Gordon Patterson, Group MD of the Starcom MediaVest Group (SMG) and Vice Chair of the ABC’s takes a look at the health of the print industry.  

 

Times remain tough in the print industry. Current GDP projections indicate that we will achieve a 2.5% GDP growth albeit that CPI inflation is just over 6%.

 

The Daily Newspaper category continues to decline with several sharp drops in total circulation. That said, vernacular circulation growth continues its upward trend and Weeklies have posted a solid growth.

 

Local Newspapers, while down overall, have several titles that reflect strong growth including The Tembisan. Free Newspapers are stable overall but it would be remiss not to mention the startling growth of the Zululand Eyethu, up 303%.

 

While overall consumer magazine circulation is down sharply we still see strong growth from titles such as Kuier: up 67%, Tuis: up 35%, Kick-off up 34% and Living and Loving: up 33% while Playboy dropped 64%. Overall, Business to Business titles dropped slightly.

 

The Custom category grew marginally overall, and we noted several postings reflecting strong growth, including; JSE Annual (+101%), Mercedes-Benz Annual (+72%) and Foschini Sport (+68%).There is no doubt that while some titles continue to grow, overall the general poor health of the economy and cost cutting measures by publishers will increasingly shape the print landscape.

 

In terms of Media Inflation for January to June 2012, MIW inflation has remained stable at 10.4% while print rate inflation is stable at just under 5.5% and circulation declines have pushed MIW inflation to just under 12%.

 

All categories of print have improved their MIW inflation with the exception of Community (Local) Newspapers which increased as a result of a slight decrease in category circulation. Daily Press leads the print MIW table with 15.6%.

 

Interestingly enough the debate continues overseas on the relationship between circulation and readership. Specifically, The Boston Herald claimed that its print readership has increased 15% over the past year to almost 500 000 but circulation numbers dropped 16%! While statisticians will claim that there is no relationship, common sense says there must be. Sure readership and circulation measure two different things but one must impact on the other.

 

Alan D. Mutter, a new media consultant stated that "The long-standing industry rule of thumb is that you get about 2.5 pass-along readers for every copy sold but, in an age when 50% of cellphones are smart phones, I have serious doubts that the number is as high today as it has been in the past.”

 

It would seem that for many titles the goal today is to have circulation revenues rising rather than just circulation numbers rising. We’ve seen this locally as incentivised sales / deal driven circulation have been slowly removed from title performance.

 

All in all publishers are in for tough times, consumers will be more selective when it comes to spending their money and advertisers want to partner with products that innovate and show positive growth.

South Africa is experiencing an increase in the growth of readership for traditional newspapers and a developing digital market, in contrast to the more developed countries, which are experiencing a migration of readers to online platforms. Unit circulation has however been steadily declining over the past few years and this trend is expected to continue into the future. This anomaly arises from newspapers increasingly being shared by more readers.

 

Although there has been a significant increase in the growth of readership of newspapers, it remains to be seen if this trend will continue as broadband penetration increases in the market and online editions start to attract more readers. These are some of the findings of PwC’s recent South African Entertainment & Media Outlook 2012-2016 (‘The Outlook’) report.

 

The total newspaper market in South Africa rose by 5.7% in 2011 to R11.4 billion, a significant increase from the 1.9% growth recorded in 2011. This increase was largely due to strong growth in advertising spending (10.8%) offsetting a 6.4% decline in circulation spending. Although there was an increase in overall newspaper readership of about 7.7% in 2011, this was mainly as a result of more people reading the same copy, rather than increased paid-unit circulation. There was a net drop in paid unit circulation of 6.7%, with a subsequent decline in overall circulation spending.

 

The overall incidence of newspaper readership increased from 29.4% at the end of 2010 to 30.8% at the end of 2011. The study found that the growth of readers tended to be among the larger newspapers, which generate more advertising than smaller titles.

 

Vicki Myburgh, Entertainment & Media Industries Leader for PwC Southern Africa, says: “It remains to be seen if the growing readership trend for print newspapers will continue as online editions are attracting more readers. We expect print readership growth to slow and ultimately decline as digital readership expands. This will have a significant effect on the advertising growth of newspapers.”

