Thursday, March 27, 2008
Recession Could Bring More Mags
Digital Media Prospers, Traditional Suffers In Recession
by Erik Sass
A FULL-BLOWN RECESSION WOULD PROBABLY take a substantial bite out of traditional media, according to a survey of industry analysts and independent researchers. But digital media will benefit from these draw-downs as financially strapped marketing executives shift dollars online, seeking more transparent measures of ROI. In many cases, a recession would simply accelerate a long-term trend that is already underway.
Of course, the $64,000 question is: are we actually headed for a recession, defined as two consecutive quarters of negative GDP growth? While this issue is beyond the scope of this article, recent headlines are discouraging. On Monday, JP Morgan Chase bought Bear Stearns for a negligible $2 per share, and last week Standard & Poors said banks still stand to lose up to $285 billion from bad sub-prime mortgage loans, further tightening the global credit crunch. On the consumer side, the Conference Board's monthly Consumer Conference Index fell to 75 in February, down sharply from 87.3 January--reaching its lowest level since November 1993. And manufacturers are reporting lower sales in the automotive, technology, and packaged goods categories.
Some ad agencies are already feeling the squeeze, according to a global survey by ICOM, a network of independent agencies. The ICOM survey found that six out of 13 American ICOM member agencies said their clients were already cutting back budgets, with an average reduction of 34%. Most of the burden fell on print and broadcast.
So what would a recession mean for traditional media? TV and consumer magazines should be able to hang tough, say industry observers--but it's not a pretty picture for radio and newspapers.
TV may eke out some growth in 2008, according to Vincent Létang, a senior analyst with Screen Digest, a global media research firm based in London. Létang predicts 1.5% growth in U.S. TV ad revenues in 2008, thanks to big boosts from the Olympics and the presidential election. But the hangover will come in 2009, he added, as the weak economy and lack of big events drive marketers to freeze and maybe even slash broadcast budgets. As revenues stagnate, Screen Digest sees TV's share of total U.S. ad spending falling from 43% in 2008 to 41% in 2012.
In the event of a recession, consumer magazines will continue to vary in terms of success, according to Samir Husni, the chair of the journalism department at the University of Mississippi, also known as "Mr. Magazine." "Luxury magazines are fairly recession-proof, and can really weather any market, because the upscale advertisers don't get affected nearly as much," but "the mass magazines are going to see a slowdown in terms of ad pages." To make up the revenue shortfalls, many magazines will raise their newsstand prices, a trend that's already in motion. While this will produce a short-term slump in newsstand sales, Husni said magazines typically rebound within 6-12 months.
On a somewhat surprising note, Husni also expects the recession to spur the launch of new magazines. Pointing to past recession launches like Fortune, Esquire, and Entertainment Weekly, he explained that the weak advertising environment lowers the competitive bar for entry to the magazine business. That is, while big publishers struggle to maintain expensive operations, new titles can sneak in and carve out a niche. "Then when the market recovers, they ride the upward trend with everyone else."
In the event of a recession, the outlook is considerably gloomier for newspapers and radio, where revenues are already declining because of long-term secular trends, which were in evidence well before the economy began to sputter.
After slipping 1.68% in 2006, total U.S. print newspaper ad revenues tumbled an alarming 9% during the first three quarters of 2007 compared to the same period in 2006, to $30.5 billion (fourth-quarter figures aren't yet available). "And that was in relatively good economic times," observed Ken Doctor, a newspaper analyst with Outsell, Inc., who said "a recession would simply compound the structural change of readers and advertisers moving from print to online."
Newspaper woes are due mostly to competition from the Internet, where online classifieds, for example, provide a superior platform for matching individual buyers and sellers of goods and services. Thus, print classifieds--a traditional mainstay of newspaper revenues--fell over 15% in the first three quarters of 2007 compared to 2006, to $10.2 billion. Meanwhile, national and retail categories are posting single-digit declines, as online search and display ads give big advertisers a more precise view of ROI. Between this earlier trend and new data showing a decline in retail consumption, Doctor forecast "a deepening, accelerating slide in newspaper revenues," although he wouldn't venture a prediction in percentage terms.
