European Commission
Enterprise Directorate General
Publishing Market Watch
Sector Report 1:
The European Newspaper Market
Submitted to: DG Enterprise, European Commission Delivered to: Cesar Santos Version: Final Date submitted: 16 March 2004
Turku School of Economics and Business Rightscom Ltd Administration Rehtorinpellonkatu 3 FIN- 10 Leake Street 20500 TURKU, London SE1 7NN FINLAND UNITED KINGDOM Tel: + 358 2 338 311 Tel: +44 20 7620 4433
www.tukkk.fi www.rightscom.com
Copyright © 2004 European Commission Publishing Market Watch Sector Report 1: The European Newspaper Market Contents
1 INTRODUCTION TO PUBLISHING MARKET WATCH ...... 5
2 EXECUTIVE SUMMARY ...... 7
2.1 STATISTICAL REPORT ...... 7 2.2 DIVERSITY AND SUSTAINABILITY...... 8 2.3 KEY BUSINESS ISSUES ...... 8
3 INTRODUCTION...... 10
3.1 STATISTICS AND SOURCES ...... 10 3.2 DATA FROM NEW ACCESSION STATES ...... 11
4 DEFINITION OF THE SECTOR...... 12
5 STATISTICAL ANALYSIS ...... 14
5.1 CIRCULATION-RELATED MEASURES ...... 14 5.1.1 CIRCULATION NUMBERS ...... 14 5.1.2 DAILY NEWSPAPER CIRCULATION ...... 14 5.1.3 NON-DAILY NEWSPAPER CIRCULATION ...... 16 5.1.4 FREESHEET NEWSPAPER CIRCULATION...... 17 5.1.5 SUNDAY NEWSPAPER CIRCULATION ...... 18 5.1.6 EUROPEAN DAILIES IN WORLD NEWSPAPER MARKETS...... 19 5.1.7 CIRCULATION PER 1000 POPULATION ...... 21 5.2 NUMBER OF TITLES PUBLISHED...... 23 5.2.1 DAILY PAPERS...... 23 5.2.2 NON-DAILY PAPERS ...... 27 5.2.3 FREESHEETS ...... 28 5.2.4 TITLES PER MILLION POPULATION ...... 30 5.2.5 NUMBER OF TITLES COMPARED WITH GEOGRAPHIC AREA ...... 31 5.2.6 AVERAGE CIRCULATION PER TITLE...... 31 5.3 REVENUE-RELATED MEASURES ...... 34 5.3.1 ADVERTISING ...... 35 5.3.2 REVENUE SPLIT BETWEEN ADVERTISING AND CIRCULATION ...... 39 5.3.3 ADVERTISING AND GDP...... 41 5.4 EMPLOYMENT-RELATED MEASURES...... 42 5.4.1 EMPLOYEE NUMBERS ...... 42 5.4.2 EMPLOYMENT COSTS ...... 43 5.5 FINANCIAL MEASURES ...... 45 5.5.1 BASIS ...... 45 5.5.2 TURNOVER...... 45 5.5.3 VALUE-ADDED ...... 48 5.5.4 OPERATING MARGIN...... 50 5.6 PER EMPLOYEE MEASURES ...... 51 5.6.1 LABOUR PRODUCTIVITY ...... 51
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5.6.2 VALUE-ADDED TO PERSONNEL COSTS ...... 54 5.6.3 TURNOVER PER EMPLOYEE ...... 56 5.6.4 NEWSPAPERS AND NATIONAL ECONOMIES ...... 57 5.7 COMPARATIVE INFORMATION FOR THE US ...... 58 5.7.1 TRENDS ...... 59
6 COMPETITIVENESS AND CULTURAL DIVERSITY ...... 61
6.1 INTRODUCTION AND OVERVIEW...... 61 6.2 DIVERSITY IN THE READERSHIP...... 63 6.2.1 READING NEWSPAPERS AND MAGAZINES ...... 63 6.3 REGULATIONS TO FOSTER DIVERSITY VERSUS EU COMPETITION POLICY ...... 64 6.4 GERMANY: FEDERAL STRUCTURES AND CONSOLIDATION ...... 66 6.5 CONSOLIDATION IN AUSTRIA...... 68 6.6 THE CASE OF CENTRAL AND EASTERN EUROPE: CONSOLIDATION AND FOREIGN OWNERSHIP AFTER 1989 ...... 68 6.6.1 THE CZECH REPUBLIC ...... 70 6.6.2 HUNGARY ...... 70 6.6.3 POLAND ...... 70 6.7 NEWSPAPERS IN MINORITY LANGUAGES ...... 71
7 THE SUSTAINABILITY OF THE EUROPEAN NEWSPAPER INDUSTRY 73
7.1 ENVIRONMENTAL SUSTAINABILITY ...... 73 7.1.1 EDITORIAL...... 73 7.1.2 PRODUCTION...... 73 7.1.3 OTHER ENVIRONMENTAL IMPACTS...... 75 7.1.4 COSTS OF COMPLIANCE...... 75 7.2 SOCIAL SUSTAINABILITY...... 76 7.2.1 DEMOGRAPHIC CHANGES ...... 76 7.2.2 LITERACY AND EDUCATION ...... 76 7.2.3 IMPLICATIONS FOR NEWSPAPERS...... 77 7.3 ECONOMIC SUSTAINABILITY ...... 78 7.3.1 SUSTAINABLE CIRCULATION...... 78 7.3.2 SUSTAINABLE ADVERTISING ...... 79 7.3.3 CONSOLIDATION...... 80 7.3.4 ONLINE BUSINESS MODELS FOR NEWSPAPERS...... 80 7.3.5 IMPACT OF ONLINE MODELS ...... 81
8 SWOT ANALYSIS OF SECTOR ...... 83
8.1 STRENGTHS ...... 83 8.2 WEAKNESSES...... 83 8.3 OPPORTUNITIES...... 85 8.4 THREATS...... 86
9 KEY BUSINESS ISSUES AND TRENDS...... 88
9.1 A CRITICAL PERIOD...... 88
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Publishing Market Watch Sector Report 1: The European Newspaper Market
9.1.1 DRIVERS OF STRUCTURAL CHANGE...... 89 9.1.2 RESPONSE TO STRUCTURAL CHANGES ...... 89 9.2 GENERAL ECONOMIC OUTLOOK ...... 90 9.3 FALLING CIRCULATION ...... 90 9.3.1 NEWSPAPERS AND OTHER MEDIA ...... 91 9.3.2 AGEING READERSHIP...... 92 9.4 FALLING ADVERTISING REVENUES ...... 93 9.4.1 IS THE LOSS OF SHARE PERMANENT? ...... 94 9.4.2 RECRUITMENT ADVERTISING ...... 95 9.5 CONSOLIDATION ...... 95 9.6 REGULATION ...... 96 9.6.1 COMPETITION ...... 97 9.6.2 DISTRIBUTION ISSUES...... 98 9.6.3 ADVERTISING ...... 99 9.6.4 VAT ...... 99 9.6.5 FINANCIAL SUPPORT ...... 100 9.7 IMPACT OF THE INTERNET AND OTHER MEDIA ...... 101 9.7.1 ADVERTISING ...... 102 9.8 DISTRIBUTION...... 102 9.9 FREESHEETS ...... 102 9.10 COPYRIGHT ...... 103
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Publishing Market Watch Sector Report 1: The European Newspaper Market
1 Introduction to Publishing Market Watch
Publishing Market Watch is a 12 month project analysing the competitiveness of the European publishing industry. It is being undertaken on behalf of the European Commission’s DG Enterprise by a team led by Rightscom, a specialist consultancy based in London (www.rightscom.com), with a substantial contribution from the Turku School of Economics and Business Administration (Media Group) in Finland (www.tukkk.fi). The project will help the European Commission understand the challenges faced by the publishing industry in Europe, and will provide publishers with valuable additional intelligence that will help them focus their efforts to maintain or improve their competitiveness.
The project has the following objectives:
• Increasing the knowledge and understanding of the European Commission about the publishing industry
• Informing future policy formation within the European Commission with respect to publishing
• Improving knowledge and understanding of competitiveness issues in European publishing among a wider constituency, particularly within the publishing industry itself.
We will be covering the industry in four sectors: newspapers; magazines and journals; books; and directories and databases. This is the first sectoral report; other sector reports are due to follow between now and July 2004.
The primary outputs of the project will be a detailed analysis of the issues facing publishers in the area of competitiveness and a series of related recommendations to the European Commission. These recommendations will be based on the identification of the main issues affecting the publishing industries’ competitiveness and the ability to modernise and innovate at a time of enormous change in the technical, commercial and social environments within which publishing operates.
The competitiveness of European industries is essential to the future strength of the European economy. The key to competitiveness of industries is their ability to provide “a sustained increase in real income and the standard of living”. This is distinct from the more specific concept of the competitiveness of individual enterprises, although the key factors affecting both types of competitiveness are closely interlinked. This study focuses on the competitiveness of publishing industry sectors, but it is likely that analysing these issues will also yield information useful to individual firms in assessing their own competitiveness.
