At Trinity Mirror’s nationals, the worst recession in living memory feels like a blip

Posted by Peter Kirwan on 4 March 2010 at 13:08
Tags: Associated Newspapers, News International, Trinity Mirror

Some news organisations have had a half-decent recession. Trinity Mirror’s nationals rank among them.

This morning, Trinity Mirror released its final results for the year to December 2009. Ad revenues at the Daily Mirror and its stablemates fell by 8% during 2009. That’s far less than the chunky double-digit percentage declines that afflicted many broadsheets.

But at tabloids like the Mirror, circulation is more important than advertising. At Trinity Mirror’s nationals, for example, circulation comprises almost two-thirds of overall revenues. During 2009, these revenues held steady at the Mirror and its stablemates, declining by a mere 0.5%.

Add it all up, and Trinity Mirror’s nationals have emerged relatively unscathed from the worst recession in living memory. Overall, revenues declined by just 3.2% YOY to £460m. On the bottom line, operating margins were barely disturbed. In 2009, these declined to 18.2% from 18.7% during the previous year.

It’s hard to call this a recession: it feels more like a blip.

Sly Bailey and her management team will feel good about this performance. The comparison with the Mail and the Mail On Sunday is suggestive.

At Associated Newspapers, home to the Mail and the Mail On Sunday, like-for-like ad revenues fell by 15% during the year to October 2009, and then by a further 11% during Q409. Although it’s hard to make a direct comparison, circulation revenues seem to have fallen more rapidly at Associated, too.

As always, however, there’s a sting in the tail. Readers have stopped buying newspapers during this recession in big numbers.

Between July and December alone, the number of national newspapers sold by Trinity Mirror declined by up to 10%.

Trinity Mirror mitigated these big declines by hiking cover prices. During 2009, the Daily Mirror rose from 40p to 45p, and the Daily Record from 60p to 65p.

But if readers’ willingness to buy newspapers continues to decline at the current rate, an awkward question presents itself.

In a world where the Daily Mail costs 50p and the Sun costs anywhere between 20p and 35p, what’s the most that Sly Bailey can charge for a copy of the Daily Mirror?

Guardian News & Media: Not that far out of line with the market, after all

Posted by Peter Kirwan on 18 November 2009 at 15:34
Tags: Daily Mail & General Trust, Guardian Media Group, Trinity Mirror

Did 25% of Guardian News & Media’s revenue base really disappear into thin air between April and September?

Last week, the Guardian itself left the door open to this interpretation. The Times appeared to confirm it, suggesting that revenues at the Guardian and the Observer had declined by £33m since April.

The contextual maths are unpleasant. In its last financial year, which finished in March, GNM generated revenues of £253m. For April-September 2008, it’s reasonable to assume that it generated half as much: say around £126m. A revenue decline of £33m during the same period in 2009 would have represented a fall of 26%.

Worse than anticipated? This would have been stunningly bad. Consider the following comparatives for total revenues (not just advertising revenues):

Trinity Mirror

– January-June: -17%
– 1st July-25th October: -12%

Independent News & Media

– January-June: -15% (in constant currency)

Associated Press

– March-June: -12% (underlying YOY figure, excluding Evening Standard)

Comparisons like these suggest that GNM’s revenue declines for April-September should be running at around the mid-teens in percentage terms.

As it turns out, that’s exactly what’s happening. A spokesperson for GMG tells me that the £33m YOY decline was a projection for GNM’s financial year as a whole — not for the six months between April and September.

On that basis, GNM should find itself 13% down on last year when its financial year comes to an end next March.

Worse than anticipated? Perhaps. But only slightly. Declines of this scale are not far off what the company was predicting last summer.

That said, GNM’s results for 2009-2010 — due to be unveiled next summer — could be the ugliest of the down cycle.

So far, GNM has cut £25m out of its cost base against 2008-2009. More cuts are on the way. But continuing revenue declines will punch another big hole in cashflow. On top of that, there’s the prospective impact of redundancy costs (these might be exceptional costs, but they represent real cash payments, unlike the notional write-downs in asset values that have become endemic among media companies).

Earlier this year, GMG’s chief executive Carolyn McCall outlined her timetable for turning around the group’s losses. “Can we afford it this year?” she asked. “Yes, but can we afford it for the next three years? No.”

The evidence suggests that McCall is on schedule. 2009-2010 won’t be a pleasant experience for GNM, but it won’t be anywhere near as bad as last week’s stories implied. By contrast, 2010-2011 should be a whole lot better.

