Publishers are facing a post-Covid “gritty claw-back” rather than a “buoyant bounce-back” in turnover in 2021, according to the newly published Media Futures 2020 report.
The picture looks “slightly better” than many feared earlier this year but 2021 is still not expected to return to 2019 levels.
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The annual report produced by Wessenden Marketing found that in contrast to turnover, profitability has stayed “relatively robust”.
It is seen as more stable than turnover but only as “the result of ongoing and grinding cost control”.
The report is a product of senior executives at 177 consumer media, news media (national and regional newspapers), B2B, events and customer media companies in the UK, Europe and Asia Pacific sharing insights into what their key issues are, where they see significant opportunities and how they are allocating resources.
Job cuts look likely to continue over the next 12 months, with 37% of bosses expecting a reduction in total staff numbers compared with 16% predicting an increase.
The report painted a picture of a “shrinking industry which is still in the middle of a fundamental business reboot, but that some companies are coming out the other side with teams of people who are ready for the opportunities and challenges that emerge”.
The report found a “massive range of performance from company to company across all the key metrics”, adding: “Turnover and headcount are the big divers.
“Whilst profits have been impacted, they are still relatively robust.
“The industry is still in the middle of its restructure, but it has a more positive view of 2021: not a bounce-back, but a gritty claw-back.”
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Response to Covid-19
Ultimately Covid-19 accelerated existing trends and the speed at which the market is operating.
Report publisher Jim Bilton of Wessenden Marketing told Press Gazette there was “clearly” overcapacity in the magazine market which had led to a cull, with more cuts to come.
He said “smarter publishers” had recognised this last year “and the stronger ones see this as an opportunity to clear the decks a bit”.
The national newspaper market also has overcapacity, he said.
He also noted that some publishers are “struggling with the organisational structures internally to be truly agile” especially in their marketing and commercial departments.
“I think editorial has been much further in advance on multi-skilling and working on a projects basis, working outside their silos, working across platforms,” he said. “But that’s got to filter through to the rest of the organisation as well on the commercial side.”
The report divided the post-Covid period into three phases for media businesses: the first was an “initial panic and flurry of activity” including the shift to working from home, cancellation of live events and a “major one-off cull” in staff over-capacity.
The second phase saw “dramatic cost-cutting and a drive into digital, subscriptions and virtual events, often giving away content free or at heavily discounted rates in order to hold on to the audience base”.
We are now in the third phase, described as being “more measured, strategic and planned – although still being executed at high speed”.
This means looking in a more focused way at long-term rather than short-term survival including what customers may be prepared to actually pay for.
Advertising and print revenue skew
The industry continues to be “heavily dependent” on advertising revenue, which accounts for 60% share of total sales among the benchmark companies but the report notes a “significant acceleration” in ad revenue declines – with a 4% forecast drop in last year’s survey increasing to 6% this year.
But the report said: “While there is a real strategic intent to build audience revenues to reduce the reliance on volatile, cyclical and declining ad revenues, much of the shift is the result of weak advertising markets rather than strengthening audience activity.”
The volatile economic market, the sheer level of competition and the shift from print to low-yielding digital are among the reasons for advertising’s struggles.
Digital revenues were said to be “growing quickly” – up 11% in the next two years compared to a 7% forecast shift in the 2019 report – in terms of their share of total company revenues.
News media is starting from the lowest base with just 12% of revenues currently coming from digital compared to 41% in B2B media.
A theme across the media industry is fragmentation as each company is “finding its own solution as to where they are in their own particular market and what their users and readers actually want”, Bilton said.
Asked what publishers ought to focus on at this stage, Bilton added: “It’s blindingly obvious but it’s understanding your own audience because I think, and perhaps particularly in magazines, that publishers sometimes overestimate just how digital and digitally-savvy their audiences actually are or what they want… it really does differ a lot from age group to age group as to what they want from digital but also how smart they are digitally.”
Some 154 magazine publishers in the US took part in the Media Futures survey for the first time this year, revealing that although 61% had seen revenue declines this year there is an “optimistic” outlook as half expect to see growth next year.
Revenue dips in Europe had been bigger than those in the US, with a deeper average rate of fall (-9% compared to -6%) and slower recovery expected next year (2% compared to 7%).
Europe’s profit margins were stronger but it was suggested US companies were putting more investment into their brands.
And although both regions made major staff culls, they were done more swiftly in the US in 2019 and the first half of 2020 while more publishers in Europe are still having to make cuts.
Overall, the US is more dependent on digital (37%), although Europe is catching up (28%), and is moving away from advertising at a slower rate.
The US report said: “The post-outbreak recovery period – and how the industry responds to new trends and consumer needs, as well as how brands and advertisers respond to publishers’ new content strategies and digital services – will shape the magazine publishing ecosystem well into this new decade.”
For the full report, contact Jim Bilton on firstname.lastname@example.org.