Although the publishing industry is susceptible to the same types of competitiveness analysis as any other industry, it has certain unique qualities, in particular in the impact of digital technology (both in production processes and in the distribution channel). The scale of this impact may be very difficult to identify from economic analysis of historical data alone. The capacity for, and effect of,
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Publishing Market Watch Sector Report 1: The European Newspaper Market successful innovation to meet the challenges of the digital revolution are also particularly difficult to measure.
Our project methodology aims to meet this challenge by combining rigorous quantitative analysis with expert qualitative analysis of the trends in publishing, building up an overview from reports on each of the main sectors of publishing (newspapers; books; magazines; directories and databases) and drilling down into sub-sectors to gain a surer perspective on the issues involved. An important part of this process will be the involvement of the industry itself, either directly or through its trade associations, both in helping to define the key issues and in providing input.
We welcome ideas from throughout the industry, so if you would like to make any comments that you think would help us, please email [email protected].
The quantitative analysis, which is being undertaken by Turku, is based on a very wide range of specialist data resources; these have been identified by a team which has considerable experience of the publishing industries and knowledge of which measures most clearly show the competitive position of the publishing industry. The final quantitative analysis will also compare the European position with the competitiveness of the US publishing industry.
As well as the four sectoral reports, the project will also deliver three special issues papers, which will look in more depth at specific topics related to the regulation and competitiveness, as these apply to publishing. The first of these papers is to be on Corporate Social Responsibility and is due to be delivered to the Commission by the end of March 2004.
The final report, which will bring together and synthesises the findings of the sectoral reports and issues papers, is due to be delivered to the Commission by the end of October 2004.
A workshop will be held in September 2004 in Brussels to test and validate the projects’ findings; invitations to this workshop will be issued in good time. We hope for a substantial turnout from across Europe, including from the new Accession States.
A website for the project has already been established (www.publishing-watch.org), giving more details about the project and team, and will provide access to the project deliverables as these are published.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
2 Executive Summary
This report on the European newspaper industry is the first report for the Publishing Market Watch 2004, a twelve-month project analysing the competitiveness of the European publishing industry sector-by-sector. The key to competitiveness of industries is their ability to provide “a sustained increase in real income and the standard of living”. This is distinct from the more specific concept of the competitiveness of individual enterprises.
Newspapers covered by this report include national and regional daily papers, non-daily newspapers (often local), Sunday newspapers and free newspapers (both weekly local “shopping” papers and daily “commuter” papers). All EU member states are reported in detail, and New Accession States where information is available.
Overall, the newspaper industry remains an important one in all member states, making a valuable contribution to GDP and to culture. It is highly unlikely that newspapers will cease to be published in the foreseeable future, but the industry faces challenges that may transform it.
2.1 Statistical report
Circulation is either static or falling in most EU member states, and has been for some years. Declines are steady rather than dramatic. Other media are growing in reach; this may leave newspapers at a competitive disadvantage.
European newspapers have among the largest circulations in the world, outranked primarily by papers in Japan. Nearly half of the twenty highest-circulation papers in Europe are in the United Kingdom. The differential between the largest and the 20th is nearly an order of magnitude.
The number of titles is though declining over the long term. This is part of the same structural trend. Average circulation per title is stable as both are declining, suggesting that attrition or consolidation is taking place.
Advertising revenue grew steadily until 2000; it declined in 2001 in most major markets in the EU under the impact of recession, a trend that continued in 2002 and 2003. However, it continued to grow in some New Accession States as a function of their overall economic expansion.
The percentage share of advertising revenue captured by newspapers is closely related to their circulation per thousand population, and in many EU states newspapers have been maintaining or increasing their share despite the decline in absolute revenue. However, they have failed to maintain their share in the New Accession States as television develops as a medium. Most newspapers in the EU depend on advertising for more than half their revenues, and this has risen slowly over the years. If overall advertising revenues are falling, newspapers will have more at risk.
Employment in newspaper is stable or rising in most member states. Employment costs are in general rising.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Turnover has risen for newspapers until 2000 and declined in 2001. Value added followed the same pattern, but operating margins are more erratic. Productivity (value added per employee) grew until 2000 but declined in 2001.
The newspaper industry in the United States shares many of the same trends: circulation has been falling steadily, and advertising revenue peaked in 2000. The US newspaper industry is much more dependent on advertising, which accounts for 80% of revenues.
2.2 Diversity and sustainability
Consolidation is a feature of the newspaper industry, but is not always thought desirable by competition authorities if it has a negative impact on cultural diversity. It is regulated at the national level. In some EU countries, newspapers can be subsidised in order to maintain plurality and freedom of speech, and in most member states newspapers receive some form of VAT concession. However, at the regional or local level many de-facto monopolies exist. Foreign ownership is a feature of the newspaper industry in most of the New Accession States.
The newspaper industry, as any other, must be sustainable environmentally, socially and economically. Environmentally, the industry creates waste but is taking steps to ensure that newspapers are printed on recycled paper and discarded newspapers are themselves recycled. Newsprint for the European newspaper industry comes mainly from recycled products and renewable resources. In some countries, the newspaper industry faces “producer pays” regulation that will compel newspapers to contribute towards the costs of collecting newspapers for recycling.
Socially, the ageing European population is likely to read newspapers more than their younger compatriots. However, newspaper readership in all segments is declining and the ageing population is less attractive to advertisers at present.
Economic sustainability is challenged by falling circulation revenues and falling advertising revenues as other media become more significant. Television is the main threat, but online services are also threatening both readership (as they provide an alternative source of news) and all aspects of advertising, including classified advertising and particularly the important “situations vacant” category. Newspapers have launched impressive online services but have generally not been successful in monetising them either through advertising or content charges.
Consolidation will be increasingly attractive to newspaper owners and this may give rise to some tensions between the industry and competition authorities.
2.3 Key business issues
This report was prepared at a critical time for the newspaper industry in Europe: recovery from economic recession has started, and forecasts for advertising expenditure are more optimistic for 2004 than for 2002 and 2003. However, newspapers have a challenging commercial environment that presents them with structural challenges as well as difficult short-term operating conditions and it is
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Publishing Market Watch Sector Report 1: The European Newspaper Market possible that they may not recover the position they held before the start of the advertising recession in 2001.
The business issues facing the industry arise mainly from competition with other media rather than from competition between newspapers, although such competition is an important factor for national daily newspapers in particular. Although the newspaper industry is also affected by general trends in business and the economy, it is these structural issues that will have the longest-term effect on the industry.
In most countries in Europe, as well as in North America, newspaper circulation has been falling for several years, irrespective of economic conditions and the penetration of newspapers. This is a long-term worldwide trend that arises from changing habits in media usage: there are many alternative news sources available, especially television. There is a specific problem with attracting younger readers of which the industry is very aware.
Falling circulation is accompanied by a fall in the share of advertising revenue commanded by newspapers. Between 2001 and 2003, this falling share was compounded by an overall fall in advertising revenue generally, affecting all media. Advertising expenditure in general may be changing its pattern, with a shift in favour of various forms of direct marketing. This may further reduce the pool of revenue available to newspapers.
Newspapers are also subject to a variety of regulatory activities designed to protect consumers from monopoly, protect social and ethical values and ensure access to a diversity of newspapers. Ongoing initiatives that may affect newspapers include harmonisation of VAT practice, potential restrictions on financial journalism arising from the Market Abuse Directive and initiatives that might regulate the content of advertising in areas such as foodstuffs and advertising to children. National-level regulation may also affect issues such as distribution. Regulation may also affect newspapers ability to consolidate where consolidation would make a newspaper or group more competitive.
However, governments in some member states have also provided financial support to the industry to ensure political plurality of newspapers.
Newspapers have launched online services, and a few of these are now profitable. However, many are still cost centres and newspaper the same problems as other websites when it comes to raising revenues from online activities. Newspapers continue to experiment with online services, and collaborative ventures are helping to create efficient platforms for the delivery of classified advertising in particular.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
3 Introduction
3.1 Statistics and sources
The statistical sections of this report have been compiled from a variety of sources, including national statistical services, the Eurostat database, information from market research reports and information provided by trade associations. We have deliberately drawn on the widest range of information available to maximise the value of the report.
This has given the report a richer data-set than previous reports. Inevitably, however, not all of this information is internally consistent. Statistics are collected by different organisations for their own purposes, and in many cases the way in which they are collected, processed and presented is the result of decisions made many years ago. This report can only work with the raw material that is available, but we have aimed to use it intelligently and transparently, drawing attention to any apparent statistical anomalies and where we are aware that different bases for calculation has been used.
However, this diversity also has an advantage: the variety of sources provide some form of reality check between one another. They can also illuminate particular business issues or strengths and weaknesses of an industry.