London Lite may be dead, but free distribution has a big future

Posted by Peter Kirwan on 10 November 2009 at 16:41
Tags: Associated Newspapers, Daily Mail & General Trust

Farewell then, London Lite.

In a column in this month’s print edition, I argue that the freesheet’s demise doesn’t signal the end of large-scale free distribution. More likely, it’s the end of the beginning.

Journalists look down their noses at freesheets for all kinds of reasons. In particular, we tend to think of paid circulation and free circulation as polar opposites.

Buying a newspaper involves a considered choice. It’s a transaction that involves brand loyalty, something advertisers are keen to piggyback upon. Affinity is implicit in the deal: readers of paid-for newspapers are typically regarded as self-selecting demographic communities.

By contrast, freesheet distribution looks like a classic case of interruption marketing. Street vendors shove copies under the noses of consumers, apparently indiscriminately. It’s easy for advertisers – and the rest of us – to believe that freesheet readers are less engaged, and therefore less valuable.

Increasingly, though, I wonder about this. Recently, I talked to an editor — on a paid-for title — who argued the merits of free distribution. He had this to say about the circulation of one London freesheet:

They know how many copies each of their distributors is likely to hand out on a given day, at a given time, on a given street corner. They know that putting their distributors in certain locations at certain times of the day will maximise their distribution. They’re getting very close to a situation in which they physically hand a copy of the magazine to everyone who wants one.

His point was that freesheet distribution is more efficient than paid-for distribution.

It may also be just as effective. Last month, Frederic Filloux, a former Liberation journalist who now works as a consultant for Schibsted, had this to say about the launch of 20 Minutes, the Parisian freesheet:

We had detailed sets of data showing, who, where, at what time of the day, people where passing by 800 points of the greater Paris; we picked the spots — entrances of subway or commuter train stations, high density street corners —  that were of the highest interest to us.

Note that mention of “who”. The science of free distribution isn’t just about numbers. It’s about the demographics of footfall, too.

For example: shortly after launching 20 Minutes in 2002, Filloux’s researchers noticed that the paper’s circulation was skewed towards male readers.

They quickly discovered the reason for the skew: women tend to turn up at train stations later than men in the mornings (because they have to take the kids to school or nursery). Keeping the distribution bins stocked with copies for half-an-hour longer in the mornings solved the problem.

Filloux continues:

After a while, our distribution and marketing team were able to pinpoint exactly where a certain category of people would show up. That proved to be of great value to advertisers; when they wanted to target a particular segment for a commercial operation, such as distributing samples of their product, the yield we delivered was unprecedented.

When editors and publishers insist they’ve achieved “unprecedented” results on behalf of advertisers, it’s worth being wary.

But still: the distribution system that Filloux describes is far from random. Arguably, there’s just as much intelligence operating behind the scenes here as there is in the ancient and venerable business of newsstand distribution. Perhaps more.

It’s easy enough to deride the content of freesheets. But it’s harder to deride the distribution mechanism, which secures both reach (and if Filloux is to be believed) desirable demographics. Advertisers lust after both.

Free distribution has a big future ahead of it. If the Evening Standard succeeds in replacing £12m or so in lost circulation revenue with additional advertising revenue, that future could arrive sooner rather than later.

Ad revenue confusion: Where does slowdown end and recovery begin?

Posted by Peter Kirwan on 4 November 2009 at 17:49
Tags: Daily Mail & General Trust, Google, ITV, Independent News & Media

Confusion stalks the land. Is flat the new up? Or is down the new flat?

Typically, recovery means revenue growth. But after two years of declining ad spend, sentiment encourages inflated claims. Disappointments seem exaggerated in their effect. Some persist in talking up a recovery. We all want the pain to end.

At the Guardian a few weeks ago, Roy Greenslade asked whether newspaper publishers might be on the “verge of a remarkable recovery”. The evidence for “renewed optimism”, Greenslade told us, lay in share prices that have “come off the floor”.

This morning, by contrast, Greenslade has noticed a Wall Street Journal piece which argues (in his words) that “there is no real recovery in advertising income”.

Greenslade goes on to paraphrase the allegation that publishers have hyped “slight moderations in the rate of decline of their year-on-year ad revenues”.

There has been some hype. But in general, this is something that chief executives and finance directors tend to avoid. Irresponsible cheer-leading is career-limiting.

Financial PRs are often less squeamish. In the face of pressure to maintain share prices, they’re paid for their promotional skills.

Of course, what matters to journalists is a new direction for the narrative. At the moment, we’re all straining at the leash to declare the end of recession.

