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Advertising changes proposed for German media
Mornings prohibited
When it comes to advertising everybody wants to throw the pie higher, to paraphrase former US President George W. Bush. What we’ve noticed is the advertising pie falling splat, blueberries oozing all over the street… metaphorically, of course. So, it’s not uncommon for one and all to be out there – again, metaphorically – scraping those blueberry encrusted euros off the pavement.
The German Association of Private Broadcasters (VPRT) is using the forum of the next debate over the German State Broadcasting Treaty – number 14 – to push for an end to advertising on German public radio channels. They propose phasing-in the change, taking out ads during prime-time morning radio. (See VPRT statement here - in German)
The shrinking advertising pie is subject of much discussion and continual anxiety. Conventional wisdom posits a zero-sum world; size of the pie may not change much so control of each slice is really important. Advertisers have their own view: turn the pie up-side-down.
Mixed into all of this is funding of public broadcasting in a new political reality. Many public broadcasters are funded through a mix of sources, the most dominant, heretofore, being license fee tax plus advertising. There are others. The BBC, for example, has kept out of the ad business
In Germany, public broadcasters divide up license fee proceeds and use their own sales-houses to add in a few million euros in advertising revenue. All of this probably made sense when the advertising business needed the support from the public sector. In the debate will be cutting advertising from German public broadcasters, radio and TV, and changing the license fee tax to a household “media fee”. Several governments – notably France and Spain – have begun phasing out advertising from public broadcasting and, in the same motion, lifting the household license fee burden and replacing that funding with direct State budget money.Finland is moving this direction.
German politicians will also be debating product placement. (JMH)
Remember Carlos Slim…?
He’s the Mexican billionaire who loaned the New York Times Company $250 million at 14% interest taking 7% of the company as collateral making him its third largest shareholder. He said the loan was for investment purposes only – no editorial interference -- and there has not been anything untoward heard about that investment since.
So it’s interesting that Slim attended the Wall Street Journal’s CEO Council Conference in Washington and it is to Dow Jones that he gave some thoughts about how he thinks The Times should direct its future online policy, saying he believes people will pay for online material and the newspaper’s online site should have a combination of free and pay access.
And even though print still is not doing too well, Slim said he has no regrets about his investment (at 14% interest why should he?) And how did he become a billionaire? “You need to offer customers what they want, when they want it.”
…And Murdoch Has No WSJ Regrets
Since Rupert Murdoch owns Dow Jones and it was a Wall Street Journal CEO Council meeting perhaps Rupert could take the title there of CEO-in-chief. There was a session about regrets and he was asked if he had any about owning the Wall Street Journal which he said a few days ago was barely profitable these days.
“I have no regrets about the Wall Street Journal, even though the accountants made me write it down by about 50%,” he told the gathering. In February News Corp. took a $2.8 billion write-down on its $5 billion plus purchase of Dow Jones that it completed only 14 months before. Things in the newspaper business were bad then, but not near as bad as they are now. Maybe no regrets, but that write-down really had to hurt.
And back to Carlos Slim, he jokingly said if Murdoch needed a loan for the Wall Street Journal he’d be glad to comply – he’d even lower the interest rate down to 12%. Doubt there were many News Corp executives laughing at that one.
The Cuts Start At AP …
AP said a year ago it had to reduce staff some 10% -- about 400 employees, and about 100 took layoffs in the summer so that means another 300 to go and it started Tuesday although blogs seemed to think in this round it will be just 80 or 90 to go, including most editorial assistants. Great timing for the axe to fall – the week before Thanksgiving.
AP newspaper clients for the past couple of years have pressured the AP to lower its pricing and for the most part the AP has done just that. The AP has been searching for new revenue streams but if there is less money coming in and expenses stay around the same it is not rocket science on what would have to happen. Thus, the AP service in the US will decline – please, no “we can do the same with less”.
And the US media have no one to blame but themselves.
…And Continue At the NAA
The Newspaper Association of America (NAA) has announced another staff cull – this time 10 employees following 39 staff who were let go in April – that then was 50% of the workforce. There are now 32 full-time staff left.
The reason is similar to what happened at the AP. Members said they wanted dues reduced, so the NAA did that for 2010, and now comes the axe to pay for less revenue. Which means those members will now get what they pay for.
The NAA since April has centered its activities on Washington lobbying and President John F. Sturm had testified to a Congressional hearing that newspapers did not want a bailout. Also newspaper associations?
Vancouver Winter Games A Tough TV Sale
As goes US television revenue, so goes the financial success of the Olympic Games, which is why the International Olympic Committee has delayed by more than a year the awarding of US rights for the 2014 winter games in Russia and the 2016 Rio summer games, hoping for a better US TV advertising market. And NBC’s remaining ad inventory for the 2010 Vancouver Winter Games indicates the IOC may want to wait the maximum time possible for the advertising climate to improve.