 

The Outlook shows that the improving advertising market for newspapers led to several new launches in the market in 2011. Myburgh says that new launches tend to run contrary to the trend in other countries where newspapers are closing shop. “The launch of new editions provides additional outlets for advertisers and contributes to an overall growth in advertising.”

With economic growth expected to moderate in 2012, the study projects advertising growth to improve to 7.1% in 2013 and to average 8.5% compounded annually during 2014-16.

 

As broadband penetrates the market, the potential for digital content and advertising is increasing significantly. The major newspaper titles in South Africa also have online editions that are attracting a small, but growing advertising stream. The study predicts digital newspaper advertising to expand at annual rates in excess of 20% during the next five years, reaching about R472 million in 2016. Digital newspaper circulation spending is projected to total an estimated R52 million in 2016, up from only R1 million in 2011.

 

Myburgh says that newspapers are also seeing an ongoing shift in classified advertising from print to the Internet. “Classified advertising on the Internet tends to be more easily searchable than in print. Furthermore, the rates are lower and ads can be inserted anytime, can be changed easily and are not as limited with respect to word count.”

When digital advertising is included, total newspaper advertising is forecast to grow by an estimated 7.9% on a compound annual basis during the next five years, rising to R12.3 billion in 2016 from R8.4 billion in 2011.

 

Print circulation

Although the growth of readership of newspapers rose during the past two years, circulation figures fell, declining by 6.3% in 2010 and a further 6.7% in 2011. Between 2007 and 2009, the cumulative decline for the two year period was 5.7%, less than half of the decrease of the past two years.

 

“As broadband penetration increases, we can expect a decline in circulation in print newspapers. Because South Africa is still well behind other countries in broadband penetration, it will experience rapid broadband growth in the coming years. Consequently, we expect steeper declines in newspaper unit circulation compared with most other countries,” says Myburgh.

 

As the economic climate improves, declines are expected to even out to 5.6% annually during 2015 – 2016, which will still be sharper than in most other countries, states the report.

 

Digital circulation

While readers do not appear to be willing to pay for online newspapers, they do appear to be willing to pay for the convenience of having a newspaper downloaded to a mobile device. A paid digital circulation market is developing in a number of countries as the convenience of having a newspaper on a mobile device increases, states the report. As the cost of accessing the internet decreases and more people get connected, fewer people will turn to print newspapers, particularly those that they have to pay for their information. This may be regarded as a negative trend but does point to an opportunity in the digital news sphere, says Myburgh. “

 

Tablets are proving to be popular in South Africa and as prices come down, we expect penetration to expand.” As the penetration of tablets and the quality of available news applications increases, the potential market for paid digital circulation will increase. The report projects that by 2016 paid digital unit circulation will total 86 000 from only 2 000 in 2011.

 

Generally people still view digital products as inferior to products in their traditional physical formats and have only been willing to buy digital products at a discount. “We expect this behaviour to characterise digital newspaper use.” Average annual newspaper spending is projected to be less than half of print newspapers and to decline from R610 in 2011 to R600 by 2016. Aggregate spending will total an estimated R52 million in 2016, up from only R1 million in 2011.

 

Myburgh says that traditional print sales will continue to decline for the foreseeable future. “Emerging technologies create new opportunities for the newspaper industry to increase online distribution and to reach larger audiences.

 

“Partnerships and acquisitions will be vital, allowing penetration into new markets and diversifying revenue streams. Tablets and mobile devices will provide access to a more youthful demographic and will help newspapers evolve their offering to appeal to younger readers.”

The most recent ABC figures have painted a picture of decline for newspapers, including a 6.7% drop in circulation figures for dailies and 4,9% for weekend papers. Although magazines are holding strong, they are becoming luxury items, able to compete because they are by nature more niched than newspapers.

There are many reasons why print publications are somewhat stagnant at the moment, including the need and availability of instant information online. For one thing, the public is becoming more environmentally conscious, and magazines that are consumed in a few hours before being thrown away hardly speak to the eco-conscious market. Secondly, the economy has forced most households into cutting luxuries – of which a R30-R50 magazine is certainly one.

