Perfect storm causing traditional media bloodbath

2Mar09

February was a terrible month for the media, especially the traditional media. As the economic crisis worsened last month the tales of media woe increased. I have maintained for a while that we are at a turning point in media and marketing history. Some claimed that 2009 could see the death of press, and at the time it seemed a slightly alarmist call.

Today its seeming more realistic.

Last week a paper that I have read many times when living in Colorado, the Rocky Mountain News shut down. It’s owners had been looking for a buyer for some time but with no success. The broadsheet had been losing money for years, including another US$16 million in 2008. So after 150 years of publishing The Rocky was gone.

Magazines in Australia continued to report appalling results. Spending on magazines dropped by a shocking 25% in January, compared to a year before according to Nielsen data.

Here is Nielsen’s traditional media report card (figures from Mumbrella):

• Internet: 16.1 hours per week (up from 13.7)
• TV: 12.9 hours (down from 13.3)
• Radio 8.8 hours (down from 9.9)
• Newspapers 2.8 hours (down from 3.1)
• Magazines 2 hours (down from 2.2)

Advertising spends in decline:

• Magazines – down 25.2%
• Outdoor – down 18.4%
• Metro press – down 14%
• Free TV – down 7%
• Radio – down 6.1%

On the up:

• Cinema – up 44.1%
• Regional press – +10.2%

Meanwhile several Australian media groups were scrambling to reorganize finances following a downturn in sales and subsequent market valuations.

Last week Seven Network confirmed it cut the value of its 47 per cent holding in the Seven Media Group from A$793.9 million to zero. Meanwhile Fairfax halted trading in its shares as it considered raising funds following the announcement of an A$365.2 million net loss for the final six months of 2008. The TEN network is also in trouble.

The bloodbath isn’t limited to Australia, in fact its worse in the US. Laurel Papworth has documented some of the media decline including this snippet from the NY Times:

Financially, the networks are on shaky ground, partly because they rely almost solely on advertising. CBS reported that for the fourth quarter of last year, as the recession deepened, operating income in its television segment declined 40 percent, even though it was by far the most-watched network. In the second week of February, CBS had 12 of the top 20 shows, according to Nielsen Media Research.

News Corporation, which owns Fox, reported operating income of $18 million in broadcast television, compared with $245 million a year ago. And Disney’s broadcasting business had a 60 percent drop in operating income.

For years the major networks raised their ad rates, despite the shrinking audience, because they still offered advertisers a larger audience than anyone else.

“More dollars are chasing fewer eyeballs,” said Gary Carr, director of broadcast services at TargetCast tcm, a media and marketing company.

Lately, the recession has forced down the cost of prime-time commercials on network television, TargetCast said. In the fourth quarter, the average cost for a 30-second prime-time spot declined 15 percent, to about $122,000, the company said.

As Laurel notes, its amazing how the traditional media are commentating on their own demise.

The big thing to consider is that the economic crisis is only partly to blame for these problems. It has apparently hastened the inevitable. We are also experiencing the ascension of digital media and a significant generational change in media consumption habits.

These are all the main ingredients of the perfect storm now battering traditional media. Some will survive, but many will perish.

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