Warnings on Media Profits

July 28, 2009

From the Media Guardian, warnings about the profits on UK media companies:

The past six months have seen the greatest number of media companies issue profit warnings since the dot com crash of 2001, according to Ernst & Young.

Rudberg pointed out that during the slump of 2001, 21 UK listed companies made profit warnings in the first half of that year – but the trend saw a “sharp increase” to a record level of 18 in the third quarter.

Ernst & Young concludes that the decrease in profit warnings between the first and second quarters this year is due to cautious financial forecasting by smaller AIM-listed media companies rather than a sign that the industry is stabilising.

“If anything the second-quarter 2009 profit warning figures suggest that the downturn has started to impact the larger listed media companies,” Rudberg said.

“In the 12 months to the end of March, 75% of the media companies that warned [on profits] were listed on AIM. [This compares] to the majority [of companies reporting profit warnings] being FTSE companies in the second quarter this year”.

The number of warnings being it’s highest for eight years only highlights the need for print media to find a new business model, whether they be small scale local papers or FTSE companies. Trinity Mirror’s declining advertising revenue plots a similar sense of urgency:

Trinity Mirror reported today that advertising revenue at its regional newspaper division fell by 36% year on year for the period to 26 April, with sectors such as recruitment and property advertising falling by more than 50%.

Overall Trinity Mirror, owner of the Daily Mail and more than 140 regional newspapers, said that group advertising revenue declined by 30% year on year.

The regional division fell 37% in January and February and 35% in March and April. Display advertising was down 24% for the period, recruitment down 50%, property down 54% and automotive advertising down 35%.

Given that much of their advertising can now be placed online, and for free or virtually any cost, it is hardly surprising that classifieds are down by such a dramatic rate. When we talk of competition for newspapers, we no longer simply mean news websites, but those competing with their business: Craiglist being one frequently mentioned.