Will Diversification Bring Better Times Ahead?
The U.S. newspaper publishing industry has long been grappling with
sinking advertising revenues, a situation worsened by the global
economic meltdown. The downturn in the newspaper publishing
industry aggravated further over the last few years, as print
readership declined with more readers opting for 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 offered and read.
Readers now have a myriad of choices to collect and read articles
or news through devices such as netbooks, tablets or other
hand-held devices.These have been weighing on the print industry,
as advertisers now get low-cost avenues through which they can
reach their target audience more effectively. We believe that an
alternative and stable source of revenue is the demand of time, to
salvage the dwindling print newspaper industry.
Waning Newspaper Advertising Revenues
Advertising remains a significant source of revenue for the
industry that in turn depends on the health of the economy. The
macroeconomic factors such as sluggishness in business spending,
high unemployment and falling home sales may affect the level of
national, retail and classified advertising revenues, as
advertisers cut their budget in response to weak economic
Advertising volumes remain under pressure as advertisers still
deter from making any upfront commitments in an economy under
recovery. According to the data released by Kantar Media,
advertising expenditures fell 16% year over year at Local
Newspapers and 13.5% at National Newspapers during the first
quarter of 2015.
The McClatchy Company (
) witnessed a drop of 16.3% in print advertising revenues during
the second quarter of 2015 following a decline of 13.6% in the
first quarter. In the first quarter of 2015, print advertising
revenues decreased 9.2% at The New York Times Company (
), while pre-print and other advertising revenues tumbled 13.1% at
Journal Media Group, Inc. (
Newspaper Companies Adapting to Changing Trends
Newspaper companies have now been remodeling and restructuring
themselves to better align to 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
Newspaper publishing companies have been offloading assets that
bear no direct relation with the core operations, diversifying
revenue base and even separating their broadcasting and digital
properties from the sluggish print business.
The companies are gradually advancing toward the pay-and-read
model. The New York Times Company, on Mar 28, 2011 launched a
pricing system for NYTimes.com, whereby after browsing a certain
number of free articles, readers will be asked to subscribe for
complete access to its articles on phones, tablet computers and the
Zacks Industry Rank
Within the Zacks Industry classification, Publishing forms part of
the Consumer Staples sector, one of 16 Zacks sectors, though the
media industry is part of the Consumer Discretionary sector. We
rank all the 260 plus industries in the 16 Zacks sectors based on
the earnings outlook and fundamental strength of the constituent
companies in each industry. To learn more visit:
About Zacks Industry Rank
As a point of reference, the outlook for industries with Zacks
Industry Rank #88 and lower is 'Positive,' between #89 and #176 is
'Neutral' and #177 and higher is 'Negative.' The Zacks Industry
Rank for Publishing Newspaper is #174.
Analyzing the Zacks Industry Rank, it is apparent that the outlook
on the Publishing Newspaper industry is showcasing a Neutral view.
The broader Consumer Staples sector portrays a soft trend. In the
second quarter of 2015, total earnings for the sector are expected
to decline 0.4%, while total revenue is expected to fall 5.4%.
Looking at the consensus earnings expectations, we remain
apprehensive about 2015, earnings for which are projected to fall
1.2%. But for 2016, the earnings forecast indicates a 9.2%
increase. On the revenue front, we remain cautious on the sector,
which is forecasting a decline of 8.5% in 2015 but building up
confidence for 2016 with projected growth of 3.9%.
For more details about earnings for this sector and others, please
read our '
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