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 making 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.
Write to Suzanne Vranica at suzanne.vranica@wsj.com and Jack
Marshall at Jack.Marshall@wsj.com
(END) Dow Jones Newswires
October 20, 2016 06:05 ET (10:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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