Plummeting Newspaper Ad Revenue Sparks New Wave of Changes
Plummeting Newspaper Ad Revenue Sparks New Wave of
Changes
With global newspaper print advertising on pace for worst
decline since recession, publishers cut costs and restructure
Oct. 20, 2016 5:30 a.m. ET
Newspapers are suffering an accelerating drop in print
advertising, a market that already was under stress, forcing some publishers to
consider significant cost cuts and dramatic changes to their print and digital
products.
Global spending on newspaper print ads is expected to
decline 8.7% to $52.6 billion in 2016, according to estimates from GroupM, the
ad-buying firm owned by WPP PLC. That would be the biggest drop since the
recession, when world-wide spending plummeted 13.7% in 2009.
That decline is hitting every major publisher, increasing
pressure on them to boost digital-revenue streams even faster to make up for
lost revenue and, in some cases, even reconsider the format of their print
products and the types of content they publish.
Many newspapers have trimmed costs to cope with the
worse-than-expected revenue decline. The New York Times Co. and Wall Street
Journal-owner News Corp, likely have further head-count reductions on the way,
and the Guardian and the U.K.’s Daily Mail recently eliminated jobs. Analysts
such as Jefferies & Co. have pared back their third-quarter estimates for
publishers including the Times and Gannett Co.
“We operate in a time of rapidly changing market
conditions, especially in the world of print advertising,” Gerard Baker, editor
in chief of The Wall Street Journal, wrote Wednesday in a memo to employees.
“These are days of accelerating change in the newspaper business.”
In light of the steep downturn, the Journal this week
announced a coming revamp of its print editions that will include the
consolidation of sections and other cost reductions, moves designed to make the
print newspaper more sustainable for the long haul and help accelerate the
newsroom’s digital transformation. Meanwhile, the Times has been working on a strategy
to significantly boost digital revenue by 2020, including shifting more
resources into digital initiatives and looking at ways to revamp things such as
its Metro section.
“It’s definitely been a hard year for print in the first
half,” said Meredith Kopit Levien, chief revenue officer at the New York Times.
Newspapers have been in a race against time to grow their
digital revenues to make up for the collapse of print advertising. They have
made strides, but face challenges on that front, including the dominance of
Facebook and Google in the digital market and difficulty making money on mobile
products.
During the past decade, marketers have fled newspapers
for a variety of reasons, including declining circulation, aging readership and
the need to fund their digital initiatives.
Other factors more recently have come into play,
including the growing use of data and analytics in the media-planning process.
Moreover, advertisers aggressively are pushing into online video, and marketers
in sectors such as retail, financial services and telecommunications are
reducing print spending.
“There’s been acceleration in the downturn this year” in
print advertising, said John Ridding, chief executive officer of the Financial
Times. “That is partly structural towards digital and mobile and the major
platforms, such as Facebook and Google.”
The newspaper print-ad outlook is a worrisome prediction
given that the overall global ad market is expected to grow 4% this year to
$529.1 billion, with a 14% acceleration in digital-ad spending, according to
GroupM. Newspapers, however, aren’t alone in seeing ad dollars dry up. Global
magazine ad spending is expected to decline 2.9% this year, estimates GroupM.
To help bolster digital dollars, many publishers slowly
are abandoning low-rent display ads and pushing into potentially more lucrative
ad offerings such as native ads, video ads and virtual reality. But so far,
digital ad revenues aren’t growing fast enough to offset declines in print,
particularly because ads in newspapers remain relatively expensive.
Although prices vary widely, the average CPM, which is
the cost for reaching a thousand people, for a full-page ad in a national
newspaper is roughly $100. Meanwhile, the average CPM for a broadcast TV ad in
prime time that reaches 25- to 54-year-olds is roughly $37, according to
several ad buyers.
That means that when an advertiser weighs the performance
of print ads against their cost, print doesn’t appear as efficient as other
media when ranking return on investment, said David Murphy, chief executive
officer of Novus Media, an ad-buying firm owned by ad giant Omnicom Group Inc.
Using data and analytics in the media-planning process
“is being leveraged by more and more national advertisers and retailers, and
that is a recent phenomenon,” Mr. Murphy said.
Jefferies analyst John Janedis has forecast an even more
difficult calendar third quarter. Last month he lowered his estimates for the
New York Times, predicting a 17% drop in print-ad sales, worse than his earlier
projection of 14%. For Gannett and News Corp, he estimates combined print and
digital ad revenues will decline 12.5% and 7%, respectively. The companies
declined to comment.
In response to the print decline, the Journal may further
reduce head count, according to people familiar with the matter.
It isn’t alone. The New York Times said further
downsizing is expected in the newsroom early next year. Emphasizing the
importance of digital, the Times this week named A.G. Sulzberger—who has
focused on the newsroom’s digital transformation—as deputy publisher, putting
him in line to become the next publisher.
In the U.K., Daily Mail & General Trust, the owner of
the Daily Mail, said it was cutting more than 400 jobs last month in response
to a tough ad market. Guardian Media Group, which publishes the Guardian and
the Observer, slashed about 250 positions earlier this year.
“Newspapers are a tough place to be right now,” said
Stephen Daintith, chief financial officer of Daily Mail & General Trust.
“The decline in the U.K. has been even more severe over the last 12 months.”
—Lukas I. Alpert contributed to this article.
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