Interesting numbers on UK Newspapers from this month's Economist (always well worth a read by the way).
Since 2008, the UK nationals circulation (Britain has 12 nationals) has been in decline and much more when compared to the US, Japan and Europe. They're down by 25%.
UK newspapers traditionally have depended on the casual reader buying off the cover (so a new Royal baby is a great fillip for them) rather than a daily buying habit or subscriptions. Tabloid headlines consequently, are key here to attract that casual reader in the newsagent.
But it is far easier for a reader not to buy a newspaper in the shop there and then, rather than cancel a subscription which is the prominent way newspapers are sold in the US for example.
The Telegraph (superb publication), FT, Guardian, Independent and Times all are all pushing subscriptions and with some success. From December 2008 to May 2013, subscriptions have gone from 26% to 41% of overall circulation.
The Telegraph for example, are giving away a free Kindle with every subscription and others are bundling digital access with the sub. Clearly too, subs are better revenue long term and give numbers on readers profiles which can be used for targeted Ads.
9% of British readers are paying for online news (paywalls) up from 4% in 2012. Some newspapers are adding content to their digital edition such as The Sun with clips of Premier League soccer games. Creating more worthwhile content that's worth paying for rather than just, an online version of the newspaper.
All of this though, is not compensating for the loss in Advertising revenue. Newspaper Ad revenue estimated by The Economist, will be 2 billion stg, about half of its 2005 level. The Times loses money, despite its successful paywall.
Like Ireland however, Britain has too many newspapers for the number of readers - it is an over saturated market. And free-sheets, such as The Evening Standard, prosper.
So with the circulation declines and albeit the efforts to grow subs, the decline in Ads and the march of online, will mean that things will tighten up through the potential closure of some of those 12 titles. Nevermind competitive threats from other and new media. Although as someone said, newspapers are like soccer clubs....some billionaire will buy them.
Indeed. Like Ireland.
The merger announced yesterday of the 2nd and 3rd largest Ad Agencies, Publicis and Omnicom, is indicative of the threat of digital.
You'll note the PR Merger photo above of both CEO's had the recognisable Arc de Triomphe as a backdrop.....lest anyone be confused who's in charge here. Publicis are a very proud French Group (I worked with them).
Whilst creating the world's biggest Agency Group (leap-frogging WPP's 17 billion), they will have combined revenues of circa 23 billion usd. That's a long way short of Google's 50 billion usd and importantly, both agencies have been able to show little organic growth in a depressed, changing, Ad Agency landscape.
They are established, mature, traditional Ad businesses who are suffering from losses of revenues to digital Agencies and consequently have been showing only single digit growth. Omnicom grew by 2% in the first half whereas Publicis by 1.3% and after suffering a 6%+ decline in Europe.
Their new combined market cap is 35 billion usd whilst Google? 295 billion.
Traditional Ad spending is slowing globally and even in new markets such as Asia and China, only showing 5-7% growth as Clients move away from the traditional Ad and Ad Agency, model.
From a client viewpoint, the merger does bring more media muscle - bad news for already hard pressed media owners. However, conflict of clients will always be a problem here.
Good creative has nothing to do with size except, a larger Agency will have more creative resources.
The key to this is the merger savings (estimated at 500 million usd) in an attempt at helping profitability......but that's a lot of pain, a lot of job losses.
Mergers like this, whilst improving shareholders income (both shareholder sets will be 50:50) through cost-savings, does not deal with the core issue - the traditional Agency model is wrong.
Agencies give away their ideas in the hope to profit off the creation and implementation of the work itself. And they continually pooh-pooh digital which clients want, rather than jumping on board.
We will see what happens but in order to achieve those "merger efficiencies" as they say, expect changes at a local country level. Which will mean mergers of local Agencies and redundancies.
But fundamentally it's a response globally to one thing - the ongoing "threat" of digital to Ad Agency revenue.
A case of, rather merge, than deal with the big issue.....
(Pretty good insight here too from Business Insider http://www.businessinsider.com/heres-the-big-downside-to-the-publicis-omnicom-merger-2013-7)
