The previous year’s survey focused on the shift from panic and doom to a more resolute and determined attitude in the face of all the challenges in the distribution of print products. The Distripress Circulation Monitor 2016 (DCM 2016) maps a more complex global marketplace: a world where the sales trends for newspapers and magazines are becoming more varied from country to country; where the business models of companies through the whole supply chain are flexing and changing; and where Distripress members are becoming more agile and creative in the way they operate. All this is captured in a new analysis contained in this year’s report which defines where Distripress members are in the change process.
The global economic context
* Global spending on advertising - a good indicator of media activity and strength – has slowed to +4% per year, which is predicted to continue through to 2018. This is lagging behind growth in Gross Domestic Product (GDP) of +5% per year.
* The variances in growth rates in ad spend around the world is widening from the +9% of Fast-Track Asia through to the -6% of Middle East and North Africa (MENA).
The global media context
* The forecast growth rate for publishing revenues at +1% per year is, predictably, much more modest than the +4% ‘all media’ figure or the +8% for internet companies.
* The revenue streams for media companies are becoming more complex and the often-quoted shift from advertising into content revenues is simply not happening as quickly or as simply as is commonly thought.
* There is a range of factors which are driving growth in different media and in different countries in different ways, but a very important impact is that publisher business models are flexing and becoming more hybrid.
* The publisher response to all this revolves around building scale, understanding the consumer, refocusing on the value of content and creating more open, agile, flexible, learning organisations.
Looking specifically at newspapers and magazines…
* The gains in digital are simply not coming on stream fast enough to compensate for the losses in print. The downside of this is a worrying revenue gap. The upside is a renewed focus on print which still accounts for 95% of global newspaper circulation revenues and for 93% of magazines.
* With advertising revenues coming under increasing pressure, more attention is being given to circulation and content revenues in both newspapers and magazines. For newspapers, circulation currently accounts for 49% of total global industry revenues, rising to 52% by 2020 with 2017 as the crossover year when circulation becomes the majority stream. For magazines, circulation currently accounts for 51% of total revenues, edging down to 50% by 2020.
Global paid-for press trends
The graph (above) illustrates a number of points:
* India and China are massive and growing markets for newspaper sales. They distort the global newspaper picture, so that when they are excluded, the newspaper business is seen to be actually in ongoing volume decline.
* 2013 was a bad year for both newspapers and magazines and 2014 a good year for newspapers. Yet the underlying trend for both newspapers and magazines is a gradual slowdown in the rate of decline in 2014 and 2015.
* Newspapers are consistently outperforming magazines. In addition, the underlying newspaper picture is actually more stable and consistent than magazines, from year to year and from country to country. By contrast, magazines are becoming more volatile in their performance around the world.
How Distripress members are managing change
At the core of this year’s report is a classification based on where Distripress members feel they are in the change process. There are four groupings:
* JUST STARTED (11% of total sample): This group is coming worryingly late to the whole process of organisational change – they have “only just started the change process”. Their business performance is slightly below average and they feel very uncertain about the future for their companies.
* DEEP INTO CHANGE (42% of total sample): This the largest segment and is “deep into the change process, but still have a long way to go”. They show by far the worst business performance – this average actually conceals a wide range of scores – but their confidence levels are around the average. This is a very mixed group, ranging from (1) those who are beginning to re-engineer their organisations from the bottom up through to (2) those who are simply cutting back on costs and are not addressing some of the deeper, structural issues.
* NEARING THE END (6% of total sample): A small number feel that they are “nearing the end of the change process”. These people have a clear vision and a strategy which they have been putting into action. They are feeling very confident about the future even though this may not be feeding through strongly into their business performance yet.
* CONSTANT CHANGE (41% of total sample): The other large segment of the sample state that they feel in a “state of constant change”. This group is made up of a mix of (1) people who feel helplessly swept along in the rapid current and (2) those who are actively keeping their heads above water by having created agile and responsive organisations – the market changes may still be unpredictable, but they are not overwhelming. In terms of business performance, this is by far the strongest group, but their confidence levels are around the average – they know enough about change to understand just how uncertain the future can be.
The different change types are fairly evenly distributed among the Publishers, Wholesalers & Distributors and Retailers & Service Companies, but with the following exceptions:
* Wholesalers & Distributors are more likely to fall into the ‘Deep into Change’ category than Publishers.
* Publishers are more likely to fall into the ‘Constant Change’ category than Wholesalers & Distributors.
There is a general sense, which runs through the survey, that Publishers are finding the decisions about what to do next the most perplexing – almost overwhelmed by the range of their options. Wholesalers & Distributors are also finding things difficult, but their options are more limited and they seem to be getting on with the job in hand in a more structured and methodical way.
The business of cross-border distribution
* The scale of the business: Cross-border, international distribution accounts for 6% of total global sales revenues: a specialist, but significant business.
* Current business performance: The decline in revenues is slowing: 21% see their company’s revenues growing as opposed to 16% last year.
* Business confidence: Confidence is increasing strongly, ahead of actual business performance: 31% feel more positive and confident about their business than they did a year ago, up from 17% in 2015.
The publisher dynamics of exporting
* Export sales trend: While the actual trend in export sales is worsening, the gap between export and domestic sales is closing. The result is that Distripress publisher members see export accounting for 20% of their total print copy sales, up from 18% last year.
* Export profitability: After a serious dip in 2015, more publishers are making money from export than last year: 72% as opposed to 65%.
* Export unsolds: These remain high (53% waste), but at the same level as last year.
* Export promotional budgets: These are coming under more pressure than ever before. Slightly fewer publishers have some kind of promotional budget (82% this year as opposed to 85% last year) and the average budget size is reducing.
* Performance drivers: The quality of the local distribution network is seen as the key factor driving sales of international product, ahead of consumer or retail factors.
Home market dynamics
* The press retail universe: The number of outlets handling newspapers and magazines is declining in 76% of the countries around the world. For the twelve Focus Countries reviewed, this decline is currently running at the rate of -2.5% per year.
* Title range within retail: The number of magazines being stocked by retailers is also reducing – data from the UK shows that in that country, it is at the rate of -6% per year.
* Retail profiles: Traditional retail channels, especially press specialists with wider ranges, are under pressure, while non-traditional outlets offer more potential and supermarkets continue to increase their share (currently accounting for 33% of magazine sales and 37% of newspapers globally). The press supply chain needs to be more agile in flexing with these changes and in making processes more streamlined, so that newspapers and magazines become simpler for retailers to manage.
* Structural change in the supply chain: This is cooling slightly, but 67% of countries are still seeing change in their supply chain structures. Change is focused in two areas: the wholesaler / distributor link in the chain, where margins and service levels are under pressure; and at retail, where newspapers and magazines are having to justify their presence more assertively than ever before.
A shrinking but fragmenting world
Behind all these factors lie four big themes in this year’s DCM. Firstly, the rate of change is increasing not slowing. Secondly, the world is fragmenting and running at different speeds in different countries. Thirdly, despite that increasing divergence in market performance, the key challenges are actually converging and the underlying issues are becoming more similar and consistent from territory to territory. The fourth theme is the most positive: that business confidence among Distripress members is increasing significantly. That is certainly not universal. It may not always be translating yet into improved business performance. Yet the change in mood is clear: that the future is actually more in our own hands than was thought a year ago.
The bottom-line is that it has never been more important to compare, benchmark and share experiences from around the world. Although our world is fragmenting, it is also becoming a great deal smaller.
The full, 64-page Distripress Circulation Monitor 2016 report is available free-of-charge to Distripress members or £195 for non-members. For more information, email: tracy.jones@distripress.net