In a recession, radio is in the same boat as newspapers, although maybe not the sinking end. Despite impressive reach--with nearly 94% of the U.S. adult population listening to radio at least once a week--radio recently seems to be losing its charm for key advertisers, for reasons that have nothing to do with the economy at large. According to the Radio Ad Bureau, total revenues fell 2% to $21.3 billion in 2007, and Marci Ryvicker, a radio analyst with Wachovia Capital Markets, predicts that even with political ad spending, revenues will fall at least 1% in 2008.
The big blows for radio are coming in the local ad market, where--like newspapers--radio suffers in comparison with interactive media: total local revenues fell 2% in 2007, to $15.1 billion. "In general, the traditional local ad market remains under attack from more targeted media," Ryvicker observed, adding that "we anticipate the reallocation of ad dollars to new media to continue for the foreseeable future."
As indicated, analysts expect digital media to win big during a recession. True, Internet revenues plunged 27% during the 2001 downturn, but they reason that the Internet has proven itself as an advertising medium in the intervening period (Google, for example, saw total ad revenues rose from $66.9 million in 2001 to over $16.4 billion in 2007). In the event of another downturn, analysts expect marketers to turn to the Internet's superior targeting and metrics to maximize ROI.
But there's some disagreement about where, exactly, all the cash will go. In a recent note, Forrester Research predicted that cost-per-action marketing (principally search) and online direct marketing (including email) will be the biggest beneficiaries. That agrees with a survey of marketers by the Direct Marketing Association which found that, even as 47% of marketers anticipate a recession, 50% said they would spend more on email marketing, 44% plan to spend more on database segmentation, and 35% plan to spend more on search optimization.
Forrester also predicted more spending on social applications that allow advertisers to launch low-cost word-of-mouth, viral, and buzz marketing campaigns. Forrester says these kinds of social campaigns are more likely to get the consumer to consider a product than traditional brand advertising--a key advantage when consumers are guarding their pocketbooks.
Forrester sees less of the new money going to online branding, principally display advertising. But some executives say this ignores growing interest in the Internet as a branding tool. Sarah Pate, CEO of AdMission, boasted that "the accountability of many of the new branding models has already brought more budget from some of our larger national consumer clients for 2008."
Can We Do That Measurability Thing?
Well before the current economic woes set in, some traditional media strove to adopt digital measurement techniques that would allow them to compete with the Internet. But it now looks like the new metrics will have only limited availability through most of 2008, meaning the Internet will still run the table on measurability, at least for the time being.
TV advertisers have been guardedly optimistic about Nielsen's C3 commercial ratings, promising to measure audience exposure to commercial pods, but in February Nielsen sent a letter to clients conceding that there were systemic problems in the delivery of these ratings and advising of further delays. A series of phased improvements at 20-day intervals will take at least until July to get the system up to speed. Meanwhile, the Media Rating Council continues to audit Nielsen's C3 system, meaning media buyers are using unaccredited ratings as currency for ad buys.
Radio broadcasters hung their hopes on Arbitron's Portable People Meter, a passive electronic measurement device that will eventually replace the old-fashioned paper diaries filled out by listeners from memory. But problems with the PPM panels have kept Arbitron from meeting its target sample sizes, prompting the company to delay deployment in the country's biggest markets by 3-9 months, including New York, Los Angeles, and Chicago, all now scheduled to get PPM ratings in September 2008.
Magazine advertisers have also pushed publishers to begin producing more rapid and precise measures audience and circulation. The Magazine Publishers of America recently responded to these demands with its plan to solicit proposals for a new audience metric derived from Internet surveys about readership. But this project is in its infancy, and is unlikely to bear fruit before the end of the year. Meanwhile, the Audit Bureau of Circulations has succeeded in signing up most major publishers for its new Rapid Report service --but a recent note from ABC urging publishers to turn in data in a more timely fashion suggests the service is struggling to fulfill its mission.
