There will be no respite for the embattled print media in Australia and around the world in the next three years, judging by a new forecast on ad spending.
We know the current and further outlook for print media is grim not only in Australia, where the 120 sackings/retrenchments among Fairfax Media journalists are on the cards, as do the 55 or so News Corp Australia journalists who lost their jobs last year, as well as the move by APN to put its regional Australian newspapers on the market.
But equally the message from offshore is grim as conveyed by the 310 jobs (including 100 journalists) going at The Guardian in London. The New York Times is reviewing its newsroom and its website and the way they mesh and interact (and staffing levels no doubt), and a similar examination is underway at The Telegraph in London. News UK is said to be reviewing staff levels, especially at The Sun.
Quietly, News UK last year wrote down the value of TheSun by more than $A400 million with no explanation, and while The Times and Sunday Times lifted earnings in the year to June, 2015, that was in the face of falling ad and digital paywall revenues. Staff cuts (especially journalists) and lower paper and printing costs contributed to the higher results. The Times lifted sales and that improvement has continued into 2016, but print ad revenues remain weak.
And that’s the big story from the past year – sliding print ad revenues in the past year have or are driving these latest round of cuts and restructurings, and digital ad and subscription revenues are not making up the lost analogue revenues fast enough.
So be sceptical of any claimed benefits from any mergers and acquisitions in the Australia media sector if the laws change – the deals will be defensive, not value creating. That’s the driving force behind these stories about Telstra selling down its stake in Foxtel and News Corp Australia backing Fox Sports into Foxtel and floating it on the ASX.
It will be a deal designed to help Telstra to lower its exposure to a declining business with weak outlook and News, to buttress Foxtel and Fox Sports against the remorseless growth of streaming video services such as Netflix.
This week we saw more gloom in the shape of the latest ad revenue forecasts from ZenithOptimedia in its March quarterly analysis of current and future ad spending trends. It is not good news for print – newspapers or magazines – which face the loss of billions of dollars in print ad revenues over the next three years, piling more pressure on already strained balance sheets and asset values.
For all their talk of hitching a ride on the internet and all things digital, and then mobile and social media, these developments have passed print media by with few successful boardings.
The big news from the latest forecast from the company (http://www.zenithoptimedia.com/wp-content/uploads/2016/03/Adspend-forecasts-March-2016-executive-summary.pdf) is that businesses around the world are set to spend more on all forms of internet advertising than on television commercials for the first time next year.
Zenith said it expected internet advertising to grow at more than three times the rest of the industry in 2016, driven by demand for ads on social media (especially mobile), online video and paid search.
The 2017 date is significant because it is a year earlier than the 2018 forecast issued by Zenith in its December report. The reason for this is the slide in ad spending in markets such as TV spending Brazil and China expected this year and next.
But included in the report was a forecast for ad spending from last year to 2018 and while it is generally upbeat, the two odd sectors out were newspapers and magazines. For them the forecast was pretty miserable.
Zenith forecasters wrote “ Over the last ten years internet advertising has risen from 6% of total global spend (in 2005) to 29% (in 2015). Meanwhile newspapers’ share of global spend has fallen from 29% to 13%, while magazines’ has fallen from 13% to 6%. Print titles will continue to lose market share as their readership continues to decline,and either move to online versions of print brands or other forms of information and entertainment entirely.”
"We predict newspapers and magazines will continue to shrink at average rates of 4% a year between 2015 and 2018, ending with 10% and 5% market shares respectively.
"Note that our figures for newspapers and magazines include only advertising in printed editions of these publications, not on their websites, or in tablet editions or mobile apps, all of which are picked up in our internet category. The performance of print editions does not wholly describe the overall performance of newspaper and magazine publishers,” they wrote
But we know from the financial reports from listed media print companies such as News Corp, the New York Times, Fairfax Media, Daily Mail and General Trust, Trinity Mirror, The Guardian and others, that digital ad revenues (and revenues from digital subscriptions, – paywalls and the like) are not keeping pace with the rate of decline in print ad revenues.
The bottom line for print media is that from 2015 to 2018, magazines will lose an estimated $US4.38 billion in print ad revenues and newspapers will lose $US8.67 billion.
That is a combined loss of $US13 billion over the next three years. And even if print manages to grab an extra $US13 billion in digital and other revenues, it will merely be marking time with the rotten state of the sector in 2015.
And who is eating print’s breakfast, lunch and dinner? Mobile advertising. Zenith says it believes mobile advertising grew 72% in 2015and will average 32% growth a year from 2015 to 2016 – or a total of $US64 billion extra in revenues.
Desktop internet advertising will grow by just 2% a year in the same time. Could it be fading by 2020, and heading for stagnation?
“We estimate global expenditure on mobile advertising at US$50 billion in 2015, representing 31.3% of internet expenditure and 9.2% of total advertising expenditure (this total excludes a few markets where we don’t have a breakdown by medium).
"By 2018 we forecast mobile advertising to grow to US$115 billion, fractionally behind desktop’s US$116 billion total. Mobile will account for 49.6% of internet expenditure and 18.7% of all expenditure,” ZenithOptima said in the report.
"Mobile is by some distance the main driver of global adspend growth. We forecast mobile to contribute a full 92% of all the extra adspend between 2015 and 2018 (again excluding markets where we don’t have a breakdown by medium).
"Television and desktop internet will be the second and third‐largest contributors respectively, accounting for 10% and 9% of new ad expenditure respectively. Outdoor, radio and cinema will contribute another 7% between them. "
