Australia’s traditional media companies are in trouble — still. They’re mid-jump over the bridge of decline that runs, as Hemingway, wrote: “Gradually, then suddenly”.
Nine, Seven West Media and News Corp all recently released their final financial figures for the decade which show that, 25 years after the companies began the pivot to digital, they are all edging closer to the tipping point. Their newspapers and magazines are still reliant on enduring print products for an ageing market, they have declining ads in both print and broadcasting and flat subscriptions for digital products.
Until recently, free-to-air television escaped the worst of the decade-long advertising slump. Now, the figures from both Nine and Seven show each down about 6% in the second half of 2019 compared to the year before.
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There’s a bit of good news: about half these losses are being clawed back through streaming services with each having an ad-supported broadcast video on demand (BVOD) offering — 9Now and 7Plus. Nine’s subscription video on demand (SVOD) service, Stan, has also made money for the first time, establishing itself as Australia’s number two streaming service of choice, behind Netflix.
But the habit of time-shifting that streaming encourages works best for drama and entertainment. Not so much for news which relies on the power of immediacy to attract and hold viewers.
Over in newspapers and magazines, the figures show that most of the money still comes from the printed page. At the three Nine mastheads — The Sydney Morning Herald, The Age and The Australian Financial Review — the aggregated numbers in the company’s presentation show that two-thirds of the revenues still come from advertising and sales in print. This is 25 years since the SMH and The Age took their first tentative steps online.
Despite the boastful harrumphing about the rise in digital subscriptions, the figures suggest that the market is close to saturated. All the companies are struggling to grow reader revenues.
None of the companies regularly report their print circulation numbers, focusing instead on surveyed readership numbers. A 2018 audit, however, showed that the three Nine mastheads had a combined daily (Monday-Friday) print circulation of about 195,000, falling by about 10% a year. This month, Nine reports a 7% fall in print subscription revenues. Sadly, it’s literally a dying market.
Nine hasn’t released digital subscription numbers in its financial reports since it merged with Fairfax early last year. Back then, they were thought to be about 400,000 across the three mastheads. News Corp releases internal figures of total Australian digital subscriptions each quarter (566,600 at December 31 — up from 460,300 the year before). The dollars in the reported revenue figures of all companies are, at best, moving sideways. There may not be more room for further growth without some further innovation breakthrough.
In managerial theory, this suggests that digital newspaper subscriptions are nearing the top of the technology S curve popularised by Harvard’s Michael Porter. Simply put, this says a market is not unlimited. It grows quickly, but once saturated it leaves limited potential for further growth.
And now there are two surprising threats: real estate and the coronavirus.
Among the major assets of Australia’s traditional media companies are real estate advertising plays — the REA Group which is 62% owned by News Corp, and Domain Group which is 60% owned by Nine.
As the market slows, Nine reports that Domain revenues in the six months to December 31 are down 11% against the same period in 2018. News says REA Group revenues are down 8% in the final quarter.
And the virus? The major source of newspaper print advertising is travel aimed at the over-60 market — think cruise ships like, say, the Diamond Princess. Count the ads in the weekend SMH or Age: about two-thirds are for this sort of discretionary travel.
As COVID-19 makes people think twice about travelling, newspapers will be among those financially infected.