Growth and diversification
Growth and diversification
Growth and diversification
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<strong>Growth</strong> <strong>and</strong><strong>diversification</strong>WWW.FUTUREOFTHENEWSPAPER.COM
• This presentation examines the growth <strong>and</strong><strong>diversification</strong> opportunities that are available tonewspaper publishers;• While newspaper publishers tend to see growth potentialin the form of other media channels, opportunities alsoexist in below-the-line non-media communications;• Publishers must establish a process to encouragegrowth <strong>and</strong> create a framework within which newbusiness opportunities can be identified <strong>and</strong>implemented.WWW.FUTUREOFTHENEWSPAPER.COM
Changing medial<strong>and</strong>scapesWWW.FUTUREOFTHENEWSPAPER.COM
Changing media l<strong>and</strong>scapesAudience fragmentation• Explosion in the range ofchannels:– Cable– Satellite– Deregulation• Advertising audiencesfragmenting• Broadcast media driven byhigh level of fixed costs• Newspapers likely to becomethe dominant mass media:– Intra community– National where applicable• Opportunity to mix mass withmicro distribution in print• Need to mix print with digital(<strong>and</strong> other activities) inexecution.WWW.FUTUREOFTHENEWSPAPER.COM
Changing media l<strong>and</strong>scapesInternationalisation <strong>and</strong> consolidationThink…………• Then think……• AOL Time Warner• Bertlesman• Bauer• CanWest• Gannett• G&J• Hachette• MTV• News Corp• Vivendi.• Alma• Australian Consolidated• Bonnier• Burda• Forbes• Independent News <strong>and</strong> Media• Modern Times Group• Mondadori (Fininvest)• Sanoma• Shibsted• United Daily NewsWWW.FUTUREOFTHENEWSPAPER.COM
Changing media l<strong>and</strong>scapesMulti-channel distributionNewspaper“Print plus”DigitalAudiovisualStaticMust haveInteractiveTransactiveDegree ofdifficultyWWW.FUTUREOFTHENEWSPAPER.COM
Changing media l<strong>and</strong>scapesMulti-channel distributionMust have:• fixed web• mobile• online classifiedWWW.FUTUREOFTHENEWSPAPER.COM
Changing media l<strong>and</strong>scapesComplementary context (USA)Financial informationAdult entertainmentTechnology newsWeather807060504030Entertainment newsGeneral newsSports informationAuto informationJob listingsProduct reviewshealth informationTravel informationReference informationPersonal adsPropertyCinema listingsInternetTVNewspaperRadioMagazineWord of MouthPhoneWirelessWWW.FUTUREOFTHENEWSPAPER.COMSource: Forrester
Changing media l<strong>and</strong>scapesValue <strong>and</strong> growth of all marketingForecast growth in expenditure (2002 -2006)6050403020100PROther mediapromotionsEventsponsorshipProduct samplingIn-storemarketingConsumerInternetOutdoorRadioB2B MagazinesConsumermagazinesYellow PagesB2B promotionConsumerpromotionDirect mailTelevisionNewspapers0 10000 20000 30000 40000 50000 60000 70000Value of expenditureWWW.FUTUREOFTHENEWSPAPER.COM
Changing media l<strong>and</strong>scapesImpact of the Internet on Classified• Online classified growingbetween 4% <strong>and</strong> 30% a year(from a low base).• Current estimates suggest lossof newspaper classified isbetween 2% <strong>and</strong> 6% a year.• Some publishers predictingtransfer of 50% of classified toonline (unlikely).LowPenetrationof digitalmediaNewbusinessmodelsContinueto buildprintMigrationunderwaySlowtransferHighValue ofclassifiedWWW.FUTUREOFTHENEWSPAPER.COM
The newspaperbusinessWWW.FUTUREOFTHENEWSPAPER.COM
The newspaper business – P&L forecastsNewspapers v all AdvertisingBest case advertising follows market25,00020,00015,00010,0005,0000-5,0002002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Circ revenue Ad revenue Total costs ProfitWWW.FUTUREOFTHENEWSPAPER.COM
The newspaper business – P&L forecastsNewspapers v all AdvertisingLikely case – advertising trend continues25,00020,00015,00010,0005,0000-5,0002002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Circ revenue Ad revenue Total costs ProfitWWW.FUTUREOFTHENEWSPAPER.COM
The newspaper business – P&L forecastsNewspapers v all AdvertisingWorst case - Internet attracts 50% of ads25,00020,00015,00010,0005,0000-5,0002002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Circ revenue Ad revenue Total costs ProfitWWW.FUTUREOFTHENEWSPAPER.COM
