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UK Publishers are Reaching a ‘Digital Tipping Point’

Vincent Flood  02 June, 2016

uk_newspapersEveryone’s an expert when it comes to the discussing the future of the national newspapers. Some say they should ditch print all together, so they can focus more heavily on things like sponsored content content, social distribution and programmatic advertising. Others say they’d be foolish to ditch their print operations when they’re still generating significant amounts of revenue. One of those others is Dan Ison, a lead partner for media and entertainment at Deloitte, who was commenting on a report produced by the Association of Online Publishers (AOP). However, he did qualify his support for print by saying that publishers are reaching ‘a tipping point’ in the physical versus digital debate. Soon, he said, publishers would have to face up to the prospect of being digital first.

Within digital advertising, UK publishers are seeing two key trends. One is that video advertising continues to chip away at display, which we’re guessing is largely related to the rise of outstream formats. Also, alongside video’s surging growth, sponsorship and subscriptions are also key drivers of revenue:

UK Digital Publisher Revenue

AOP & Deloitte DPRI report

% Change
  Q1 2016 vs. Q1 2015 MAT to March 2016 vs.

 MAT to March 2015

Total Digital Revenue 8.3% 6.2%
Display Advertising -8% -4%
Online Video 43% 25%
Mobile 7% 3%
Sponsorship 27% 20%
Subscriptions 29% 12%
Recruitment -13% -2%
Other classified 10% 34%

However, the AOP report doesn’t look beyond digital revenue, and while digital growth is to be welcomed, the bigger picture is important for newspaper groups. While it’s next to impossible to provide a full breakdown of the accounts for each media group, not least because comparable sources simply aren’t available, below are some of the key issues each group is facing. While it’s easy to be snarky from the outside, we would invite readers to bear in mind that most of the companies below have been making brave (if not always successful) attempts at innovation.

Telegraph Media Group

The Telegraph’s 2015 accounts haven’t been posted to Companies House yet, but according to numbers leaked to The Guardian earlier this year, The Telegraph made an operating profit of £51m last year. That was £4m down on the previous year. Profits before tax were £47m compared to £45m in 2014. And turnover for the 53 weeks up to 3 January 2016 was £319m compared to £318m in 2014.

The Telegraph is faring much better than the other UK newspapers, which a source told The Guardian was accomplished by ‘a firm control on costs, including on newsprint and distribution’. Print advertising revenue reportedly only saw a single digit decline, although the same source conceded only that the company faced “a challenging print advertising trading environment”.

When it comes to digital side, the Guardian’s source said there was steady growth, but not on a scale to replace the decline in print.

Guardian Media Group

The Guardian is known for its open-minded approach to online innovation, while usually haemorrhaging cash behind the scenes. That said, digital revenues have been growing (2015: £82.1m, 2014: £68.3m) and the company appears to be investing more in its membership and events initiatives than before.

The Guardian committed to reducing its costs by 20 percent earlier this year, and there are rumours that some of those restructuring announcements will be made in the coming days. The group intends to reduce its operating costs by £50 million over the next three years.

In 2014 Guardian Media Group sold its 50.1 percent stake in Trader Media Group to Apax, a private equity firm. GMG made the deal to secure the future of the Observer and The Guardian, and in 2015 the company was sitting on a cash and investment fund of £838.3m. Interestingly, Trader Media Group appears to be flourishing online — operating profit for the 2014/15 was 35 percent higher than the year at £133.1 million (2014: £98.7 million).

Trinity Mirror

In a trading update for the 4 month period from 28 December 2015 to 1 May 2016, Trinity Mirror reported a fall of nearly 2o percent in print ad revenues. The company also closed its new print newspaper, the New Day, after just two months.

The group’s revenue fell on a like for like basis over the period by 8.6 percent with a 9.3 percent decline in the first quarter and a slower rate of decline of of 6.4 percent in April.

Within that figure, publishing revenues declined by 8.5 percent overall, with print down by 10.9 percent and digital grew by 15.7 percent.

ESI Media

Many have wondered what would happen if the newspaper groups jettisoned their print operations to go all-in on digital. Well, we’ll soon found out. The Independent shut down its print operations earlier this year and ‘i’, the Independent’s sister paper, was sold to Johnston press. While we haven’t seen any hard numbers on revenue yet, the additional focus on the web operation appears to be paying dividends in traffic terms, with the Indy’s web traffic up by more than 6 percent last month.

Looking at the bigger picture, the main goal of the Independent over the last year has been to rein in its losses. The year before last The Independent cut them down to £4.6m, which is an impressive turnaround compared with the £22.6m deficit of just three years earlier.

It’s going to be interesting to see if the ‘London Live’ TV station turns into an asset for ESI. An insider told Video Ad News that the online video audiences were small to the point of being negligible.

In its six months on air during 2014, the station generated £1.3m in revenue, but the channel’s trading loss for the year to September 2014 was £10m, which excluded the exceptional start-up costs and year-end accounting adjustments.

News UK

According to the group’s 2015 accounts, in 2015 New Corp made an operating loss of £33.7 million, which is small beer compared to 2014’s loss of £88 million. Last year News UK tore down the Sun’s paywall to return to the open web, while The Times and The Sunday Times are still subscriber-focused.

On the video side, it’s going to be interesting to see how News Corp makes use of the acquisitions of Unruly and Storyful, which News Corp chief executive Rebekah Brooks said will play big role in their advertising strategy. It seems likely that branded content and distribution is going to feature even more heavily in The Sun’s monetisation strategy.






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