, sell.”
Apparently he’s not a fan of traditional media.
Seems the stock market isn’t either and is following his advice. Gannett, which announces results Wednesday, closed Tuesday at an 18-year low of $17.17 and McClatchy, getting yet another Standard & Poors rating pushing its debt even deeper into junk territory, closed at $4.79, meaning its market capitalization is just $394 million -- two years ago it paid $4 billion for the Knight Ridder newspapers it kept.
Signs Point To Big UK Advertising Downturn
A key indicator for the health of the UK economy forecasts a severe advertising downturn for the rest of the year across most platforms with the decline said to be the worst since the 2001 9/11 attacks in New York.
The Institute of Practitioners in Advertising (IPA) said in its latest Bellwether report that "marketing budgets for the current year were revised down for the third consecutive quarter in Q2, with the rate of decline gathering to a pace not seen since budgets were hit in the immediate aftermath of the 9/11 terrorist attacks in late-2001."
The report said it was possible that marketing’s spend will fall for the first time in the eight years the reports have been issued. Every sector saw forecast budget cuts except the Internet, while the increase is slowing down to the smallest level in five years.
In Q2, 27% of the companies surveyed said they cut their marketing budgets while just 15% said the budget was increased. Some 75% of marketing budgets for all platforms except digital were revised down. Budgets for newspapers, TV, outdoor, radio, and the movie theaters declined at their fastest rate in two years.
Anheuser-Busch Deal - "Genius" to Europe?
...imagine the possibilities...
Analysts looking at the brewer Anheuser-Busch buy-out by Belgian/Brazilian brewer InBev all mention the obvious advantage for InBev.
InBev is known for cost control (boring) while Anheuser-Busch is renowned for marketing and branding genius (YEAH!!), particularly the Budweiser brand. Could some of that genius come to radio in Europe?
Imagine the possibilities of French, German, Spanish and Swedish translations of this: (JMH)
Big Brother Off
…network cancels…
Australia’s Ten Network cancelled reality TV icon Big Brother. Ratings started to slide in 2004 and, even with aging Bay Watch babe Pamela Anderson on last week, the end has come. Eight seasons and A$30 million (€18 million) a year is quite enough.
Reality TV arrived shortly before the turn of the century. Big Brother was first. There’s a product life cycle to everything.
Big Brother Australian producer Endemol Southern Star said it has plenty of other free-to-air and pay-TV possibilities for the show. Endemol Southern Star is a joint venture of show originator Endemol and Australia’s Fairfax Media.
Meantime, Endemol founder and Big Brother creator John de Mol is reportedly in talks to buy UK channel ITV. (JMH)
New Yorker Cover Tests The “Any Publicity Is Good Publicity” Thinking
The New Yorker Magazine, which has highbrow and wealthy demographics, for its July 21 issue ran a cartoon cover that it actually thought favored the Barack Obama Presidential campaign by ridiculing allegations that the Obamas are closet radical Muslims – a cartoon showed them standing in the Oval Office, he turban-clad wearing Islamic dress and she in military fatigues carrying a Kalashnikov with an American flag burning in the fireplace under a portrait of Al-Qaeda leader Osama bin Laden. If that was supposed to be favorable then something definitely got lost in the translation.
Obama spokesman Bill Burton commented, “Most readers will see it as tasteless and offensive. And we agree." John McCain’s campaign took a similar position, “We completely agree with the Obama campaign that it is tasteless and offensive," spokesman Tucker Bounds said. The cartoon is sensitive since the Obama campaign believes its candidate’s Achilles heel with voters are questions about his patriotism and his religion.
The New Yorker editor says it was supposed to be satire. It “combines a number of fantastical images about the Obamas and shows them for the obvious distortions they are," said David Remnick. "The burning flag, the nationalist-radical and Islamic outfits, the fist-bump, the portrait on the wall -- all of them echo one attack or another," he said. "Satire is part of what we do, and it is meant to bring things out into the open, to hold up a mirror to prejudice, the hateful, and the absurd. And that's the spirit of this cover," he said.
Cartoonist Barry Blitt commented, "I think the idea that the Obamas are branded as unpatriotic (let alone as terrorists) in certain sectors is preposterous. It seemed to me that depicting the concept would show it as the fear-mongering ridiculousness that it is," he said. Looks like he blew that idea!
The cartoon creates the very last image the Obama campaign wants. How that cartoon may be used by political opponents – and that doesn’t mean the McCain campaign but rather those who plain just don’t want Obama elected and will use almost any means at their disposal to ensure that – could become a decisive factor in the election to come.
More High-Level Tribune Departures
With Tribune newspapers busy redefining themselves (translation: cutting staff and cutting news pages) the editor of the flagship Chicago Tribune has decided that after publisher Scott C. Smith left this month that her time has come, too. Her last day will be Thursday and she is being replaced by Gerould W. Kern, 58, who has been Tribune Publishing's vice president of editorial since 2003.
"[The] decision was difficult and a long time coming and it would be inaccurate to attribute it to any one event," Lipinski, 52, wrote in a staff memo. "I began my editorship seven months before 9/11 and in the seven years since have become accustomed and even comfortable with editing and managing through crisis and change," she wrote. "But professionally, this position is not the fit it once was. Personally, my family and I believe it is time.”
Meanwhile in Los Angeles Variety says rumors are flying that this may well be Los Angeles Times publisher David Hillier’s last week and that he has been summoned to Chicago for a meeting with Sam Zell and Randy Michaels, Tribune’s chief operating officer.
Hillier became publisher in October 2006 after his predecessor, Jeffrey Johnson, refused to make budget and staff cuts and was forced to resign by the previous Tribune management. Hillier served as publisher of the Chicago Tribune for two years before joining the Times.
Car makers shift gears
...high fuel prices...
Rising gasoline prices may give sellers of digital radio technologies a new hurdle to overcome with automobile manufacturers. ABI Research says car makers are shifting attention in on-board telemetrics to cost savings from safety and "infotainment." (See ABI release here)
No doubt the secret meeting at the EBU last week between WorldDAB and automobile manufactures representatives focused on how to get DAB (and all its variants) into cars. With a 5 to 6 year development cycle car makers have resisted changing the basic in-car radio and audio offerings until universal standards (like FM and AM) arrive. Consumers' attention to high gasoline prices worry car makers much more than choice of radio system.
The radio medium thrives on in-car availability. Or, it has so far...
Oh, the ABI report also mentions, just so very briefly, that BMW and Chrysler will rollout cars equipped with Internet access this year. (JMH)
German radio ratings delayed
…inconvenient…
German radio audience survey results will be delayed 3 weeks, said supplier ag.ma (Arbeitsgemeinschaft Media Analysis) in a press release (June 25). Instead of the expected data dump on July 15th, we’ll just have to wait until August 6th for Radio II 2008. This will press into holiday time for German media buyers.
The reason is "discrepancies in the allocation of demographic data from the official statistics,” said the release. "The data from the ma Radio II 2008 survey is fine.”
Media-Micro-Census GmbH (MMC), which actually collects and tabulates the data, discovered “irregularities.” Added to this phase of the German radio audience survey are children 10 to 13 years and foreigners. This is the first time in history that the ag-ma radio details have been delayed. (JMH)
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