For Newspapers and Radio, Online Growth Isn't Enough
In the event of a recession, the rising Internet tide may well lift all boats, including Web revenues for newspapers and radio. But it's unlikely that growth in these areas will offset losses due to structural and cyclical downturns, as their contribution to total revenues remains small.
Ken Doctor of Outsell, Inc. noted that most big newspaper publishers' online revenues have dwindled from the robust rates of 20%-30% a few years ago to a more modest 8%-15% per year. The slowdown is bad news, he went on, because most publishers still derive less than 10% of their total revenues from online advertising.
Meanwhile, according to Wachovia's Ryvicker, the majority of big radio broadcasters get at most 1%-2% of their total revenues from online business. Non-spot revenues, including online, grew 10% to almost $1.7 billion in 2007. However, online radio revenues accounted for no more than $500 million of that, or just 2.3% of the total. Furthermore, broadcasters remained locked in a battle with recording artists over royalties for songs played online, which could jeopardize future growth.
Monday, March 24, 2008
BoSacks Speaks Out: The Economy, the Recession and Publishers
We are clearly headed into some dicey economic times. For some of us a recession will create new problems of instability where we are already under stress - from new competitors, the internet, and the demand for accountability. At the same time some of us will not only survive, but will actually thrive and prosper even under the conditions of a recession. How can this be?
There are lots of factors, but I put most of it down to creative management, market position, and stamina. Stamina is the easiest to understand. It is the wherewithal to have dogged determination to succeed.
Stamina is not enough though, you also need the proper market position, which is where you are in the "food chain" of information distribution. Do you own your media segment? Do you have a commanding share of your particular niche? Do you have the best editorial/content? If so, you have the proper market position.
And lastly, creative management. Do you have managers with the wit, the vision and, most importantly, the flexibility to adapt to changing market conditions?
Oh yes, and then there is luck. But a good deal of luck is recognizing any of the above conditions as it is flying by or landing near you. Once there is recognition, there needs to be an action plan to use that luck. And that brings us back to creative management,stamina, and market position.
What do you think?
Shallow men believe in luck. Strong men believe in cause and effect.
Ralph Waldo Emerson (1803 - 1882)
Bad news for Big Media
By John Simons, writer
The Following few paragraphs represent a synopsis of the full article:
As the United States slips into recession, advertising spending is set to fall - spelling trouble for traditional media companies already battered by Internet upstarts.
(Fortune) -- Media industry watchers are no longer debating whether the United States economy is in recession. Rather the question is, "how bad will it get?" If recent trends continue, the outlook is likely bleak for broadcasters, magazine publishers, newspapers, cable operators and the conglomerates that own them.
Advertising spending - the fuel that powers the media and entertainment industries - is poised for a downturn as corporations and consumers grow frugal. Cutbacks in consumer spending are expected to take a toll on everything from Disney's theme parks to Time Warner's magazines and News Corp.'s newspapers, according to analysts.
After some detail the article went on to conclude the following:
Cowen and Company analyst Doug Creutz is preparing for a rougher ride for this recession. "Our industry thesis is informed by our view that a recession in 2008 is likely, and that its impact could be more severe than those experienced in either 1990-91 or 2001," he says.
Creutz does see some companies' weathering and even prospering during a downturn. He likes Viacom's prospects, for instance, because cable networks can rely on subscriber and affiliate fees to help offset an advertising slowdown.
For the complete article: http://rs6.net/tn.jsp?t=vd4eclcab.0.0.cuf4zubab.0&p=http%3A%2F%2Fmoney.cnn.com%2F2008%2F03%2F23%2Fnews%2Fcompanies%2Fsimons_media.fortune%2Findex.htm&id=preview
Then Think about this paragraph from the Wall Street Journal
IN THE LEAD
Executives Find Ways To Keep Moving Ahead Despite Economic Fears
By CAROL HYMOWITZ
The collapse of financial titan Bear Stearns last week heightened concerns among executives across industries that the U.S. economy is in a recession. The mess on Wall Street has made it difficult for companies to get financing to do deals; slowed sales of cars, clothing, other consumer goods; and prompted managers to scuttle hiring plans and consider layoffs.