The newspaper businessIndustry organisation• The “typical” newspaper company is going to have to releasebetween 6% <strong>and</strong> 18% of its costs in order to retain its currentfinancial position over the next ten years;• New product lines are likely to have a lower cost to market,providing the organisation can demonstrate greater flexibility;– Content repurposing– Multi-media selling– Integrated “back of house” operations– Cross marketing.WWW.FUTUREOFTHENEWSPAPER.COM
The newspaper businessMedia cost analysis1009080706050403020100RegionalnewspaperNationalnewspaperConsumermagazineTradeJournalRadioStationTV StationVariableFixedWWW.FUTUREOFTHENEWSPAPER.COMSource Merrill Lynch
The newspaper businessMedia cost projectionsDevelopmentFundCurrent profitforecastReactivecostingCurrentCoststructureInvestmentcostingWWW.FUTUREOFTHENEWSPAPER.COM
Strategiesfor growthWWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthThe dimensions growthMarket growthcurrent New sectors Neighbouring Internationalgeography growthCurrentProduct growthverticalIntegrationNewMediaproductsNon mediaDiversificationLaunch<strong>Growth</strong>MechanismOrganicPartnershipWWW.FUTUREOFTHENEWSPAPER.COMAcquisition
Strategies for growthVertical integrationStorygatheringAggregateChannelsAOL Time WarnerPackageDistributeSelf-editMarketWWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthVertical integration“Why is Time Warnerhoping to merge with AOL,when Time hasn’t mergedwith Warner?”The Time Warner synergies tookeight years to take affect.WWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthMedia <strong>and</strong> marketingInformationSalespromotionEventsNewspaperMagazinesBroadcastInternetDataCommerceContentgatheringAggregateChannelsPackageDistributeSelf-editMarketWWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthMedia <strong>and</strong> marketingInformationSalespromotionEventsNewspaperMagazinesBroadcastInternetDataCommercePollingConsumerrecruitmentContentgatheringAggregateChannelsShared content <strong>and</strong> archiveDynamic <strong>and</strong> staticcontent aggregationFulfilmenttoolsAggregationFulfilmentsystemsPackageDistributeTargeted <strong>and</strong> tailoreddistributionSelf-editMobileMarketWWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthDriving valueSize doesn’t matter• There is no correlation between a media firm's size <strong>and</strong> its economicperformance;• A presence in different media does not drive better economicperformance;• Firms that were more focused only on media (with no interest inother activities) performed more strongly;• There was a positive correlation between internationalization <strong>and</strong>economic performance.Conclusion“While M&A deals may allow firms to satisfy stock-market requirements<strong>and</strong> may create market power it seems that the hopes placed in thesesynergies are generally disappointing. The existence of economies of scale<strong>and</strong> scope, or the ability of firms to implement them, has still to be proved.”“The view of analysts <strong>and</strong> executives that size matters is not validated by theWWW.FUTUREOFTHENEWSPAPER.COMempirical data within the study.”Source: University of Paris
Strategies for growthDriving valueNon-media <strong>diversification</strong>Events• Establish events programmelevering communication of thenewspaperDMGTDatabasemarketing ordirect mailResearch <strong>and</strong>informationDistribution• Repurpose the subscriber <strong>and</strong>classified prospect base• Augment thro calling process• Company information• Establish opinion poll on back ofcompany polling• Realise the value of thedistribution chain at a retail <strong>and</strong>household levelAxel SpringerThe TelegraphBonnierThomsonReedVariousNMPPCreative &sales services• Vertically integrate agencyservices, particularly in smallerPubliGroupeWWW.FUTUREOFTHENEWSPAPER.COMmarkets