In the report covering the newspaper sector, we have identified four measures of size that can be used to analyse industry trends:
• Daily or weekly circulation • Revenues from circulation • Revenues from advertising • Total turnover of companies publishing newspapers
These measures are all relevant to assessing the competitiveness and the sustainability of newspaper publishing, but they are not directly comparable. We have drawn relevant conclusions from each of these measures individually, and also through comparing and contrasting them.
Circulation figures and sales revenues from both circulation and advertising demonstrate market trends, and can be linked to important economic and social trends that determine the market size for individual product types such as newspapers.
The figure for corporate turnover is a valid one for the analysis of competitiveness factors such as value-added, margins or employment costs. Although turnover is related to measures such as circulation and sales, it looks at the total firm and therefore includes revenues from other businesses that the firm might own.
Although this may seem to make turnover less immediately relevant, there is a trade-off between relevance and the ability to perform a useful analysis. Information such as value-added, margins and total employment costs is also derived from data collected at the corporate level rather than the product level.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
These are therefore the figures that provide a fuller competitive analysis than circulation and sales revenue figures alone.
In some of the statistics gathered, “outliers” can be found that do not seem to match the rest of the data: this is most typically found across the data for a whole country, although sometimes within a time series there is an apparently aberrant year. It has not been possible within the scope of this report to research systematically all of these in detail to identify the cause of all unexpected results, but we draw attention to them and (where feasible) propose a possible explanation. In some cases, this is because the information has either been gathered or reported differently at a national level. The user can therefore identify which figures might valuably be researched in detail.
We should also emphasise that the data collected by national statistical organisations, trade associations and others is intended to give a general picture rather than a firm basis for business decision-making, and this is how we have used it here. Any user of this report considering a business decision should use the data as a starting-point only, and would be advised to carry out their own detailed research, including field research if necessary. Similarly, the data can be used to identify areas where the EC may be interested in acting, but as before additional detailed research may be required to confirm the information and to determine the detailed causes of patterns or aberrations in the statistics.
There are also some significant gaps in data, both for member states as well as the New Accession States. In particular, we have been able to obtain only market data for Greece (circulation and advertising revenue): we understand that this data has not been collected and it certainly does not appear in Eurostat. We are also concerned about the lack of data for Germany pre-1999: we are continuing to attempt to contact the German national statistical service but at the time of writing have not been able to clarify the reasons for the lack of data.
3.2 Data from New Accession States
The data sources available for the New Accessions States are not as complete as those for the existing EU members. Data gathering has not been a priority for these countries. However, we have been able to obtain useful data for a significant number of countries, although time-series are complete only for a very few.
We draw attention to the data for Poland in particular. This is the largest market among the New Accession States. However, the data suggests that in areas such as value-added per employee or turnover the performance of the Polish newspaper industry has made a sudden leap in 2001. The level of margin in particular is the highest in Europe, and productivity (value added per person employed) is also high compared with other New Accession States. These figures are the direct result of a very large apparent leap in value-added in 2001. We have not been able to identify an explanation of this change: indeed, the newspaper industry in Poland is reported to be very competitive and advertising revenue has been falling sharply since 2001, the most recent year for which Eurostat provides data.
Data from other sources for the New Accession States may also be subject to the same considerations.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
4 Definition of the sector
Several terms are used within the report with very specific meaning to define sub- sectors of the industry. It is essential for any understanding of the report that the definitions used for these sub-sectors are also understood. These definitions follow the NACE data collection categorisation used by Eurostat (which makes the definitions effectively immutable from the point of view of reporting on the newspaper sector at the European level). Category 22.12 covers publishing. Newspapers are considered under four categories:
Daily newspapers include those published between four and seven times each week.
• National newspapers are available throughout a country, but are not always high in circulation: in some countries, the leading regional papers can sell more than some national papers. In Germany, some newspapers published for major cities such as Berlin and Frankfurt are in effect national papers.
• Regional daily newspapers are a significant force in several European countries. In major markets including Spain, Germany, France ands Italy they have larger combined circulations than the national papers. They are usually supported by extensive classified advertising as well as income from circulation.
The definition of "regional" can vary and in some cases a "regional" paper might serve a very small market and be considered as "local" rather than "regional." For the purposes of this report, such differences are disregarded in the statistical information. Although there is a large number of such papers, some are little more than differently-labelled editions of the same newspaper, perhaps with slightly different local content.
Non-daily newspapers are, for the most part, weekly local papers, sometimes carrying strong classified advertising content as well as local news. They are published between one and three times a week.
Sunday papers are published in six EU countries, including the large Germany and UK markets as well as France, Greece, Ireland and Luxembourg, and are modelled on national daily papers.
The term “freesheets” covers a diverse category of newspapers. It includes weekly local free newspapers of the type published widely as advertising-based "shopping papers", as well as daily "commuter" newspapers such as the Metro newspapers published in several European cities and often distributed at transport nodes. The business models and performance indicators for these categories are very different, and the category could usefully be split into two (daily freesheets and weekly freesheets) to make it more useful in future.
Freesheets are published in several Member States.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Some European markets (notably Italy, France and Spain) sustain newspapers dedicated to sport. These have been classified with daily or weekly papers according to frequency.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5 Statistical analysis
5.1 Circulation-related Measures
5.1.1 Circulation numbers The trend in most Member States is either for circulation to remain static or to fall in all types of newspaper publishing. The falls are most noticeable in the two largest markets, Germany and the UK, where it has been a consistent trend over several years. Even a country like Ireland, with a growing economy, has not shown substantial growth in newspaper circulation. This trend is also found in the US newspaper market, and is a major concern to newspaper publishers that is discussed in more detail throughout this report.
The newspaper industry emphasises that circulation does not equate with readership, and in some cases claims that readership is in fact growing rather than declining (as several people may read each copy of a newspaper). This is often presented as a justification for advertising rates, but is not easy to audit and some experts feel that these is little real growth in readership.
5.1.2 Daily newspaper circulation The circulation of daily papers has either fallen or remained static in most EU Member States for some years. No single country is experiencing either dramatic declines or dramatic growth. This may leave them at a competitive disadvantage compared to newer media such as the internet that are still growing their audience. The fact that the trend has been long-term suggests that it is going to be hard to reverse.
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20000 1996 1997 ) 1998 15000 1000
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Figure 1: National daily newspaper circulation in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Circulation in those New Accession States for which data is available shows are more mixed picture. However, it can be seen that the three countries with the largest circulations in 1998 have all declined over the period to 2001.
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4000 1996 1997 )
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Figure 2: daily newspaper circulation in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5.1.3 Non-daily newspaper circulation The circulation of non-daily papers, which include weekly local papers, has shown only marginal growth or decline in most countries. The main exceptions are Spain and Ireland but recent data is not available to show if the trend continued in 2001.
Although non-daily papers are a major success in some countries (notably the UK), the overall trend is of concern as it suggests that non-daily papers may be competing against other local media that are becoming stronger as they mature.
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6000 1995 1996 5000 1997 ) 1998 000 4000 1 1999 (x. 3000 2000 2001 2000 2002
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Figure 3: Non-daily newspaper circulation in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
Circulation for the weekly local press declined until 2000 in most of the New Accession States, and shows a slight recovery in 2001, unlike the situation in the member states. There is no data to indicate that this has continued.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
900
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600 1996 1997 ) 500 00 1998 10 . 400 1999 x ( 2000 300 2001 200 2002
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Figure 4: Non-daily newspaper circulation in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
5.1.4 Freesheet newspaper circulation Freesheet circulation is growing in Germany, but is mainly static or even falling elsewhere. It should also be noted that the freesheet sector comprises a very wide range of newspapers, ranging from local advertising weeklies to daily newspapers for commuters. This presents a real challenge to the conventional paid-for daily newspaper.
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80000 1995 70000 1996 60000 1997 1998 50000 1000)
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Figure 5: Freesheet newspaper circulation in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The fact that the circulations are flat or growing only slightly may reflect the freesheet industry's need for cash to help it develop: circulation is entirely at the publishers’ discretion.
In the New Accession States that have reported circulation information, freesheets are really only a significant force in the Czech Republic, where Metro (a free newspaper publisher publishing freesheets in several EU member states) publishes a free daily newspaper.
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4000 1995 3500 1996 3000 1997 0) 1998 2500 100
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Figure 6: Freesheet newspaper circulation in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
5.1.5 Sunday newspaper circulation Sales of Sunday newspapers have been flat since 1995, with occasional good or bad years but no basic change of scale. The largest market for Sunday newspapers is by far the UK, where circulations are declining.