Print publications that are going digital are simply responding to a marketplace that has already – irreparably – changed.

Android and mobile devices have changed their designs for ease of reading and most companies can easily replicate the aesthetic quality of print on a mobile platform. Not to mention that by storing information digitally, readers can access information that would have otherwise been archived to the bottom of a landfill.

There are other benefits to going digital too: it has become much easier to convince loyal subscribers to try new publications and it is much easier to accurately and instantly prove circulation figures than ever before. At the end of the day, if publishers see that they are no longer providing value for readers and advertisers, it makes sense to move to a platform that will fill the gaps.

At Snapplify, we wanted to make that process easy, so that any print publication could simply take the high-res PDFs they would normally send to the printer and we’d “snapplify” them, enabling magazines and newspapers to publish instantly to mobile.

Since then, we were surprised to find that a few forward-thinking online publications wanted to use the product too. Branko Brkic, the editor of The Daily Maverick (a successful current affairs news site) used the technology to produce a premium publication, delivered via tablet only.

iMaverick is the perfect example of how using an app allows publishers to deliver content with a premium feel to the mobile devices of a paying subscriber. By giving the reader something special – the gloss and layout of a print publication, on the go – it provides the publisher with a crucial competitive advantage over Web-based news sites.

Although the market is still small for paid-for news and analysis, it is viable. The crux of the matter was the premium experience which is only possible via an application. If publishers start engendering a culture of paying for premium access to quality photography and original reporting, the industry will continue to grow.

We are currently experiencing a transition phase for publishing. Most publications already have an online element, and this will extend to smart devices such as tablets as they become cheaper and more accessible. Now that we can mimic the tactile and aesthetic pleasure of print magazines with tablet and mobile apps, at a lower cost, with the immediacy and archival capability of online, there is no reason to fear the decline of the publishing industry.  Instead, we can look forward to the evolution thereof.

The medium chosen does not matter – as long as we’re on the same page.

South Africa's media dynamics are unlike those anywhere else – and it's this knowledge of the local market that has enabled the Junk Mail stable to stay ahead of its online and print competitors.
While Junk Mail's future is online, there is still a huge and lucrative market for print publications that has helped to fund online development.
We embraced the Internet very early, in 1996, and 71% of all our ads are now placed via the web. But we also still sell over 100,000 copies a week of our print publications. Even at R20 a copy, it's still much cheaper than the Internet for millions of South Africans – and for a lot of people it's much faster too. This digital divide is still the reality of the local media landscape.
The Junk Mail stable includes the flagship sites JunkMail and JobMail, as well as AutoMart, TruckandTrailer, FreePropertyAds, Lovemail and machinery sales site Mascus. In print, there are three regional editions of Junk Mail, Cape Ads, JobMail and four vehicle sales publications.
Understanding the needs and buying patterns of the South African market has been key to Junk Mail's success. We have 20 years of experience in the classified ads business, we know this market intimately, and we've designed our categories, our publications and our online sites around that knowledge. That's why we're not unduly worried by the influx of global competitors. Someone planning their company out of Seattle or London would never dream of publishing print classifieds because that's not how their world works.
What global competitors miss is that while print is no longer in its heyday, it's never declined at anything like the rate people predicted. Our print publications are still a good, profitable business that delivers great value to buyers and sellers alike. If you want to sell something, your chances are best with us.
Not that Junk Mail is resting on its laurels. In 2010 the company took the bold step of removing paywalls from all its online properties, and separated the online business completely from print. We still want to optimise all the opportunities that remain in print, without diluting the focus of the online team. So our print and online teams are often competing for the same customers, which keeps them on their toes.
The company is also ramping up its mobile presence, recently re-launching a much faster version of its mobile sites. Mobile is a completely different environment from the desktop and people use it in a very particular way. Mobile ad placements have gone from zero three years ago to 17% now, and we expect that to take off in the next few years.
Classified advertising is a ruthlessly competitive business. What has kept us ahead for 20 years is understanding that it's also extremely local. Whatever medium our customers find most convenient, that's what we give them. We're also a very results-driven organisation - we look after what works, even if it's not trendy.