Dean Singleton, Gary Pruitt And Sly Bailey Have One View In Common – That Traditional Media’s Downturn Is Cyclical And Things Will Get Better -- And There Are Signs They May Be Right

Philip M. Stone January 11, 2007

The general view of the financial markets these days is to stay away from traditional print companies for all the various doom and gloom theories, but there are some first signs appearing on both sides of the Atlantic that the worst may be over, or at least bottoming out, and the cycle is starting to turn back in traditional media’s direction.

Sly Bailey, the CEO of Trinity-Mirror, the UKs largest newspaper publisher, gave a speech this week that should not go unnoticed. She has been in the headlines for the past months for all the wrong reasons – the company’s newspapers were seeing their circulation and advertising woes go from bad to worse. Last August Trinity Mirror undertook a general review of the business and then in December announced it was to sell 138 of its 240 regional newspapers plus The Racing Post, while keeping its national newspapers (Daily Mirror, Sunday Mirror, People) that are struggling terribly. The stock market’s immediate reaction that day was to tumble the shares 5.07% and they have languished there ever since.

But Bailey’s speech gave her an opportunity to expound how she sees the future of traditional newspapers and she came over very gung-ho.  She is convinced print’s problems today are cyclical and newspapers are going to bounce back. In other words, she is singing from the same hymnbook as Gary Pruitt of McClatchy and Dean Singleton at Media News in the US. Pruitt bought the Knight-Ridder newspapers and Singleton has a $500 million investment going on for new printing presses, not exactly actions by media executives who don’t believe in the future of newspapers.

Bailey accepts that the Internet has changed media business models forever as consumers chase the web in ever growing numbers for their news and entertainment, and the advertisers therefore are following suit.

“I would argue, however, that the immediate impact of this trend on advertising has been somewhat overstated,” she told her audience of business leaders. “We expect the cycle to move back into more positive territory. And we remain convinced that newspapers, as printed products, will remain a powerful medium for many years to come. I don’t wish to sound complacent, but to focus solely on the threats, as opposed to the opportunities would be a huge mistake.”

Trinity-Mirror now operates more than 300 national, regional and local websites, with the company making money for some time from its digital operations, but her eye is still very much on print.

“I won’t pretend that this is anything more than a time of real challenge for traditional media owners and not one of them could honestly tell you exactly what kind of business they will be running in 20, 10 or perhaps five years time. I do believe though that the essential attributes at the heart of newspaper business – powerful brands, journalistic excellence and effective platforms for advertisers – are as relevant and compelling in today’s digital age as they have always been.”

And there are indications that this is not just all talk. There are some encouraging signs in the UK and elsewhere that although Internet growth continues to run wild, newspapers and TV are beginning to see some improvement.

The Daily Mail & General Trust, publishers of the Daily Mail, Mail on Sunday, and the Northcliffe regional newspapers, reported that its 2006 income benefited from improved retail advertising plus the inevitable cost cutting. And the company sounded a positive note saying, "The new financial year has started well with signs of a gentle recovery in some sectors of the national advertising market with our national titles producing strong circulation results in an ever competitive market."

And with Kate Middleton, Prince William’s girl friend, giving UK newspapers and those elsewhere a story with plenty of legs, then perhaps the circulation rot will come to an end for everybody.

The same advertising improvement may be true for the UK traditional broadcasters, too. ITV, the largest commercial network, says that its January advertising bookings beat forecasts which is not really as great as it sounds when you consider the forecast was a 3% drop from the same period a year ago. The company says it looks like January’s performance will be in the area of flat to plus 2% -- which is a huge improvement over last year when it experienced in many months double-digit percentage drops. Given those circumstances, flat to plus 2% is at least a start in the right direction.

And it’s not just in the UK. In Germany, for instance, Nielsen Media Research said that daily newspaper ad sales rose 6.3% to €5.3 billion ($7 billion) in 2006. TV broadcasters grew at a slower rate – 3.1% -- but they were still the top ad beneficiaries with €8.3 billion ($10.8 billion).

None of that is to say that Internet boom times are over. European 2007 growth forecasts range from Group M’s 33.5% increase to ZenithOptimedia’s 28%.  The UK leads the world with the largest proportion of total advertising spend going on the Internet at around 13.5%  - indeed half of all the money spent on the Internet in Europe is within the UK. Its Internet advertising grew close to 40% in 2006 but it is expected to slow a little in 2007 to “only” 36.2%. For all that it seems traditional media is beginning to hold its own and to see some light at the end of a very long tunnel.

In the US there are also small signs that traditional print media may be over the worst in circulation losses. Traditional advertising is still expected to fall around 1% this year, according to TNS Media Intelligence, while the Internet spend will go up around 20% -- less growth than previous years. 

But on the circulation side, Gallup’s annual lifestyle survey shows that newspaper readership is holding steady. The Gallup Poll, taken in December, says 44% of all Americans read their local newspaper daily, and another 13% say they read the newspaper several times a week, meaning that 57% are classified as frequent readers. While that is 10 percentage points less than 10 years ago, Gallup notes there has been no decrease in newspaper readership in the past two years ago.

Difficult to understand how that squares with the dramatic audited circulation losses of US metropolitan newspapers over the past couple of years, but maybe publishers dropping so much of their bulk sales could be a major reason.

And in a further boost to the use of traditional media, while 22% of the poll’s respondents said they access the Internet every day, and another 11% said they access it several times a week, those numbers are still less than half the number of people using the same criteria who read newspapers. The leading US news source is still local TV news, which 55% of the respondents said they watch every day and another 14% said they watch several times a week.

The Gallup survey confirms research from other organizations over the past years that the younger one is the more likely one is to access the Internet for news, that women prefer to get their news from television, and men prefer to read print,

All of this may just be little more than just grasping at straws, and improvements may vary very much on local conditions, but maybe, just maybe, for traditional media the situation is beginning to stabilise.

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