In the New Accession States, Sunday newspapers appear to be becoming more popular in the Czech Republic and Slovakia in particular.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
18000
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12000 1996 1997 ) 10000 1998 1000 . 8000 1999 x ( 2000 6000 2001 4000 2002
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Figure 7: Sunday newspaper circulation in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Figure 8: Sunday newspaper circulation in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
5.1.6 European Dailies in World newspaper markets The largest dailies in western world still come from Europe, based on 2002 circulation. Four of the top 20 newspapers worldwide in terms of size are European. Most of the top 10 newspapers come from Japan, where two largest newspapers have a circulation over 10 million. Only one newspaper in the top 10 comes from United States and one from China, while two newspapers come from Europe.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Rank Newspaper Country Circulation 1 Jomiuri Shimbun Japan 14 246 000 2 The Asahi Shimbun Japan 12 326 000 3 Mainichi Shimbun Japan 5 635 000 4 Nihon Keizai Shimbun Japan 4 737 000 5 Chunichi Shimbun Japan 4 571 000 6 Bild Germany 4 220 000 7 The Sun United Kingdom 3 461 000 8 Sankei Shimbun Japan 2 665 000 9 USA Today United States 2 603 000 10 Canako Xiaoxi China 2 530 000 11 The Chosun Ilbo South Korea 2 428 000 12 Tykyo Sports Japan 2 425 000 13 Daily Mail United Kingdom 2 411 000 14 The Joongang Ilbo South Korea 2 200 000 15 Times of India India 2 131 000 16 The Mirror United Kingdom 2 117 000 17 The Dong-A Ilbo South Korea 2 100 000 18 Nikkan Sports Japan 1 987 000 19 Hokkaido Shimbun Japan 1 947 000 20 The Wall Street Journal United States 1 821 000
Table 1: Top 20 newspapers in world based on circulation (2002) (Source: International Federation of Audit Bureaux of Circulation )
Rank Newspaper Country Circulation 1 Bild Germany 4 220 000 2 The Sun United Kingdom 3 461 000 3 Daily Mail United Kingdom 2 411 000 4 The Mirror United Kingdom 2 117 000 5 Zeitungsgruppe WAZ Germany 1 064 000 6 Neue Kronen Zeitung Austria 1 018 000 7 Daily Telegraph United Kingdom 1 003 000 8 Daily Express United Kingdom 930 000 9 De Telegraaf The Netherlands 795 000 10 Ouest France France 785 000 11 The Times United Kingdom 705 000 12 Corriere della Sera Italy 690 000 13 Daily Star United Kingdom 673 000 14 La Repubblica Italy 624 000 15 Daily Record* United Kingdom (Scotland) 566 000 16 Le Parisien/Aujourd'hui* France 485 000 17 Financial Times* United Kingdom 479 000 18 Zeitungsgruppe Germany 458 000 Thüringen* 19 Helsingin Sanomat* Finland 446 000 20 La Gazzetta dello Sport* Italy 445 000 * 2001 circulation
Table 2: Top 20 newspapers in EU based on 2002 circulation (Source: World Press Trends 2002, International Federation of Audit Bureaux of Circulation)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Almost half of the top 20 newspapers in Europe come from the United Kingdom, while the largest and fifth largest newspapers come from Germany. Both nations have large populations. Taking the population into account, it is surprising that, among the top 10 newspapers, there are papers from Austria and from Netherlands.
Among the list of top 10 newspapers in New Accession Countries, Poland and Czech Republic appear most often. Two Polish newspapers are clearly the largest ones, and the largest one would figure in the European top 20 list.
Rank Newspaper Country Circulation 1 Gazeta Wyborcza Poland 457 000 2 Super Express Poland 371 000 3 MF DNES Czech Republic 338 000 4 Blesk Czech Republic 333 000 5 Metro Hungary 281 000 6 Pravo Czech Republic 213 000 7 Rzeczpospolita Poland 203 000 8 Nepszabadsag RT Hungary 200 000 9 Super Czech Republic 173 000 10 Novy c as Slovakia 148 000
Table 3: Top 10 newspapers in Accession States based on 2001 circulation (Source: World Press Trends 2002, International Federation of Audit Bureaux of Circulation)
5.1.7 Circulation per 1000 population The number of newspaper readers per 1000 population is an important factor in terms of both revenue generated from selling newspapers and their ability to command advertising revenue. There is a strong relationship between daily circulation per 1000 population and the share of total advertising revenue taken by newspapers. Correlation coefficient between these is 0,72 which indicates a strong positive correlation.
Country Daily circulation per 1000 Share of total population advertising revenue Gr 67.0 15.0% Pt 69.0 11.0% It 105.0 22.0% Es 107.0 30.0% Fr 146.0 17.0% Be 150.0 21.0% Ie 153.0 56.0% Dk 272.0 47.0% Lu 272.0 59.0% Nl 273.0 22.0% De 289.0 43.0% Uk 300.0 42.0% At 302.0 30.0% Se 416.0 55.0% Fi 445.0 58.0% Table 4: Circulation per 1000 population in EU Member States (2001) (Source: World Press Trends 2002. Statistics Finland, World in Figures)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The relationship between advertising share and circulation per 1000 population is not as distinct in the New Accession States, but is still identifiable. The correlation coefficient is 0.64 which indicates moderate correlation.
Country Daily circulation per Share of total 1000 population advertising revenue
Lt (unknown) 37.3% Mt (unknown) (unknown) Cy 61 (unknown) Po 73 10.9% Sk 93 11.9% Lv 145 36.4% Hu 167 14.0% Cz 169 18.0% Si 171 (unknown) Ee 191 50.4% Table 5: Circulation per 1000 population in New Accession States (2001) (Source: World Press Trends 2002. Statistics Finland, World in Figures)
The trend in circulation per 1000 population in EU member states is generally decreasing (at variable rates). There are a few exceptions, such as the United Kingdom, where the circulation per 1000 population has actually increased in 2002. Other positive examples are Ireland and Italy, where the trend has been stable or even growing slightly, circulation per 1000 population being around 150 copies in Ireland and 100 copies in Italy. Finland and Sweden are clearly different from other countries, at 400 to 450 copies per 1000 population.
500
450
400
350
300
250
200
150
100
50
0 fi se uk at de nl lu dk ie be fr es it gr pt
1995 1996 1997 1998 1999 2000 2001 2002
Figure 9: Circulation of daily papers per 1000 population in EU Member States 1995-2002 (Source: World Press Trends)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
In the New Accession States, the general trend in circulation per 1000 population is mostly either growing or stable. However, there are a few exceptions, such as Hungary, Czech Republic and Slovakia, where circulation per 1000 population has decreased substantially. In countries like Latvia and Estonia (the Baltic Countries) and in Poland, circulation per 1000 population has increased, in Latvia significantly. The obvious reason for this development in Baltic Countries is the increased freedom of the press after the collapse of Soviet Union. In other Accession States the development has been quite stable.
250
200
150
100
50
0 sk ee si cz hu lv pl cy
1995 1996 1997 1998 1999 2000 2001 2002
Figure 10: Circulation of daily papers per 1000 population in New Accession States 1995-2002 (Source: World Press Trends)
5.2 Number of titles published
Overall, the number of titles published has not changed significantly over the short term.
5.2.1 Daily papers The total number of titles of daily newspapers in EU shows a very slow declining trend over the period from 1995 to 2002.
The largest market, Germany, shows a distinct decline in the number of daily titles published - a trend that has been seen over several years. Other European countries show a similar pattern or are steady: only a small number (but including the UK, the second largest market) show growth in titles. The trend of low or
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Publishing Market Watch Sector Report 1: The European Newspaper Market negative growth is a long-term structural one rather than a response to current economic circumstances.
1 200 1147 1147 1136 1139 1132 1123 1126 1118
1 000
800
600
400
200
0 1995 1996 1997 1998 1999 2000 2001 2002
Figure 11 Total number of daily papers published in EU member countries 1995 to 2002 (Source: World Press Trends 1999 to 2003)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
450
400
350
300
250
200
150
100
50
0 at be de dk es fi fr gr ie it lu nl pt se uk
1995 1996 1997 1998 1999 2000 2001 2002
Figure 12: Number of daily papers published in EU Member States 1995 to 2002 (Source: World Press Trends 1999 to 2002) The number of titles published in the New Accession States shows a little more turbulence (but the large chance for the Czech Republic 1999-2000 is due to a change in statistical classification, when 57 local dailies were included in the category). The reported number of titles in accession countries should be observed with some reservations.1
1 For example the number of daily titles in Poland in 2001 was reported 76 in 2002 edition of the World Press Trends, while the 2003 edition of the WPT reports 46 for the same year.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
80
70
60
50
40
30
20
10
0 cy cz ee hu lt lv mt pl si sk
1995 1996 1997 1998 1999 2000 2001 2002
Figure 13: Number of daily papers published in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5.2.2 Non-daily papers Non-daily titles, including Sunday papers and local weekly newspapers, generally are decreasing in number: in part this may be due to consolidation of smaller local titles. The figures for France are missing from the last three years, which makes it impossible to assess the total change in the EU level.
