Regionals' ad revenue to fall 13.2 per cent this year

Advertising revenue will pick up in the first half of next year, according to an Ernst & Young report – but regional newspapers will find recovery most challenging.

The report states regionals’ advertising revenue will fall 13.2 per cent in 2009, on the back of a steep fall in 2008.

Overall, advertising could fall six per cent this year – eight per cent in radio, six per cent in television – the worst fall since the Sixties.

And, because 69 per cent of regionals’ revenue comes from advertising, they are most exposed to an ad-spend fall.

Other media less dependent on advertising – for example, business to business magazines and pay television – will suffer less.

The report adds regional papers, which had a 28 per cent circulation fall between 1999 and 2007, are also suffering from advertising shifting online.

‘Regionals’ main concerns with migration online are: firstly, the shift is causing price deflation within the sector which means publishers generate less revenue, compared to print, from their advertisers once they move online,’the report says.

‘Secondly, most regionals’ online brands are not nearly as strong as their print brands.

‘Thirdly, regional publishers are losing market share within their main revenue source as they have been unable to transfer their print dominance online.

‘For example, in 2007, regional publishers accounted for 55 per cent of the print recruitment segment but only 28 per cent online.”

Structural challenges – not just cyclical

The report does say, however, that advertising spend will pick up in the first half of 2010 – before the economy, which won’t recover until the second half of 2010.

Luca Mastrodonato, media analyst at Ernst & Young said: “Unlike the previous two downturns, this one does not follow an advertising spend boom.

‘In 2007, advertising spend as a percentage of GDP was at its lowest level since 1993. As a result, advertisers will be quicker to increase advertising spend during the recovery this time round.”

But, unlike last time, the media faces structural challenges, not just cyclical – which means tough decisions for executives.

‘Management teams and investors were confident that once the economy started recovering, their advertising and circulation revenues would go back to pre-recession levels and their profits would follow suit,’the report says.

‘This time it’s different. Companies are having to change their operating models in order to survive.

‘Broadcasters are looking to cut down on public service broadcasting obligations; newspapers are outsourcing production, distribution and ad sales; radio companies are dropping digital stations and several companies are looking to sell their advertising exposed businesses.”

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