This is visible, most of all, in the headlines that fill up Blackberry screens. One among many tells a story: “Daily Mail looks to happy New Year as advertising slide slows” (The Times, 30 September).

Dan Sabbagh’s accompanying copy spells out the facts on which this bright headline relies: a 21% decline revenue at the Mail and Metro during July and August, followed by a 10%-12% decline in September.

This big contrast between flaky summer months and back-to-school September might not tell us much. Notably, Sabbagh’s story quotes Peter Williams, DMGT’s finance director, refusing to “call the bottom, in case it turns out we are on a ledge”.

The reaction to Independent News & Media’s trading update on 29^th October was similarly interesting.

INM’s trading update was ugly. Ad revenues fell by 19% YOY during the nine months to October. Operating profits nearly halved. Worst of all, from the City’s perspective, INM cut its forecast profits for the full year, which ends in December.

Yet some of the coverage — at Dow Jones, Reuters and the Irish Times — underlined the idea that ad revenues are stabilizing.

Arguably, it was the third par of INM’s trading statement that influenced these stories and headlines:

This marginally improved year-to-date revenue performance compared to the trend for the 1st half of 2009 demonstrates a stabilising advertising revenue trend, with each region experiencing similar advertising trends to H1 2009.

The “marginal improvement” mentioned here was very marginal indeed: a 19.6% decline in ad revenues during 1H, versus a 19% between July and October. Tucked away in the 20^th par of the earnings release, meanwhile, was this warning:

Based on still limited visibility, the advertising trends experienced in September and October remain challenging and are expected to continue for the remainder of 2009.

In other words: things might continue to improve very slowly, but don’t bet on it.

Stephen Miron, the chairman of Global Radio, probably thinks similarly about the prospects for his business. Last month, Miron told the Times: “Single-digit declines are the new up now — so used are media businesses to the problems of the year so far.”

It was a back-handed comment. Yet already, the game has moved on. Since Roy Greenslade raised the prospect of a rip-roaring recovery three weeks ago, the shares of DMGT, Johnston Press and Trinity Mirror have all turned downward. The markets have hit the pause button: the six month-long run-up in share prices is over for now.

This suggests that Big Media needs to generate real revenue growth, and quickly. Yet the GDP numbers for Q3 — down by 0.4% — say that this isn’t possible, not yet. Retailers, the biggest advertisers of all, are experiencing similar difficulty. Marks & Spencer may have beaten the market’s profit expectations today, but only because of canny cost management. Like-for-like non-food sales are still declining.

After Christmas, we’ll find out more about how consumers are feeling. Perhaps VAT cuts and the car scrappage scheme have simply brought forward household expenditure that would otherwise have occurred in 2010. Richard McGuire, fixed income strategist at RBC Capital Markets, is among those who think this is the case.

Last week, Sir Martin Sorrell unveiled disappointing results at WPP. He had this to say to those who (for understandable reasons) persist in talking up the market.

“I don’t want to get into that mentality where you accept that declines in negatives is good. We don’t accept that. I’m surprised at people who see sequential declines in negatives [of revenue loss] and say the downturn is over. . . We will only declare final victory when we see positive growth year on year. You can’t declare victory on improving negatives.”

The message was a stern one. As usual, though, Sorrell was on the money. We’re not out of the woods yet.

Deal or no deal: DMGT emerges £20m ahead after freesheet wars

Posted by Peter Kirwan on 29 October 2009 at 14:11
Tags: Associated Newspapers, Daily Mail & General Trust, News Corp

Unlikely as it might seem, the disappearance of The London Paper, the pending closure of London Lite and the Evening Standard’s switch to free distribution represents a enviable trio of victories for Daily Mail & General Trust.

Compare DMGT’s current situation with its context a year ago:

• The Evening Standard is no longer costing DMGT’s shareholders £10m a year in losses. . .

• . . . but DMGT retains a 25% stake in the Standard, and will therefore benefit if its free distribution model succeeds.

• Following the closure of The London Paper, News Corporation is no longer a tiresome irritant in London.

• DMGT’s London Lite will soon be gone, taking annual losses of £10m with it.

• DMGT should now be able to nurse Metro — rumoured to have made profits of £8m a year when times were good — through the rest of the recession. Cutting losses elsewhere should allow DMGT to bid handsomely for a renewed distribution deal with Transport for London.

• Presumably, the future also looks slightly brighter for the Mail and the Mail On Sunday.

DMGT’s hold on London continues to look reasonably strong, and the balance of risks has improved. For good measure, DMGT has improved the annualised profit potential of Associated Newspapers by £20m or so.

