Thursday, August 25, 2005
E-Media and Misunderstanding Print's Flexibility and Scalability
Investment banking firm Veronis Suhler Stevenson issued their 19th annual Communications Industry Forecast. Here are some highlights:
I saw an editorial in one of the printing industry magazines that the recent reformatting and circulation cuts at TV Guide shows "print's remarkable ability to move with the times." This is our problem. We've been moving with the times, with lower page counts, decreased frequency, lower circulation. While TV Guide did not decrease its frequency, catalogers and other categories did. It all amounts to less printing. Responding to a decline in demand is not exactly a remarkable ability as far as I can see. Less printing equals less sales dollars, less sales dollars means fewer jobs, less capital investment, and a variety of other problems. The Audit Bureau of Circulations data for magazines shows flat circulation for 15 years, despite an increase in titles, starting well before new media came to marketability. It's sad to say that revelations in the past 24 months cast doubt on circulation data, and the situation may not be flat, but inflated.
There is another issue in terms of media data that need to be addressed. Many media are print-based of course, but it's important to look at the careful phrasing of the data creators. Often you will see the term "measured media." Print's problem has not been with measured media, like magazine or television advertising, it's the unmeasured media of brochures, sales sheets, promotional materials, newsletters, and a host of other printed matter that have borne the brunt of electronic media's effect. The shift to direct mail at the expense of catalogs is also an indication of the shift to shorter runs and lower page counts, as direct mail's purpose is to drive e-commerce traffic. So even print's demonstrated positive capability results in less total print. The true test are the postal data, and it is clear that postal weight or units mailed are not keeping up with real GDP. (Also note above, when you compare the VSS data, keep in mind real GDP growth of 3.5% and current GDP growth of 6.5% and you'll realize that some of the growth rates above are just treading water).
Always keep in mind that e-media is not always the sole culprit. Throughout the 1990s and continuing to today, public relations, events, product placement, and promotions, have been taking dollars from what would have otherwise been print budget items.
Print's ability to "play well with other media" will be one of the keystones to its profitable survival. Before that can happen, print businesses have to play well with other media first.
To create this environment, one has to be able to look at data and events around them in perspective. As I have said many times, the environment has nothing to be feared, but must be navigated by sharp-minded, creative businesspeople, which is part of our industry's entrepreneurial spirit. Confronting realities is the first step. Finding opportunities is next, whether they are print-related or not. Seizing those opportunities with hard-nosed single-minded determination is what differentiates leadership from "plain vanilla" management.
- According to the newly-enhanced 2005 Forecast, technology innovation, the emergence of new media, quickening audience fragmentation, increasing demand for customization and tighter focus on return on investment are collectively causing major shifts in spending patterns and time spent with media. These shifts are expected to drive accelerated growth across all four sectors - advertising, specialty media and marketing services, institutional end-user and consumer end-user - through 2009.
- Communications spending is expected to be the 4th fastest growing sector of the U.S. economy in the 2004-2009 period, expanding at a compound annual rate of 6.7 percent, surpassing the trillion-dollar mark in 2008, and reaching $1.109 trillion in 2009, compared with nominal GDP growth of 6.0 percent during the same forecast period.
- Growth in total communications spending is forecast to be 6.8 percent for 2005, reaching $857.59 billion, following on the strong 2004 growth rate of 7.3 percent.
- After regaining its position as the second-largest sector of the communications industry in 2004 from the consumer end-user sector, advertising spending is expected to remain strong with forecast growth of 6.1 percent to $199.67 billion in 2005, and compound annual rate of grow of 6.8 percent from 2004 to 2009, reaching $260.90 billion.
- Comparably, consumer spending is expected to accelerate in 2005, climbing 7.0 percent to $199.34 billion, and slow slightly during the forecast period to grow at a compound annual rate of 6.3 percent, reaching $252.80 billion by 2009. Growth in advertising is expected to continue to be driven primarily by the migration of advertising dollars from traditional to new media.
- New media advertising is expected to continue to attract advertising dollars in 2005 with forecast growth of 20.7 percent compared with only 3.2 percent for traditional media. During the forecast period, spending on new media advertising is forecast to grow at a compound annual rate of 16.9 percent, reaching $68.62 billion by 2009, while traditional media advertising is expected to rise only 4.2 percent on a compound annual basis during the forecast period to $192.28 billion.
- Specialty media and marketing services, the largest sector of the communications industry in 2004, is on track for another strong year of accelerated growth in 2005 with an expected 7.0 percent gain in marketing spending to $275.11 billion. Driven by custom publishing, branded entertainment and public relations, the specialty media and marketing services sector is forecast to grow at a compound annual rate of 6.7 percent during the forecast period, reaching $355.15 billion by 2009 to remain the largest sector of the communications industry.
I saw an editorial in one of the printing industry magazines that the recent reformatting and circulation cuts at TV Guide shows "print's remarkable ability to move with the times." This is our problem. We've been moving with the times, with lower page counts, decreased frequency, lower circulation. While TV Guide did not decrease its frequency, catalogers and other categories did. It all amounts to less printing. Responding to a decline in demand is not exactly a remarkable ability as far as I can see. Less printing equals less sales dollars, less sales dollars means fewer jobs, less capital investment, and a variety of other problems. The Audit Bureau of Circulations data for magazines shows flat circulation for 15 years, despite an increase in titles, starting well before new media came to marketability. It's sad to say that revelations in the past 24 months cast doubt on circulation data, and the situation may not be flat, but inflated.
There is another issue in terms of media data that need to be addressed. Many media are print-based of course, but it's important to look at the careful phrasing of the data creators. Often you will see the term "measured media." Print's problem has not been with measured media, like magazine or television advertising, it's the unmeasured media of brochures, sales sheets, promotional materials, newsletters, and a host of other printed matter that have borne the brunt of electronic media's effect. The shift to direct mail at the expense of catalogs is also an indication of the shift to shorter runs and lower page counts, as direct mail's purpose is to drive e-commerce traffic. So even print's demonstrated positive capability results in less total print. The true test are the postal data, and it is clear that postal weight or units mailed are not keeping up with real GDP. (Also note above, when you compare the VSS data, keep in mind real GDP growth of 3.5% and current GDP growth of 6.5% and you'll realize that some of the growth rates above are just treading water).
Always keep in mind that e-media is not always the sole culprit. Throughout the 1990s and continuing to today, public relations, events, product placement, and promotions, have been taking dollars from what would have otherwise been print budget items.
Print's ability to "play well with other media" will be one of the keystones to its profitable survival. Before that can happen, print businesses have to play well with other media first.
To create this environment, one has to be able to look at data and events around them in perspective. As I have said many times, the environment has nothing to be feared, but must be navigated by sharp-minded, creative businesspeople, which is part of our industry's entrepreneurial spirit. Confronting realities is the first step. Finding opportunities is next, whether they are print-related or not. Seizing those opportunities with hard-nosed single-minded determination is what differentiates leadership from "plain vanilla" management.
