Newspapers take another hit

Structural shift of ad revenues from traditional media to online continues

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 16, 2013 12:07 pm AEDT

In bad news for newspaper and magazine publishers, advertising revenue recorded its fifth month of negative growth in 2012.

According to media buyer, Standard Media Index (SMI), advertising revenue fell 0.3% in December compared to the previous year. That fall comes on top of a 7% drop in October and a 2% rise in November, indicating the volatility of the ad market. The data is based on the 60% of ad market that SMI captures.

Related: Fairfax to sell radio assets?

Over the 2012 calendar year, the total ad market was down 1%. On the brighter side, digital advertising rose 36% over the previous year, while cinema and outdoor advertising rose 10.8% and 2.1%, in December respectively.

Newspapers and magazines recording 17% and 15% falls respectively, reflecting the structural shift of ad dollars from traditional media to online. For publishers like Fairfax Media (ASX: FXJ) and News Corporation (ASX: NWS) this represents further evidence of the need to move their traditional business online. Fairfax management have even admitted that the company is likely to be digital only sometime in the future.

Radio advertising was hardly changed, posting a 0.1% fall for the month, while free-to-air (FTA) TV advertising dropped 3.3% in December. The Nine Network dominates with a 42.5% metropolitan ad share. Seven Network – owned by Seven West Media (ASX: SWM), came in second with a 35.7% share, while struggling Ten Network Holdings (ASX: TEN) lost 4% to its rivals, falling to a 21.6% market share.

Even FTA is struggling against the structural changes in the ad market. SMI report that pay TV increased its ad revenue by 9.5% in 2012, to $386 million, suggesting consumers are leaving FTA networks, despite the additional of digital channels, and signing up for pay TV – good news for Foxtel owners, Telstra Corp (ASX: TLS) and News Corp.

Foolish takeaway

Fairfax Media boss, Greg Hywood stated last year that he saw no upturn in the ad market until 2015. Results so far suggest he may be on the money.

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Motley Fool writer/analyst Mike King owns shares in Fairfax. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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