This is important. The speed with which newspaper owners can cut costs remains the only factor that differentiates them from one another in the eyes of short-termist investors. It will take Trinity Mirror’s bean-counters months to grind out the same kind of savings at Fort Dunlop and elsewhere.

No wonder some see this sequence of events as too good to be true. Hence the nods and winks delivered by Steve Busfield at Media Guardian this week:

Was a deal done to end the ear-bleedingly expensive London freesheet wars? Will DMGT now offer a shared ownership or printing deal to News International for Metro? I’m sure that such a deal, were it to have been done, would breach some kind of anti-competitive rules.

No doubt. But consider the risks of an anti-competitive side-deal. If discovered, it would provoke a huge outcry. With good reason, the chief executives of quoted companies (and their lawyers) tend to be very worried about the risk of discovery.

In any event, the rough equivalence in terms of the outcome for DMGT and News Corporation suggests that there was limited room for a stitch up.

In the year to June 2008, The London Paper lost £12.9m on News Corporation’s behalf. This year’s losses will have been larger. They might even have approached £20m — roughly the amount that DMGT has saved on an annual basis by selling the Standard and shutting Lite.

If News Corporation wanted a side-deal, its only bargaining chip would have been the nuisance value of continuing to publish The London Paper. With News Corporation under pressure from investors to bolster margins within its newspaper division, that threat had lost much of its credibility.

If DMGT and News Corporation agreed something on the side, no doubt we’ll find out soon enough. But the numbers suggest that it really wasn’t necessary.

Ad revenue gloom continues at DMGT

Posted by Peter Kirwan on 29 September 2009 at 10:19
Tags: Associated Newspapers, Daily Mail & General Trust, Northcliffe Media

This morning brings a carefully-worded trading update from Daily Mail & General Trust. Quoted companies use trading updates to “guide” the market toward reasonable expectations for full-year results. DMGT’s financial year finishes in early October. The company will report full-year results on 26^th November.

I said the statement was carefully-worded. Actually, the lack of any sign of an improvement in national newspaper ad revenues is disappointing.

Some relative improvement is visible at Northcliffe (smaller YOY declines in ad revenues). Yet local newspaper revenues continue to decline at an alarming rate.

It bears repeating: with circulation revenues stagnant at best, we need an improvement in ad revenues before we can start talking about any kind of sustainable recovery for the newspaper industry. At DMGT, there’s no real sign of this happening yet.

Associated Newspapers:

This is what we knew about ad revenues at Associated up until this morning:

Q408: -8%

Q109: -23%

Q209: -15%

And this is what we learned this morning:

Q309: -16%

Interestingly, DMGT didn’t offer a number for display advertising performance at Associated during Q3. Nor is there any mention of digital revenues. Depending on your perspective, you might choose to find this worrying.

July and August, it seems, were a nightmare:

Whilst Associated’s total advertising revenues in July and August were down by 21%. September has been better, although trading remains volatile from week to week with little visibility on future advertising performance.

Note that suggestion of “little visibility”. Associated said the same in July about Q2. The coded implication? Despite the talk of economic recovery, the slump in national ad markets continues unabated.

Northcliffe Media:

Here’s what we knew up until this morning:

Q408 (UK ad revenues): -27%

Q109 (UK ad revenues): -36%

Q209 (UK ad revenues): -33%

And here’s what DMGT told us this morning about Northcliffe in Q3:

July & August 2009: -26%

September 2009: “continuing improving trend”

And here’s what we’re told about that “continuing improving trend”:

Absolute weekly levels of advertising revenue have stabilised and year-on-year rates of decline are now showing improvements.

This sounds positive enough. Typically, local newspapers are are an early-stage recovery play. Yet these YOY declines still feel stubbornly high.

Remember, too, that DMGT’s local newspaper ad revenues have been declining at a significant rate for well over a year now. In July and August 2008, for example, the YOY decline was 23% — not much different from what’s happening now.

The only real bright spot was reserved for investors. DMGT has cut its costs by £150m this year. Across Associated Newspapers and Northcliffe Media, 1,500 jobs (around 15% of the workforce) have gone during the past 11 months.

As a result, DMGT says that it “confident” that it won’t disappoint market expectations of profitability for the full year. In particular, cost-cutting means that Northcliffe’s profitability actually improved YOY during August and September.

For small mercies like this, if that’s how to describe them, we should be grateful.

The 20/20 Scenario: After a year of recession, what’s next for ad revenues?

