Bottom line is grim reading for our media industry
OPINION:Seismic changes are afoot in medialand and big changes lie ahead . . ., writes IVAN YATES
THERE’S AN elephant in the sitting room – yet the media is not talking about it. We hear, see and read about the woes of every sector, yet one of the most acute crises is in the media sector itself.
All the analysis is about the symptoms – endless agonising over Gerry Ryan’s 10 per cent pay cut; the resolution of the battle between Tony O’Reilly and Denis O’Brien; the proposed merger talks of Metroand Herald AM. Behind this façade, all media platforms are facing painful change through rationalisation and consolidation.
Most newspapers rely on advertising for over 60 per cent of their total revenue. Property supplements and classified property advertising have been the key moneyspinner over the past decade. Now some titles have lost up to 70 per cent of property advertising. Recruitment advertising has declined in line with the slump in the jobs market.
The gloom has been compounded by the dramatic slump in car sales and retail spending. Glossy new car launches and motoring supplements are disappearing.
I suspect the total advertising agency spend will be down 30 per cent, with drastic consequences for newspapers. According to the joint national readership survey (JNRS) figures for 2008, we buy each weekday just under 750,000 newspapers, with a readership of two million. The daily titles are familiar: Indo, Irish Times, Examiner, Star, Sun, Mirror, Mail and Evening Herald. On Sundays we buy less than 1.2 million newspapers, read by 2.5 million. The choice is vast: Sindo, Trib, World, Business Post, Sunday Times, News of The World, Mirror, Star, Mail and People. Can all survive in the new economic climate?
Circulation figures are at best static. Over the past century, market penetration by daily newspapers dropped from 120 per cent to 50 per cent. Prospects for growth are poor so there is no scope for price increases to compensate for advertising revenue losses. Irrespective of
the recession, the print media face the loss of readers through the migration online.
Young people live on the internet. Whether it’s Facebook, You Tube, eBay or just blogging – our youth live a virtual life. Subscription schemes for online newspapers have limited appeal. Readers want their paper online but don’t want to pay for it.
These difficulties are mirrored in the regional press. Strong consolidation by Thomas Crosbie Holdings, Independent News Media and Johnston Press have snapped up traditional family-owned local titles. Only six provincial newspapers remain with their original owners. The Voice group of free newspapers collapsed. Local freesheets have failed. Johnston Press is seeking to offload some of its new titles.
Instant news is free on radio. Joint National Listnership Research (JNLR) figures reflect the proliferation of Ireland’s radio market. Some 1.2 million people tune in to morning radio, whereas 700,000 listen in the evening. The JNLR percentages are somewhat complex as they exceed 120 per cent. The divide is: Any regional local station 55 per cent; All RTÉ (Radio 1, 2FM Lyric) 44 per cent; Today FM Newstalk 23 per cent.
RTÉ is the biggest broadcaster. Its advertising revenue this year will be down €68 million. RTÉ is so significant because its size dictates the advertising rate card at the premium end of the market. When it discounts
heavily due to influenza, the consequence is pneumonia right across the entire broadcast sector. Its rivals must survive on advertising alone without recourse to the licence fee.
Radio wasn’t as dependent on property and personnel advertising. The problem here is the proliferation of stations. The existing network has been supplemented with regional and community radio operators.
Local radio has been successful with the highest penetration (over 50 per cent reach figures) of market share being achieved by Highland, Midwest Radio, Limerick 95FM and Shannonside/ Northern Sound.
It costs approximately €2.5 million a year to run a local radio station. Today FM and Newstalk cost a multiple of that. These independent national stations are owned by Communicorp, which also owns 98FM, Spin 103 and Spin South West. Regional stations such as Beat, Spin, IRadio and 4FM have been added to the crowded arena. Can all of these survive?
The most glamorous medium is television. It is not immune from the current downturn. The increasing prevalence of Sky digiboxes has provided the viewer with endless choice.
TV3 has changed ownership. It is losing money, has cut costs and recently merged with Channel 6. Despite creativity and some excellent production it has not penetrated the top 20 most popular programmes. TG4 remains a niche station requiring ongoing public subsidy. Rumours about Setanta’s financial difficulties abound. It is difficult to imagine the survival of all existing Irish TV services.
Most media operations are losing money. This has been offset by cost-cutting – job cuts and pay reductions. Some media organisations paid premium prices for acquisitions over the past decade financed by heavy debts. Bankers are now staring at revenue falls from dwindling advertising. The spectrum, across print and broadcast media, is not viable in its present form. Change is inevitable.
The largest Irish media player is the Independent group (INM). They face a €200 million bond repayment in May. INM has a market capitalisation of €142 million with debt of €1.4 billion. Their shares have fallen from €3.90 to 9 cent in recent weeks.
The media glare has been on the O’Reilly family and Denis O’Brien, akin to an episode of Dallas. The real drama is contained in the balance sheet. These financial stresses are echoed in every media company.
Irish media is facing meltdown. In the mid-1990s we saw the spectacular collapse of the Press Group, despite having three leading titles. There will always be the potent threat of low-cost UK newspapers.
Perhaps the Competition Authority and the Broadcasting Commission of Ireland (BCI) cannot sustain their present rules in relation to cross-media ownership. Producing high-quality news reporting, investigative journalism and in-depth analysis is costly.
The economics of the media require further synergies. This means we could see the emergence of one key media conglomerate in the independent sector to rival RTÉ. What odds that Denis O’Brien will control INM, Communicorp and TV3?
Ivan Yates is a former Fine Gael minister for agriculture. He runs Celtic Bookmakers and is a media commentator and analyst