Strategies for growth<strong>Growth</strong> mechanismsReview of alternativesMerger <strong>and</strong>acquisitionUpside• The least risky form of growth.• Realisation of known resources• Acquisition of mature businesses withproven products <strong>and</strong> management.• Ability to create synergies by mergingactivities across acquired divisions.Downside• Legislation is limiting share.• Argue that acquiring peers <strong>and</strong>competitors, is buying decline.• Should be seen as a fundingmechanism for other forms of growthProductlaunchOrganicgrowthPartnershipor alliance• Product launch can be an outst<strong>and</strong>ing wayto create value at lower costs.• Rise in the number of newspapers beinglaunched• <strong>Growth</strong> in circulation drives growth inadvertising driving profits up.• Organic growth in single title markets(Newspapers in decline are also veryprofitable!• Sharing of risk <strong>and</strong> expertise.• Excellent way to enter new market arenas• Few opportunities remain to launchtraditional newspapers.• Only a minority of new newspaperssurvive passed two years• <strong>Growth</strong> tends to be at the expensecompetitors.• Competitive pressures to deliver sharecan be expensive• Partnerships fail when things are good.Success can lead to strategicdifferences.WWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthSubjective analysis - EuropeSubjective analysis of synergies derived from newspaper companies growing in alternative mediaOthernewspapersTelevisionRadioMagazinesInternetEventsInformationservicesSalespromotionGathering21120120ContentEnhancement01021120Repurposing12222120Consumer revenues00011210Communication revenues10010202MarketingCross sellingAudience enhancing002111224211211020DistributionSystems integration110001111100221210Efficiency21111010PeopleEffectiveness10010010TechnologyFinanceExternalsManagementSystems enhancementSystems reductionCash collectionCash savingsEnterprise valueLegislationSustainability115022210-200000022101101-10-1-10011121100010111-1000015001010101021101000200070Competitive advantage01111210WWW.FUTUREOFTHENEWSPAPER.COMSubjective score151010241115217
Strategies for growthOne-step <strong>diversification</strong> modelMarketscurrentnewProducts / servicesnew currentCoreBusiness1Buy sportsmagazine52Buy businessmagazine3Launch financemagazine139Launchneighbouringfinancemagazine4New Businessweb-site658LaunchEntertainmentsweb-site71213LaunchneighbouringEntertainmentsMagazineLaunchBusinessTV station7LaunchEntertainmentsTV station9LaunchSports TVstation11LaunchNewsTV stationAcquirefinancialDatabase10LaunchSportsDatabaseWWW.FUTUREOFTHENEWSPAPER.COM
Strategy implementation5 steps to develop the newspaper businessVisionProcessFinanceSupportmechanismsOrganisationFocus for all employees;Quantifies scale <strong>and</strong> scope of activity <strong>and</strong> funding;Sets targets over time <strong>and</strong> function.Who is in charge of devising the strategy?What is the process for identifying, <strong>and</strong> evaluating<strong>and</strong> justifying new products?Balance of risk <strong>and</strong> opportunity;Ensure funding of gestation <strong>and</strong> economic cycles;Internal competition for funding – R&D <strong>and</strong> set up;Dichotomy of decentralisation <strong>and</strong> central control;Need to pool <strong>and</strong> focus points of expertise;Institutional ownership can inhibit growthGood people, sharing visionWWW.FUTUREOFTHENEWSPAPER.COMRewards recognising innovation
Strategies for growthConclusionsOpportunities for newspapers• Bright future for new newspapers in many markets– Move toward niche <strong>and</strong> specialist newspapers– Access to younger audiences• Need to convert youngsters to newspaper readershipfrom age of eleven.• Need to create multi-channel newspaper services:– Print <strong>and</strong> digital– Dynamic <strong>and</strong> static content– Print <strong>and</strong> online advertisingWWW.FUTUREOFTHENEWSPAPER.COM
Strategies for growthConclusionsOpportunities beyond newspapers• Primary opportunities exist through br<strong>and</strong> extension:– Grow business around the edges of the corenewspaper product:• Magazines• Events• Digital services• Diversification into other media should be self funding:– Little evidence of synergies being achieved in content,marketing or technology– To barriers of fragmentation <strong>and</strong> legislative control limitopportunities to become major multi-media player.WWW.FUTUREOFTHENEWSPAPER.COM
Contactjim.chisholm@futureofthenewspaper.comGo to:WWW.FUTUREOFTHENEWSPAPER.COM
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