Newspapers: The writing is on the wall
Monday, April 16, 2007/
Apart from new-media, there are various forces afoot that seem to be taking the writing off the newsprint and putting it on the wall. By JASON BAKER of IBISWorld.
By Jason Baker
Revenue for the newspaper publishing industry is forecast to grow by a lacklustre average of 0.5% a year over the next five years. While most people would think the main reason for this poor outlook is the ongoing growth of the internet, they would only be partly correct.
IBISWorld forecasts that real growth in economy-wide consumer spending will soften on average in the five years to 2011-12, compared with real growth in consumer spending in the previous five years. This slowdown will particularly affect discretionary expenditures and expenditures on higher-value goods (where retailers’ advertising expenditure is concentrated).
High oil prices will, if sustained, adversely affect spending on non energy-related goods and services. There will be slower overall growth in motor vehicle sales, compared with the previous five years.
IBISWorld also forecasts slower growth in economy-wide employment, compared with growth in employment in the five years to 2006-07; and this will affect job advertisements.
Higher real interest rates will, if realised, keep down growth in the price of assets, which will dampen growth in real estate prices and property sales volumes. A softer housing market will have flow-on negative effects on real estate classified advertising revenues. Any sustained fall in housing prices would also adversely affect consumer spending, which would adversely affect classified as well as retail advertising.
If a trend of consolidation of the Australian retail sector were to continue, that would give larger retailers additional negotiating leverage, which may adversely affect retail advertising rates also.
Of course new technologies will also have their part to play in all of this.
There will be strong competition from media that is able address niche audiences, such as the internet, magazines, direct mail marketing, telemarketing, outdoor signage advertising and corporate sponsorship (which can, in turn, provide advertisers with free-to-air TV exposure, being a commodity where supply is limited by regulation).
Competition from substitute products and services will intensify, and will result in newspapers losing advertising market share to other media. It is estimated that globally, newspapers’ share of total global advertising will fall from 30% in 2005 to 25% in 2015.
The introduction of digital TV transmission will allow TV broadcasters to multi-channel, enabling broadcasters to target their audiences more effectively, and to provide new interactive services. Growth in pay-TV subscriber numbers will increase the viability of this medium to advertisers. Internet TV will also emerge as a stronger medium over the coming five years.
So in the case of newspaper publishing, the writing is on the wall. Current trends will result in slow growth, and increased competition from substitutes looks like it will slowly take away newspapers’ share of advertising. Among smaller publishers, survivors will be specialist publications that target niche markets offering high subscription and/or advertising rates and with a high market share within their niche.