550
500
450
400
350
300
250
200
150
100
50
0 at be de dk es fi fr gr ie it lu nl pt se uk
1995 1996 1997 1998 1999 2000 2001 2002
Figure 14: Number of non-daily papers published in EU Member States 1995 to 2002 (Source: World Press Trends 1999 to 2003)
Again, the position in the New Accession States shows a more turbulent picture, and although some countries are declining, it does not follow the same overall pattern of decline seen in the existing member states. However, the declining pattern is clearly visible in the countries that have a large number of non-daily titles.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
120
110
100
90
80
70
60
50
40
30
20
10
0 Cyprus Czech Estonia Hungary Lithuania Latvia Malta Poland Slovenia Slovak Republic Republic
1995 1996 1997 1998 1999 2000 2001 2002
Figure 15: Number of non-daily papers published in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
5.2.3 Freesheets Freesheet title numbers have fallen in two large markets (The Netherlands and the UK), but risen in Germany, the largest of all. Circulation has also fallen in The Netherlands and the UK and has risen in Germany, which suggests that consolidation is not a factor. There is no strong pattern discernable across the different European countries, and variations are likely to be due to local conditions as much as to general economic trends.
Freesheets have not yet developed a substantial presence in any of the New Accession States except the Czech Republic. As in some of the member states, they have not been immune to problems in the advertising market.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
1 500 1 400 1 300 1 200 1 100 1 000 900 800 700 600 500 400 300 200 100 0 at be de dk es fi fr gr ie it lu nl pt se uk
1995 1996 1997 1998 1999 2000 2001 2002
Figure 16: Number of freesheets published in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
13 0
12 0
110
10 0
90
80
70
60
50
40
30
20
10
0 cy cz ee hu lt lv mt pl si
1995 1996 1997 1998 19 9 9 2000 2001 2002
Figure 17: Number of freesheets published in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5.2.4 Titles per million population The number of titles published per million population give a general indication of the intensity of competition for market share. The smaller countries have a higher density of titles per million population, but in the larger markets the UK stands out as one that is attempting to sustain a large number of titles in relation to the population served.
45 40 35 30 25 20 15 10 5 0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 18: Number of newspaper titles per million population published in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002 and Statistics Finland, World in Figures)
Incomplete data makes it harder to assess the situation across the New Accession States, but is noticeable that the highest number of titles can be found in two Baltic states, Estonia and Latvia, and reaches a level as high as the higher European markets.
50 45 40 35 30 25 20 15 10 5 0 cz ee hu lv pl sk
Figure 19: Number of newspaper titles per million population published in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002 and Statistics Finland, World in Figures)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5.2.5 Number of titles compared with geographic area The number of titles published can be assessed according to the area of the country. A larger number of titles may be an indication of intensity of competition among the regional press and in urban centres. Newspapers which operate in countries with a high ratio of titles to area are likely to encounter more competitive conditions.
7
6
5
4
3
2
1
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 20: Titles per thousand km2, EU Member States, 2001 (Source: World Press Trends 1999 to 2002 and Statistics Finland, World in Figures) The New Accession States are generally among the countries with a lower density of titles in relation to area. In Czech Republic, Estonia and Latvia the newspaper density exceeds the median density of EU Member States, which may be an indicator of a maturing market.
2.5
2
1.5
1
0.5
0 cz ee hu lv pl sk
Figure 21: Titles per thousand km2, New Accession States, 2001 (Source: World Press Trends 1999 to 2002 and Statistics Finland, World in Figures)
5.2.6 Average circulation per title Average circulation per title is largely stable. Newspapers with higher circulation per title should be more competitive, with central costs defrayed across a wider number of copies leading to higher operating margins. In some countries,
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Publishing Market Watch Sector Report 1: The European Newspaper Market circulation per title is declining in line with the general trend in the market. In countries where overall circulation is declining but the average circulation is steady or rising, this is indicative that some consolidation is taking place.
Where there is a smaller number of readers for each title, competition may be more intense, with titles splitting a local market. It may also be harder for individual newspapers to attain economies of scale. For daily circulation in some member states, the low numbers can reflect a more fragmented regional market with few large national newspapers; this pattern is found in both Spain and Germany, for example.
250
200 1995 1996 150 1997 0) 1998 100
. 1999 x ( 100 2000 2001 2002 50
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 22: Average circulation by title, daily newspapers in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002) For non-dailies, the increasing readership in Spain reflects a fall in the number of titles and one of the few rises in readership in the member states.
1200
1000 1995
800 1996 1997
00) 1998 600 10 1999 (x. 2000 400 2001 2002 200
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 23: Average circulation by title, non daily and Sunday newspapers in EU Member Sates 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The picture for freesheets is more varied. Circulation is more under the control of the publisher than it is for paid papers, so to some extent is less likely to fluctuate in line with market conditions. The start of a new paper or an existing one ceasing to publish can make a significant difference where freesheets are widely- distributed urban dailies.
600
500 1995
400 1996 1997 ) 1998 300 1000
. 1999 x ( 2000 200 2001 2002 100
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 24: Average circulation by title, freesheets in EU Member Sates 1995 to 2001 (Source: World Press Trends 1999 to 2002) In the New Accession States, several countries are showing a decline in per-title circulation. The data for the Czech Republic appears anomalous here and elsewhere. The limited time-series data makes it hard to draw definite conclusions.
120
100 1995
80 1996 1997 ) 1998 60 1000
. 1999 x ( 2000 40 2001 2002 20
0 cy cz ee hu lt lv mt pl si sk
Figure 25: Average circulation by title, daily newspapers in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
500
450
400 1995 350 1996 300 1997 )
00 1998 250 10
. 1999 x ( 200 2000 150 2001 2002 100
50
0 cy cz ee hu lt lv mt pl si sk
Figure 26: Average circulation by title, non daily and Sunday newspapers in New Accession States 1995 to 2001(Source: World Press Trends 1999 to 2002)
700
600 1995 500 1996 1997 400
00) 1998 10
. 1999 x
( 300 2000 2001 200 2002 100
0 cy cz ee hu lt lv mt pl si sk
Figure 27: Average circulation by title, freesheets in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
5.3 Revenue-related Measures
Despite falling circulations, in some markets, including both Germany and the UK (although for the UK data is only available until 2000), the revenues from circulation sales have in fact risen. Publishers are able to extract additional revenue from the market in the short term through higher prices, but this may not be able to continue, especially in the face of competitive pressure by one publisher or another to increase circulation by cutting prices, provoking a price war that reduces overall revenues.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
In some countries such as Italy, publishers took advantage of the introduction of the Euro to raise prices and this may also be reflected in the revenue trends.
5.3.1 Advertising
5.3.1.1 ADVERTISING REVENUE Data on advertising revenue is only available for daily newspapers.
Advertising revenue has declined in some EU Member States since 2000 and stayed level or shown slight growth in others. Spain and Germany continued to grow in 2001; in the case of Germany growth was flatter than in previous years, and Spain is the only country to show better growth in 2001 than it did in previous years.
The decline seen in many markets in 2001 is likely to have continued in 2002 and 2003. Other observers such as PriceWaterhouseCoopers, in their Newspaper Publishing report, suggested that the German market would fall by 3% in 2002, the UK market by 2% and France by 2.9%. Countries where growth continues, such as Ireland, will have seen it flatten to less than 2% in 2002.
The World Association of Newspapers, in its World Press Trends, suggests that the 2002 position was rather worse than PriceWaterhouseCoopers projected, with only newspapers in Belgium and Greece attaining modest (less than 1%) growth in 2002.
The decline in advertising revenue, combined with at best modest increases in revenues from circulation, exacerbate a long-term trend with short-term impacts.
7000
6000 1995 5000 1996 )
€ 1997
n 4000 1998
illio 3000 1999 m ( 2000 2000 1000 2001
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 28: The advertising revenue of daily newspapers in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002) Advertising revenue in the New Accession States has shown a similar pattern, with significant growth in advertising up to the peak year of 2001. However, the trend in 2002 is different for three New Accession States. Where advertising revenues in
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Publishing Market Watch Sector Report 1: The European Newspaper Market most of the existing states fell in 2002, according to the World Association of Newspapers they rose significantly in some of the key New Accession States markets: by 5.2% in Poland, the largest market, by 15.2% in the Czech Republic, and by 5.9% in Hungary (data not available for other countries). This suggests that the economic development of some states is outpacing any structural decline at least for the time being.
PriceWaterhouseCoopers’ projections suggest that growth will slow but continue in Poland and Hungary, and speed up in the Czech Republic. The PWC forecast is more pessimistic for the New Accession States it covers than the WAN study is, but both suggest that the development of the economy in these countries will support more advertising.