The worst thing business leaders can do, however, is panic, especially because the length and severity of a slowdown is impossible to predict. Here are some management lessons gleaned from recent events to help executives navigate successfully in coming months.
After some details the article goes on the following thought, a great one for all publishers:
Look overseas for growth. The weak dollar and continued growth in India, China and other emerging economics are a boon to small, and some big, U.S. companies with broad global reach. Cleveland-based Horizons, a maker of specialty metals and aluminum, expects overseas sales, which already account for 25% of its revenue, to double this year after also doubling in 2007. The company started expanding overseas five years ago -- first to Western Europe, Japan, Korea and Russia, then to Saudi Arabia, Dubai, Egypt and India.
"We'd be scrambling now if we weren't already global," says Wayne Duignan, director of international sales.
For the complete article:
Sunday, March 23, 2008
Periodicals Postal Rate Hikes Confirmed
Increase to take effect May 12.
By Joanna Pettas
The Postal Regulatory Commission has determined that the postal rate hike for Periodicals proposed last month-the first mandated to be tied to the Consumer Price Index-does not violate the new postal law and will go into effect on May 12.
Periodicals rates will increase on average about 2.72 percent according to the Postal Service, though David Straus, ABM Washington Counsel, estimates an increase of nearly 2.9 percent for almost all Periodicals, the difference being that a limited number of out-of-county pieces and in-county qualified publications now receive a discount.
According to the postal service, "Interested persons were given the opportunity to comment on the notice adjustment. Most of the comments focus on planned increases for specific rate categories or products. None claims that the planned increase for any class violates the price cap."
Under the Postal Accountability and Enhancement Act, the Postal Service may "bank" the difference between the CPI cap and the implemented price changes, which means that the .18 percent difference between the rate hike and the 2.9 percent CPI can be added to the CPI for rate hikes within the next five years.
Also under the new law, the Postal Service has extensive flexibility to vary rates within classes as long as the class average is CPI-limited. However, Straus says that the increases within the Periodicals class this time, at least, are very nearly across the board, with extremely small variations among different publications.
The Economist Seeks Termination of Printing Agreement with Quebecor World
Publisher looking to end contract, but says it is open to new arrangement.
By Jason Fell
The Economist is looking to terminate its contract with commercial printer Quebecor World, but says it is open to discussing how to continue the relationship, according to a statement filed jointly by the companies. Quebecor World filed for bankruptcy protection earlier this year.
According to a court filing, The Economist wants to terminate its print agreement at the expiration of the initial term in September. The printing agreement would continue to be valid until then.
The Economist argues that it is being harmed by some of the automatic legal protection that the printer has received under its bankruptcy agreement. According to the filing, the magazine "is not seeking to enforce a monetary claim against the debtors of their estates. The Economist merely seeks to exercise its contractual right to terminate the printing agreement."
"We understand and respect the decision taken by The Economist and we will continue to provide them with the top quality product and service they expect," Quebecor World Magazine Group president Doron Grosman said in the joint statement. "We will also work with them in the coming months to prolong and extend our mutually beneficial partnership."
A Quebecor spokesperson could not immediately be reached for further comment.
In the court filing, The Economist does not say why it is seeking a termination of the printing agreement. A spokesperson for The Economist declined to comment.
Quebecor World, one of the world's largest printers, announced its bankruptcy filing in January and its entering into a $1 billion financing deal with Credit Suisse and Morgan Stanley to help finance the company's operating needs. Earlier this week, the ailing printer said that, under bankruptcy protection, it would delay the release and filing of its 2007 financial statements until the end of April.