CHICAGO, Aug. 8, 2014 /PRNewswire/ --Today, Zacks Equity Research discusses the Publishing, including New York Times Company (NYSE:NYT-Free Report), Gannett Co. Inc. (NYSE:GCI-Free Report), McClatchy Company (NYSE:MNI-Free Report) and InterActiveCorp (Nasdaq:IACI-Free Report).
Industry: Publishing
Link: http://www.zacks.com/commentary/33828/publishers-switch-up-ad-policies
The U.S. publishing industry has long been grappling with sinking advertising revenue, and the global economic meltdown only worsened the situation. The downturn in the publishing industry, which has been going on for quite some time, came in the wake of declining print readership as more readers choose to get free online news, thereby making the print-advertising model increasingly irrelevant.
Changing consumer preferences and the advent of new and innovative technologies have been altering the way news is read and offered. Readers now have a myriad of choices to collect and read articles and news through devices such as netbooks, tablets or other hand-held devices.
These have been weighing upon the print newspaper industry, as advertisers now get low-cost avenues through which they can reach their target audience more effectively. We believe that an alternative and a stable source of revenue is the demand of time, to salvage the dwindling print newspaper industry.
Let's have a look at what is happening in the publishing industry and how newspaper companies are adapting with the changing scenarios to keep themselves alive in the race for survival.
Circulation Falling Prey to the Internet
Newspapers have fared far worse than magazines, as web-based news options have gotten the better hand in recent years. The two-decade-long erosion in newspaper circulation reinforced the decline in advertising revenue. Circulation has also fallen prey to budget cuts with newspaper companies reducing the number of print pages and newsroom staff to combat the downturn.
Despite the fall in newspaper circulation, some companies are reporting improved revenue from circulation due to the increase in subscription and newsstand prices. On the flip side, while the increase in prices for print editions is generating more circulation revenue, it is also resulting in subscriber losses due to the shift in preference for free online content.
Waning Newspaper Advertising Revenue
Advertising volumes are still under pressure as advertisers keep shying away from making any upfront commitments in an economy which is still not completely awoken from a state of hibernation. According to the data released by the Kantar Media Intelligence, advertising expenditures during first-quarter 2014 fell 5.8% in Local Newspapers due to soft advertising demand across auto dealers and retailers, however, advertising expenditures remained flat at National Newspapers.
Print advertising revenue at The New York Times Company (NYSE:NYT-Free Report) dropped 6.6% in the second quarter of 2014. At Gannett Co. Inc. (NYSE:GCI-Free Report), publishing advertising revenue fell 5.7% in the quarter. Print advertising revenue tumbled 9.6% at The McClatchy Company (NYSE:MNI-Free Report).
Business Reviving Endeavors
In an effort to offset declining revenue and shrinking market share, publishers are scrambling to slash costs. This has compelled many newspaper companies to undertake cost-cutting measures, such as trimming of headcount, pay cuts, furloughs, voluntary retirement program and closure of printing facilities.
Newspaper companies have now been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications. The publishing companies are adapting to the changing face of the multi-platform media universe, which currently includes Internet, mobile, tablet, social media networks and outdoor video advertising in its portfolio.
Publishing companies have been offloading assets that bear no direct relation with the core operations. The New York Times Company in May 2012 divested its remaining stake (210 Class B units) in the Fenway Sports Group, the owner of the Boston Red Sox and the Liverpool Football Club, for $63 million. Another example of shedding the assets by the company is the sale of Regional Media Group in Dec 2011, which has long been grappling with shrinking advertising revenue.
Waning print advertising revenue, in an uncertain economy, compelled The New York Times Company to take this tough decision of divesting Regional Media Group, part of The New York Times Media Group. This would allow the company to re-focus on its core newspapers and pay more attention to its online activities. The decision to divest the division is also considered part of the cost containment efforts undertaken to stay afloat in this turbulent environment.
The New York Times Company on Sep 24, 2012 completed the sale of About Group, which it acquired in 2005, to InterActiveCorp (Nasdaq:IACI-Free Report) for a consideration of $300 million. In Oct 2012, the company sold its stake in Indeed.com, a job portal, for approximately $167 million.
The New York Times Company on Oct 24, 2013 completed the sale of its New England Media Group, including The Boston Globe and its allied properties to an acquisition company spearheaded by John W. Henry, who owns Fenway Sports Group. Additionally, the company also offloaded its 49% stake in Metro Boston.
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