300
250 1995 1996
) 200
€ 1997 n 150 1998 illio 1999 m ( 100 2000 50 2001
0 cy cz ee hu lt lv mt po si sk
Figure 29: The advertising revenue of daily newspapers in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
5.3.1.2 SHARE OF TOTAL ADVERTISING EXPENDITURE Newspapers command a varying share of total advertising revenue in the Member States, reflecting local conditions.
The share of advertising revenue is closely related to the number of copies circulated per thousand population. The newspapers in countries where circulation per thousand is high tend to command a higher percentage share of the total advertising market. In the Member States, the percentage ranges between 15% of total advertising revenue (Greece) to 58% (Finland). In other low-ranked countries such as Italy, where newspapers attain a 22% market share, they are usually competing with commercial television stations in particular.
In some EU members states, advertising growth in the newspaper industry kept pace with or slightly exceeded growth in advertising overall: in these markets newspapers are at least holding their own against other media. However, in countries such as Sweden, the Netherlands and Belgium growth in newspaper advertising fell behind growth in overall advertising revenue. Newspapers in these countries are thus gradually losing share to other media.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The figures in Figure 30 are based on information from World Press Trends, a well- respected source of statistical information about the newspaper industry. However, experts who have reviewed this data have commented that the figures seem high for the UK and for Germany. Information from the Advertising Association’s annual statistical survey of the UK market would tend to confirm this viewpoint, putting newspapers’ share of the UK market at 29%. We have been unable to locate another reference source covering all EU Member States on a comparable basis, so the WPT data remains the only internationally-comparable data.
70
60
50
40
30
20
10
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 30: Newspaper share of total advertising in EU Member States (2001) (Source: World Press Trends 1999 to 2002) Newspapers in the New Accession States are also suffering from competition with television, and in general seem to generate considerably less of their revenue from advertising.
60
50
40
30
20
10
0 c z ee hu lt lv pl sk
Figure 31: Newspaper share of total advertising in New Accession States (2001) (Source: World Press Trends 1999 to 2002) In Figure 32 the newspaper advertising expenditure change percentage is compared against the change of total advertising expenditure from 1995 to 2000.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The vertical line represents the total advertising growth, 41%. The nine countries to the left of the vertical line express below average growth in total advertising expenditures and the countries to the right of it represent above average growth respectively. The diagonal line across the chart represents equal growth in newspaper advertising to total advertising. In countries above the diagonal line the newspapers have gained market share and in countries below it, newspapers have lost market share.
The illustration reveals that while there have been vast differences in the development of total advertising, ranging from nearly zero-growth in Greece to over 100 % growth in Portugal, the changes in newspaper market shares have generally been much more moderate with the notable exception of Greece (where newspaper advertising expenditures have almost doubled in real terms while total advertising has not grown at all). The shift in advertising expenditures has been from electronic media (mainly television) to print media (both newspapers and magazines)
The winners among the newspaper industries in advertising competition have clearly been Italy and Ireland, where both total advertising expenditure growth and newspaper advertising expenditure growth clearly exceed average European trends. In Italy, the newspapers have won market share mainly from television advertising and in Ireland the newspapers have gained ground from both television and magazines.
120 %
ie 000, 2
5- 100 % gr 199 it ng
si 80 % i pt ces i vert pr t
r ad 60 % uk es n a pe t a s
p at s con w 40 %
ne be f fr o
% 20 % nl
nge fi
a de se h
C dk 0 % 0 % 20 % 40 % 60 % 80 % 100 % 120 % Change % of total advertising 1995-2000, constant prices
Figure 32: Change in the newspaper share of total advertising in EU Member States (1995 – 2000 at constant prices) (Source: World Advertising Trends 2002)
The situation is rather less encouraging in those of the New Accession States where we have been able to obtain data. Newspapers have been falling behind other media over a five-year period. Total advertising expenditure growth varies from a slight decline in Malta to over 300% growth in Slovakia. The average
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Publishing Market Watch Sector Report 1: The European Newspaper Market growth in Accession countries during the period observed was 165% being approximately four times as fast as in EU member countries.
The main reason is that television is becoming more available and much more varied in many of the New Accession States and poses a much stronger challenge. In addition to the strengthening competition by television, in some countries magazines (Hungary, Lithuania, Estonia) and radio advertising (Latvia, Slovenia) are gaining market share. Newspapers in these countries are increasing their revenues in line with overall economic growth, but other media are outpacing them. This may present problems in the long term, with increased competition for both readers and advertisers between the newspapers themselves.
350 %
, 300 % 2000 - 250 % 1995 ng si i t s 200 % e lv c i ver pr
ad pl 150 % sk nt a per t a p ns
s cz co
w 100 % e n n
i hu si 50 % lt % e ee ang
h 0 % C mt
-50 % -50 % 0 % 50 % 100 %150 %200 %250 %300 %350 % Change % in total advertising 1995-2000, constant prices
Figure 33: Change in the newspaper share of total advertising in New Accession States (1995 – 2000 at constant prices) (Source: World Advertising Trends 2002)
It should be noted that these effects are not dramatic at the moment, and do not point to an industry under intense pressure from other channels, but rather indicate that newspapers will have to work hard to maintain their competitive position or to improve it.
5.3.2 Revenue split between advertising and circulation There has been a general long-term trend towards increasing dependence on advertising rather than circulation revenues in most EU Member States since 1995. Newspapers in the majority of EU countries depend on advertising for between 50% and 60% of their revenue. A notable exception is Luxembourg, which generates 80% of newspaper revenues from advertising: this may be a result of its very small population.
The data on revenue structure is available only for four Accession States. According to available data no clear tendency for the development of income structure can be established. In the Czech Republic there has been a steep increase in the share of advertising contributing to total income. In Estonia there
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Publishing Market Watch Sector Report 1: The European Newspaper Market has been some fluctuation, although the development seems to be towards a greater advertising dependency.
90 %
80 %
70 %
60 % 1995 1996 50 % 1997 1998 40 % 1999 2000 30 % 2001
20 %
10 %
0 % at be dk fi fr de gr ie it lu nl pt es se uk
Figure 34: The proportion of revenues derived from advertising in daily newspapers in EU Member States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
70 %
60 %
50 % 1995 1996 40 % 1997 1998 30 % 1999 2000 2001 20 %
10 %
0 % cy cz ee hu lt lv mt po si sk
Figure 35: The proportion of revenues derived from advertising in daily newspapers in New Accession States 1995 to 2001 (Source: World Press Trends 1999 to 2002)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Both of the largest markets, Germany and the UK, have shown a long-term trend towards increased dependence on advertising.
In 2000 and 2001, this trend either reversed or flattened in many countries. Of the major markets, only Spain showed a significant increase in the percentage derived from advertising in 2001. This reflects general market conditions.
This may expose the industry to risk as advertising revenue has turned down worldwide, although some commentators have predicted a small upturn in 2004. A reduction in advertising revenue, however, is unlike a reduction in circulation revenue in that a concomitant reduction in cost does not follow. This increasing exposure to potentially vulnerable and volatile advertising revenues is one of the key challenges for the industry if it wishes to remain competitive.
5.3.3 Advertising and GDP Advertising expenditure will normally rise in line with a country’s GDP. If advertising expenditure is rising faster, it will create a gradually bigger market. This has been the case in most of the member states until 2001. Later data is not available,2 but if advertising fell in 2002 and 2003 as many observers suggest then its continuing growth in relation to GDP as a whole may change.
0,70
0,60
0,50
0,40
0,30
0,20
0,10
0,00 at be de dk es fi fr gr ie nl pt se uk
1995 1996 1997 1998 1999 2000
Figure 36: Newspaper advertising expenditure per GDP, EU Member States (Source: World Advertising Trends 2002) Trends in the New Accession States are much more mixed, with several countries showing downturns as early as 1998. However, this trend would also appear if advertising expenditure was growing but GDP was growing faster, and this seems to be the case as advertising revenues did indeed grow over the period 1995- 2001.
2 The advertising expenditure data for latter years will be added to the final report as the data becomes available.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
0,50 0,45 0,40 0,35 0,30 0,25 0,20 0,15 0,10 0,05 0,00 cy cz ee hu lt lv mt pl si sk
1995 1996 1997 1998 1999 2000
Figure 37: Newspaper advertising expenditure per GDP, New Accession States (Source: World Advertising Trends 2002)
5.4 Employment-related Measures
5.4.1 Employee numbers The number of employees measures the number of people involved in the operations of an industry. When this number is compared to total employment it indicates the relative importance of that industry in employment terms. This indicator should preferably be counted from the full-time equivalent number of employees. However, the number is rarely available from the statistical sources. In these tables, the number of employees includes those temporarily employed and part-time employed in a given year.
The three countries that employ the largest numbers of people in their newspaper industries are Germany, the UK and France: these are also the three largest markets. The year 2002 shows a small decline for Germany, flat employment in France and an increase for UK (data for Germany is only available from 2000 to 2002).
A clear trend of decreasing employment is found in Denmark and Sweden. In other countries the trend is stable or slightly increasing.
