As quarterly circulation figures for Australian newspapers and magazines again emphasise the pain being felt by our media groups, Goldman Sachs JBWere have downgraded their outlook for the sector for the fifth time in a year.

The firm told clients that it was now forecasting an ad market contraction in calendar year 2009 “of similar magnitude to previous downturns” in 2001 and 1991 when the advertising market tumbled by 6.7% and 6.0% respectively.

Goldman Sachs said new forecasts were for a 5.9% fall this year, compared with the previous forecasted fall of of 2.3% and a fall next year of 5.5%, a little better than the previous forecast for a drop of 6.1%.

The firm said it had “downgraded earnings estimates, dividend forecasts, and price targets across the sector.”

Poor circulation figures for major newspapers and magazines will only confirm the downgrade.

As reported in Crikey today, sales of papers and magazines fell again in the December quarter but ad revenues are still falling — although not as dramatically in either the US or in the UK where the Daily Mail Group reported a 23% slump in January ad revenues for national titles.

Here we’ve seen APN warn of a profit drop, and News Corp confirm that its earnings will fall 30% with the performance of the Australian papers worse than that. Meanwhile, ad revenues for the Free To Air Network fell in the December quarter, and are weakening in early 2009. West Australian Newspaper’s results and outlook were nothing to boast about and sales of its key mastheads fell more than 2% in 2008 and were also weaker in the December quarter in September.

Goldman Sachs said: “since we last revised our media sector earnings forecasts, the macro environment has deteriorated to such an extent that the Economics teams at both GSJBW and Goldman Sachs have — again — revised global economic growth forecasts downwards. For example, on 2 December 2008, the GSJBW Economics team was forecasting 2009 Australian GDP growth of +1.0%. We are now forecasting growth of -0.2%.”

Goldman Sachs said its preferred media stocks were News Corp and Austar; the least preferred were Fairfax Media, Seven Network, West Australian Newspapers, Ten Network and APN News and Media.

These are the changes Goldman Sachs said it had made to its forecasts for ad revenue growth this year and next:

Metro TV: FY09 -8.6% (was -7.5%), FY10 -0.2% (was +1.0%).

Metro newspapers: FY09 -14.9% (was -11.5%), FY10 -4.3% (was -3.3%).

Online: FY09 +16.7% (was +14.7%), FY10 +6.0% (was +13.0%).

Regional newspapers: FY09 -6.5% (was -6.0%), FY10 -2.5% (was -0.5%).

Outdoor: FY09 -7.4% (was flat), FY10 -1.6% (was +5.0%).

Peter Fray

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