Writing on the wall for newspapers

The newspaper and magazine industry could be "decimated" in 2009 with one out of every 10 print publications forced to reduce publication frequency by more than half, move online or close entirely, according to a report by Deloitte.

The industry outlook has gone from difficult to "impossible", the report says, as newspapers and magazines, already weakened by the rise of online advertising and falling readership, experience further declines in circulation and advertising rates.

"This is a downward spiral," said Howard Davies, partner at Deloitte and co-author of the report. "It has already become quite difficult for print publishers, but it is going to get much worse as the advertising market deteriorates."

Advertising revenues may fall up to 20 per cent with classified advertising, traditionally one of the most lucrative elements of a newspaper, particularly badly hit, the report says.

The subsequent decline in revenue leaves free newspapers – funded entirely by advertising – the most exposed but will affect all newspapers.

While the industry has built an online presence over the past decade in response to its perilous situation, historic levels of profitability are unlikely ever to be restored, Deloitte argues.

"Not even the most successful online newspaper and magazine sites generate sufficient profit to offset declining margin from print versions," the report says.

"In late 2008 the online contribution is at most a few per cent of a title's revenues and most of those are tied to the print version in various ways."

It adds that a return to viable business models cannot be achieved through drastic staff cuts and companies should consider forcing savings from suppliers and reducing print frequency. "Titles could print half as often, only at weekends or publish online only," the report says.

The Independent newspaper last month took the radical step of moving into the same building as the Daily Mail in a drive to save an estimated £2m-£3m ($2.9m-$4.4m) a year by sharing costs on functions such as information technology and personnel.

Mr Davies said parts of the magazine industry were more resilient, for example subscription-based titles that served niche markets. But titles with non-unique content and that relied on advertising, such as celebrity magazines, would suffer the same fate as newspapers.

The report says publishers need to look closely at how their print and online customers vary. If "online only" cannot be made to work financially, a newspaper's online presence may need to be reduced significantly to encourage people back to the physical product.

Japan's newspapers have restricted their web presence and titles have suffered a smaller decline in readership and advertising than North American and European peers, says the report.

Advertising revenues for UK regional newspapers are forecast to fall 20 per cent next year, according to GroupM, a media and marketing forecaster. Advertising revenue across national titles is predicted to fall from £1.9bn last year – a figure broadly flat over the previous five years – to £1.2bn within five years.

In 2002, 12.8m national newspapers were sold daily on average in the UK. This year it was fewer than 11m and in 2013 it will be slightly above 9m, according to Enders Analysis, the media research specialist.

Published by: Salamander Davoudi

Published 10th December, 2008

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