Employment trends are related to overall competitiveness. In the case of those EU Member States where employment in the newspaper industry has fallen recently, it is likely that employment is moving in alignment with business trends. This can indicate that an industry is making efforts to remain competitive as markets become more difficult.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
120000
100000 1995 1996 80000 1997 60000 1998 1999 40000 2000 20000 2001
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 38: Employment in the newspaper industry in EU Member States 1995 to 2001 (Source: Eurostat NewCronos Database) Employment in the industry in the New Accession States follows a similar pattern, remaining steady or showing a slight increase with the most notable exceptions of Latvia where the employment is decreasing and Poland where there is a clear trend of increase in employment.
12000
10000 1995 1996 8000 1997 6000 1998 1999 4000 2000 2000 2001
0 cy cz ee hu lt lv mt pl si sk
Figure 39: Employment in the newspaper industry in New Accession States 1995 to 2001 (Source: Eurostat NewCronos Database)
5.4.2 Employment costs The cost of employing a person within the newspaper industry differs considerably between Member States. The highest-cost country is Italy, where employment
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Publishing Market Watch Sector Report 1: The European Newspaper Market costs in the industry have historically been high. However, local conditions can affect costs: in Denmark, generally a high employment cost economy, the average employment cost in the newspaper industry is very low as the newspaper companies employ large numbers of low-paid workers to distribute newspapers (especially freesheets) to readers. This reduces the average employment cost across the industry considerably. In most countries, workers in distribution are not directly employed by the newspaper companies and therefore do not affect the average in this way. Another factor that contributes to the differences in average per employee costs is the structure of the industry. If printing activities are largely integrated in publishing firms the cost structure includes both journalistic and industrial (manufacturing) workers. In the case of largely outsourced printing, the personnel costs include mainly journalistic work. Differences in social costs also contribute to the differences in total employment costs per employee.
Low per-employee costs are not necessarily beneficial: if an industry cannot pay good salaries to employees, it will not be able to recruit and retain good staff capable of operating the existing business well, responding to changing conditions and innovating as new ideas are required.
There is little evidence that employment costs are levelling off as economic conditions become more difficult. Costs in the Netherlands and Sweden showed a significant drop and those in the UK a smaller drop; most other European countries, however, showed a continuing trend to higher costs: in the case of Italy, adding to an already high per-person cost.
80,0 70,0 1995 60,0 1996 50,0 1997 40,0 1998 000 €) 1 ( 30,0 1999 20,0 2000 2001 10,0 0,0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 40: Personnel costs/person employed in EU Member States 1995 to 2001 (Source: Eurostat NewCronos Database)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Employment costs in the New Accession States are also rising, although slightly less steeply. They are generally considerably lower than those in most of the EU member states. The closest to the EU employment costs is the cost level in Slovenia.
40,0 35,0 1995 30,0 1996 25,0 1997 20,0 1998 000 €) 1 ( 15,0 1999 10,0 2000 2001 5,0 0,0 cy cz ee hu lt lv mt pl si sk
Figure 41: Personnel costs/person employed in New Accession States 1995 to 2001 (Source: Eurostat NewCronos Database)
5.5 Financial Measures
5.5.1 Basis There are a number of possible ways of reporting financial data to allow for inflation and variations in overall economic performance. Because it can be useful to have more than one set of datapoints to draw on, we have presented some of this information in two ways: based on nominal exchange rates, and on Purchasing Power Parity (PPP). The different treatments can show distinctly different results.
5.5.2 Turnover Turnover measures the industry's value of sales in a particular year, adjusted for stock changes. It measures the volume of operations, but overestimates an industry's contribution to national income because it includes the value of inputs produced by other industries.
• The combined turnover of the newspaper publishing industry in the Member and New Accession States (excluding Czech Republic, Greece and Luxemburg) in 2001 was approximately €43.5 billion, of which €1.3 billion is the combined turnover of New Accession States and €42.2 billion is the combined turnover of Member States
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Publishing Market Watch Sector Report 1: The European Newspaper Market
• The largest newspaper publishing industry is in Germany with a turnover €13.2 billion in 2001. Poland has the largest newspaper industry in the New Accession States, at €0.6 billion.
In most EU Member States, the turnover of the newspaper publishing industry has declined (after inflation) between 2000 and 2001. It grew in Italy, although less rapidly than in previous years. Before 2001, the only countries showing a long- term pattern of falling turnover growth were Sweden and Finland: other countries either grew each year or fluctuated between growth and contraction.
It is too early to determine if the fall seen in 2001 is a trend that will last a few years, or whether the forecast improvement in general economic conditions will help advertising revenue forward.
16000 14000 1995 12000 1996 ) 10000
€ 1997 n 8000 1998 illio 1999 m 6000 ( 4000 2000 2001 2000 0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 42: Turnover of the newspaper industry in EU Member States 1995 to 2001 (nominal exchange rate view) (Source: Eurostat NewCronos Database)
Turnover shows a more variable pattern in the New Accession States, with the large Polish and Hungarian markets showing an accelerating growth as their economies develop.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
700
600 1995 500 1996 )
€ 1997
n 400 1998
illio 300 1999 m ( 200 2000 100 2001
0 cy cz ee hu lt lv mt pl si sk
Figure 43: Turnover of the newspaper industry in New Accession States 1995 to 2001 (nominal exchange rate view) (Source: Eurostat NewCronos Database) The PPP view shows different trends: the UK, for example, shows a rise in turnover rather than a decline: this is probably due to the strength of Sterling in 2000-2001.
14 000,00
12 000,00 1995 10 000,00 1996 )
€ 1997
n 8 000,00 1998
illio 6 000,00 1999 m ( 4 000,00 2000 2 000,00 2001
0,00 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 44: Turnover of the newspaper industry in EU Member States 1995 to 2001 (PPP view) (Source: Eurostat NewCronos Database)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
1 400,00
1 200,00 1995 1 000,00 1996 )
€ 1997
n 800,00 o
i 1998 l l i 600,00 1999 (m 400,00 2000
200,00 2001
0,00 cy cz ee hu lt lv mt pl si sk
Figure 45: Turnover of the newspaper industry in New Accession States 1995 to 2001 (PPP view) (Source: Eurostat NewCronos Database)
5.5.3 Value-added Value added is the measure of the total annual output of goods and services produced by the residents of a particular country. This is the value of turnover less the value of inputs from other industries. On a single firm level it means the value that is created by the factors of production of that firm.
The sum of value added of all industries and households is equal to the Gross Domestic Product (GDP). Therefore the share of an industry's value added of a country’s GDP measures directly that industry's contribution to the national economy.
When the value created is compared to GDP there is much less difference between the member and accession countries. The average contribution to GDP in Member countries is 0.27% and in accession countries 0.22% respectively.
The Finnish newspaper publishing industry has the highest contribution to the GDP: 0.54%. Generally there is a pattern in both Member and New Accession States that the relative size of the newspaper publishing industry is higher in northern parts of Europe than in the south.
Value-added is an important measure, as this has a considerable impact on the ability of an enterprise to pay a workforce and generate a profit. The value added needed for a profitable operation depends on the amount and unit price of the factors of production employed.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
7000
6000 1995 5000 1996 )
€ 1997
n 4000 1998
illio 3000 1999 m ( 2000 2000 1000 2001
0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 46: Value-added at factor cost of the newspaper industry in EU Member States 1995 to 2001 (Source: Eurostat NewCronos Database) The growth in value-added over the six years 1995-2001 shows a similar pattern to turnover: varying levels of growth in most states. However, in 2001, the newspaper industries in most EU Member States generated less value added than in the years before.
This may be the result of the downturn in the general economic situation, and as this drop has only occurred in the last year of the series it is not yet possible to say if it is a trend.
A long-term drop in value-added would be cause for considerable concern as it would imply the need for action, especially staff cuts.
600
500 1995 1996
) 400
€ 1997 n 300 1998 illio 1999 m ( 200 2000 100 2001
0 cy cz ee hu lt lv mt pl si sk
Figure 47: Value-added at factor cost of the newspaper industry in New Accession States 1995 to 2001 (Source: Eurostat NewCronos Database)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
In assessing the position in the New Accession States, the very rapid growth in value-added in the Polish newspaper industry should be evaluated carefully. The data is drawn from Eurostat, but the growth does seem abnormally rapid and we have not been able to identify an overriding change that would account for it. Indeed, the newspaper market in Poland is highly competitive with at least one national newspaper having collapsed recently.
5.5.4 Operating margin This indicator measures the profit after operational costs (goods and services and personnel costs) as a percentage of the turnover. The need for operating profit depends largely on the investment intensity of the national industry. In countries where the printing facilities are largely integrated in the publishing firm, the need for operating profit in order to cover the depreciations and capital costs is higher than in countries where printing is largely outsourced.