According to Mediaweek, NBC still has about 30%– 35% of its Vancouver inventory unsold, which is unusual for so late in the day. NBC apparently is trying for as much as $800,000 per 30-second ad, an increase over the $500,000 - $700,000 it got for the Turin Games in 2006, but the advertising economy has tanked, of course, in those intervening years and some major Olympic advertisers like Anheuser-Busch are cutting way back on their Olympics spend. Can resurging autos race in to save the day?
NBC can, of course, slash its pricing, offer make-goods for poor prime time results elsewhere in its schedule, and otherwise dispose of the inventory, but what will be important at the end of the day is just how much revenue it can earn from these Games and was it a profit or loss. That will go a long way in determining the financial climate for bidding on future rights.
DJ Employees Better Keep Their Heads Down -- McKinsey Is Taking A Look
For media entity employees perhaps the most frightening news they hear on the jungle drums is word that McKinsey, the consulting group, has been invited in by management to take a look at how things can be done better. The usual result is a bunch of firings – Condé Naste you will recall just lost 460 employees and had six magazine titles close as a result of its recent McKinsey look-see.
Dow Jones is the latest to get the McKinsey touch although DJ management is putting out the word the idea is not to save costs but rather to determine how products can be made better and grow. Right. It was only a couple of weeks back that as part of its existing growth exercise the WSJ announced it was increasing its New York coverage but at the cost of closing its Boston bureau.
News Corp bought Dow Jones, you will recall, for some $5 billion a couple of years back and in February this year wrote down the value of that investment by some $2.8 billion, and while the Wall Street Journal may now be the highest circulation US newspaper it’s the bottom line that counts and ad revenue at the WSJ has suffered to the point where Rupert Murdoch said recently it was barely profitable. Revenue is also down at Dow Jones newswires.
Murdoch has in the past been benevolent to his print properties, but it could just be with the publishing part of the empire in the last quarter reporting operating income of only $25 million, down from $109 million for the same quarter a year ago, that some cold, hard business decisions are now print’s fact of life.
More public broadcasting austerity
“drastic” cuts at ORF
Service and staff cuts are coming to Austrian public broadcaster ORF. General Director Alexander Wrabetz submitted an “austerity” budget with “drastic” cuts. Austrian Chancellor Werner Feymann had indicated last spring that Wrabetz needed to get ORF’s financial house in order… or else.
Communicating to the ORF Trustees (November 13), Wrabetz said 414 staff jobs will be cut by 2011, supplementary pension payments curtailed and bonuses cut. “It is also true to say that we need to make some very painful decisions in the programs,” he said. The Sport Plus channel will be “streamlined,” less spent on sports rights, equipment, telephones, electricity and all the rest.
ORF radio and television channels dominate in audience ratings. That has not kept ad spending from fleeing behind a dark door. ORF counts on advertising for a significant portion of its budget. In 2007 ad revenue for the broadcaster was about €300 million. That fell to €220 million last year giving ORF at €79 million loss. (See that story here) This year ad revenues are expected to barely exceed €200 million.
Speculation in Austria about executive changes at ORF is rife. ORF Enterprise, the public broadcasters’ commercial arm, is expected to name ex-ATV CEO Franz Prenner as General Director, reported Presse am Sonntag (November 15). (JMH)
Hungarian license lawsuit fails
Competitors circle
Hungary’s two national commercial radio channels are continuing to fight for their licenses. Both companies – Emmis International and Accession Mezzanine Capital - filed civil lawsuits against Hungarian media regulator ORTT asking the Budapest Municipal Court to halt the license transfers pending a civil trial. The Court ruled (November 14) against the application for an injunction, reported Magyar Nemzet. ORTT’s executive director resigned after the licenses were awarded to less experienced companies. (See earlier article here)
Meanwhile, regional and local radio broadcasters appear to be salivating at a chance for new advertising revenues. Slager Radio and Danubius Radio reportedly earned as much as 70% of the total radio ad spending in Hungary. Their presumed successors, generally viewed as far less experienced, may only earn a third of that amount, according to an advertising agency executive who preferred to speak off the record for competitive reasons.
Speculation within Hungarian media circles has run wild with rumors of Slager Radio’s owner and Danubius Radio’s owner buying or leasing frequencies. “There are no negotiations with Slager Radio or the Danubius owners,” said Roxy Radio director Alexander Skvortsov to Hirszerzo (November 13). “There was no request from any party,” said Radio 1 general manager Erdélyi Krisztián.
The fate of both channels’ high profile performers has also been subject of rumor. Neither Slager Radio nor Danubius Radio have released any of their employees from existing contracts.
Politicians not linked to the succeeding applicants for the national licenses have been vocal in calling for the National Communications Office to suspend the awards. Articles in both the Economist and the Financial Times (November 9) referred to the appearance of a political deal targeting foreign investors in Hungary, renewed corruption concerns and the impact on foreign investment in Hungary. (JMH)
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