National newspapers have bumper years ahead despite falling circulations, claims report

Newspapers are on the up according to a new financial report which is likely to confound the industry’s doomsayers.

An
investigation by accountancy firm PricewaterhouseCoopers reveals that
despite the rise of the internet and falling sales, the business
prospects for the newspaper industry are good.

After 30 years of
steady decline in newspaper circulations, the PWC report says Britain
still has one of the highest newspaper readership rates in the world,
at 402 sales per 1,000 people.

PWC director David Trunkfield
said: “We believe that the focus on declining ABCs masks a more
fundamental positive outlook in which newspapers will be able to
continue to drive revenue increases.

“Combine this with the high
operating leverage inherent in newspapers, and progress will translate
into strong profitability in the short-to-medium term, as proven in the
strong private equity interest in the auction of the Telegraph earlier
this year.”

PWC flags up concern at the fact that newspaper
readers are disproportionately old, singling out The Daily Telegraph
which, it says, has 54 per cent of readers over the age of 55.

But
it points out that the success of the free Metro titles and compact
editions of former broadsheets could help attract younger readers.

PWC
believes the press has the potential to increase revenues by further
increasing cover-prices. It claims that British papers are currently
under-priced compared with Europe and that qualities could go up to one
euro (70p) without significantly harming circulation.

Newspapers
are also well placed to benefit from the current upturn in the
advertising market, following the advertising recession of 2001-2003.

PWC
estimates that national qualities get 70 per cent of their revenue from
advertising against 30 per cent from copy sales, for popular dailies
the proportions are reversed and for regional papers the split is 80
per cent advertising versus 20 per cent cover price.

The
increasing use of colour printing is another factor which looks set to
give the newspaper industry a shot in the arm. PWC estimates that
advertisers are willing to pay two-thirds more for adverts in colour
compared with mono.

Selling products and services “off the page”
is recommended as a way of boosting income. The report says the Sunday
Times Wine Club has a turnover in excess of £100 million and reader
offers at the Telegraph Group account for around 15 to 20 per cent of
its profits.

But there is a note of caution over the use of cover-mounted CDs and DVDs.

From
the experience of the glossy magazines market, PWC says, cover mounts
are not only unsustainable but lead to greater “reader promiscuity”.

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