Posted by Peter Kirwan on 2 September 2009 at 12:51
Tags: Associated Newspapers, Independent News & Media, Johnston Press

Newspapers & live events: There’s money in affinity

Posted by Peter Kirwan on 21 August 2009 at 15:02
Tags: BBC Worldwide, Daily Mail & General Trust, Guardian Media Group, Media, News International

Simon Jenkins went to four festivals this year: Glastonbury, The Hay Festival, the Welsh Eisteddfod and the CLA Game Fair.

(The CLA Game Fair? For metropolitan types among you, the CLA bit stands for Country Land & Business Association, and its Game Fair is a three-day festival of country pursuits.)

Last week, Jenkins found himself marvelling at the vast crowds that attended each of these events — vast crowds “being parted from considerable sums of money in the cause of affinity”.

Sensibly, Jenkins went on to argue that newspapers should emulate the music industry, which has “cast off its enslavement to recording studios and recast itself, almost in Victorian mode, as a mass movement for live audiences”.

At EMI, Guy Hands wouldn’t recognise this description of an industry “casting off enslavement”, but one thing’s for sure: if it doesn’t already, the music industry as a whole will soon generate more revenue from live performance than it does from the sale of CDs and MP3 files.

The increase in performance revenues is compensating for the decline in physical music sales. The lessons for publishers are obvious.

As our lives become more virtual, as the number of shared national moments on telly dwindles, we crave live experience more than ever. It’s partly a tribal thing: attending Glastonbury or Glyndebourne says a lot about who you are.

It’s also partly about the increasing importance of experiences as opposed to products. Not for nothing does an entire sub-sector of the marketing industry devote itself to experiential marketing. In an increasingly digital world, retailers need to find more ways of getting their products in front of us so that we can look at them, touch them, smell and taste them.

Broadcasters have been quicker than newspapers to satisfy this craving. Apparently, the public’s taste for Top Gear has been sufficient to sustain “a £20m world tour”, produced in associated with Clarion Events.

Like Top Gear, Kevin McCloud’s Grand Designs started out as a reviews-based show, only to become a vehicle for all sorts of collectively-held aspirations. The original TV programme (produced by Fremantle Media and broadcast on Channel 4) has given birth into a huge exhibition (organised by Media 10).

Along the way, there’s been a massive expansion of focus. On telly, Grand Designs concerns itself with self-build homes. At the NEC, in October, it promises to interest “anyone who has an interest in design, build, interiors, shopping, home wares, gardens, kitchens & bathrooms, and innovation”.

Who’s to say that the Mail, the Guardian or the Times or the Telegraph can’t mobilise similar numbers of fans? Grand Designs is watched by around 5m viewers eight times a year, with repeats driving up reach. But the whitetops reach several million readers every day, and their brands have been around a lot longer.

Intrigued, I decided to look up the financial performance of the four festivals that Jenkins mentions in his column. The results were interesting:

Glastonbury: As the great-grandaddy of them all, Glasto is an exception to the rules in terms of size. But its size hasn’t restricted growth: even this well-established event is growing rapidly. In 2005, revenues were £16.3m. As you might recall, there was no event in 2006. But in 2007, revenue shot up to £22.3m. The numbers make me wonder whether Glastonbury broke through the £40m barrier this year.

The Hay Festival: Here, too, there’s significant growth. In 2005, Hay Festival of Literature and the Arts Limited generated £1.2m in revenues. Revenues grew by 22% in 2006, and by a further 26% in 2007. But 2008 was the breakthrough year, with revenue expanding by 53% to £2.9m – probably due to international expansion. Whatever the reason, the company behind The Hay Festival has more than doubled in size in the space of three years.

The National Eisteddfod Of Wales: The only registered charity on the list, and the only one that describes itself as “a process rather than an event”. Eisteddfod has reputedly been dogged by financial problems. But its topline looks healthy enough. In 2008, it generated revenues of £3.8m.

The CLA Game Fair: According to the most recent set of accounts at Companies House, the Game Fair generated revenues of £3.2m in 2006. The event was called off in 2007 “due to the appalling weather”. But in 2008, it generated £3.8m. Once again, the growth rate is impressive: 18%.

The story is consistent and obvious. Simon Jenkins is correct: there’s money in live events. Investing in them should be a no-brainer for newspapers.

The decline & fall of local newspapers, Part 1

Posted by Peter Kirwan on 23 June 2009 at 12:26
Tags: Johnston Press, Media, Newsquest, Northcliffe Media, Trinity Mirror

Deflation will put an end to the supermarkets’ advertising jamboree

Posted by Peter Kirwan on 22 June 2009 at 22:51
Tags: Associated Newspapers, Media, Northcliffe Media, Trinity Mirror