The result of value added less personnel costs is the operating margin. The average operating margin in member countries in 2001 was 10.6%. The low operating margins reflect the productivity problems of Denmark, France and Sweden.
The 2001 downturn in turnover and value-added is, not surprisingly, reflected by a downturn in operating margin, which has been relatively steep on most Member States. Operating margin takes personnel costs into account, and these have not fallen at the same rate: employment has fallen slightly in some countries and more sharply in others, but personnel costs per employee in the newspaper industry have continued to rise in most Member States, with the result that the total employment cost itself rose in most countries, and showed only a small decline in others.
35,0 %
30,0 % 1995 25,0 % 1996 1997 20,0 % 1998 15,0 % 1999 10,0 % 2000 5,0 % 2001
0,0 % at be de dk es fi fr gr ie it lu nl pt se uk
Figure 48: Operating margin of the newspaper industry in EU Member States 1995 to 2001 (Source: Eurostat NewCronos Database)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The operating margin as a percentage of turnover shows more volatility than turnover or value-added, as well as considerable variation between countries. Ireland and the UK are the leaders, with a range of 1% to nearly 30%. Unlike value-added, margin factors in employment costs and so highlights the impact of a variety of trends. Businesses with low margin will eventually find it hard to sustain their businesses unless they are funded from elsewhere.
Margins in the New Accession States are equally variable and show a variety of trajectories. However, the lack of historic data makes it difficult to identify clear trends.
60,0 %
50,0 % 1995 1996 40,0 % 1997 30,0 % 1998 1999 20,0 % 2000 10,0 % 2001
0,0 % cy cz ee hu lt lv mt pl si sk
Figure 49: Operating margin of the newspaper industry in New Accession States 1995 to 2001 (Source: Eurostat NewCronos Database)
5.6 Per employee measures
Other measures of competitiveness can be related to employment.
5.6.1 Labour productivity The most significant measure of competitiveness is value-added per employee: this reflects productivity in an industry, and also its ability to pay adequate salaries to employees.
Value-added per employee for the newspaper industry has increased between 1995 and 2000 in most EU Member States. The highest-performing countries according to this measure have been the UK, Ireland, Austria and Italy, and the lowest-performing Denmark and Portugal. However, in 2001 the newspaper industry in almost all EU Member States generated less value-added per employee as circulation and advertising revenue fell but staff numbers were not reduced. In most cases the fall-off took the industry to the same level that it had seen in 1999. Finland and Portugal did not fall, however.
The decrease of value-added per employee on an industry level is usually an indicator of the beginning of intense price competition in the maturing markets.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
This is usually followed by a “cost hunt” in individual firms. This is entirely predictable, especially as the turnover growth rates begin to decline.
The almost universal falls in value-added per employee may give rise to problems of competitiveness. If it continues, choices may have to be made between reducing personnel costs through downsizing or reducing profits across the European industry as a whole.
120,0
100,0 1995 1996 80,0 1997 60,0 1998
(1000 €) 1999 40,0 2000 20,0 2001
0,0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 50: Value added per employee in the newspaper industry in EU Member States 1995 to 2001 (nominal exchange rate view) (Source: Eurostat NewCronos Database)
The statistics indicate that the New Accession States achieve lower labour productivity in terms of value-added per person.
The trend for Poland reflects the very high growth in value-added referred to earlier. However, it should be noted that the decline in productivity that characterises the industry in the EU member states does not apply in the New Accession States, where productivity is in general rising.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
60,0
50,0 1995 1996 40,0 1997 30,0 1998
(1000 €) 1999 20,0 2000 10,0 2001
0,0 cy cz ee hu lt lv mt pl si sk
Figure 51: Value added per employee in the newspaper industry in New Accession States 1995 to 2001 (nominal exchange rate view) (Source: Eurostat NewCronos Database)
For the purpose of comparison, we have included the same analysis based on Purchasing Power Parity. This changes some relative placings: Sweden and Portugal, for example, changes places, Spain’s position improves and the productivity of the Italian industry can be seen even more clearly. However, the overall trends do not change and the 2001 downturn can still be observed.
120,0
100,0 1995 1996 80,0
) 1997
0 € 60,0 1998 00 1 ( 1999 40,0 2000 20,0 2001 0,0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 52: Value added per employee in the newspaper industry in EU Member States 1995 to 2001 (PPP view) (Source: Eurostat NewCronos Database)
When the PPP approach is applied to the Accession States, there are again some adjustments but overall trends for each country follow the same pattern as they do under nominal exchange rates.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
100,0 90,0 1995 80,0 70,0 1996 60,0 1997 50,0 1998 000 €) 1
( 40,0 1999 30,0 2000 20,0 2001 10,0 0,0 cy cz ee hu lt lv mt pl si sk
Figure 53: Value added per employee in the newspaper industry in New Accession States 1995 to 2001 (PPP view) (Source: Eurostat NewCronos Database)
5.6.2 Value-Added to personnel costs The ratio of Value Added to personnel costs is an alternative way of looking at the relationship between the costs of people employed in the industry and the value generated. It is a relative measure, and so not subject to issues such as variation in exchange rates or inflation. Rather than being a direct measure of productivity, it is a measure of the effectiveness that the industry makes of the money it spends on people, regardless of the number employed.
In this analysis, the pattern of slight growth to 2000 followed by a downturn in 2001 is still clearly visible for most member states.
A critical value for the indicator is 1. If the indicator is below 1 it means that the value created does not cover the employment costs thus creating an operational loss.
This has the effect of narrowing the gap between countries: using the personnel- related measures described earlier, it can be seen that productivity in the Italian newspaper industry is much greater than productivity in the Danish industry. The Italian industry employs a relatively smaller total number of people but pays them highly; the Danish industry employs a much larger number of workers paid, on average, much less as many of them are directly employed simply to distribute the newspapers to customers. The ratio-based analysis demonstrates that these different approaches are more similar in result that might be thought from the personnel numbers-based approach alone.
Newspaper publishing follows the trend found in other industries: While the industry’s turnover is growing the differences in productivity levels are increasing and as the growth becomes slower the productivity differences become narrower.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
2,50
2,00
1995 1996 1,50 1997 1998 1999 1,00 2000 2001
0,50
0,00 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 54: Value added to personnel cost in the newspaper industry in EU Member States 1995 to 2001 (Source: Eurostat NewCronos Database) The New Accession States have very different patterns from country to country in the instance, making it hard to see a general pattern.
3,50
3,00
2,50 1995 1996 2,00 1997 1998 1,50 1999 2000 1,00 2001
0,50
0,00 cy cz ee hu lt lv mt pl si sk
Figure 55: Value added to personnel cost in the newspaper industry in New Accession States 1995 to 2001 (Source: Eurostat NewCronos Database)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
5.6.3 Turnover per employee As with value-added when considered against personnel employed, turnover per person employed also shows a distinct rising pattern to 2000, followed by a downturn in 2001 as sales fell away but the number of people employed grew slowly.
300,0
250,0 1995 1996 200,0 1997 150,0 1998 000 €) 1
( 1999 100,0 2000 50,0 2001
0,0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 56: Turnover per employee in the newspaper industry in EU Member States 1995 to 2001 (nominal exchange rate view) (Source: Eurostat NewCronos Database) In the New Accession States, similar patterns can be observed. However, it is noticeable that the sharp downturns seen in 2001 do not feature here.
120,0
100,0 1995 1996 80,0 1997 60,0 1998
(1000 €) 1999 40,0 2000 20,0 2001
0,0 cy cz ee hu lt lv mt pl si sk
Figure 57: Turnover per employee in the newspaper industry in New Accession States 1995 to 2001 (nominal exchange rate view) (Source: Eurostat NewCronos Database)
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Analysis based on Purchasing Power Parity maintains the general trends, but shows a different positioning of the individual countries.
350,0
300,0 1995 250,0 1996 1997 200,0 1998 000 €)
1 150,0
( 1999 100,0 2000 50,0 2001
0,0 at be de dk es fi fr gr ie it lu nl pt se uk
Figure 58: Turnover per employee in the newspaper industry in EU Member States 1995 to 2001 (PPP view) (Source: Eurostat NewCronos Database)
250,0
200,0 1995 1996 150,0 1997 1998
(1000 €) 100,0 1999 2000 50,0 2001
0,0 cy cz ee hu lt lv mt pl si sk
Figure 59: Turnover per employee in the newspaper industry in New Accession States 1995 to 2001 (PPP view) (Source: Eurostat NewCronos Database)
5.6.4 Newspapers and national economies The percentage of GDP contributed by the newspaper industry gives an indication of its importance to the overall economy in each country.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00% at be de dk es fi fr ie it nl pt se uk
Figure 60: Value added to GDP, EU Member States 2001 (Source: Eurostat NewCronos Database)
0.40%
0.35%
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
0.00% c y ee hu lt lv mt pl si sk
Figure 61: Value added to GDP, New Accession States 2001 (Source: Eurostat NewCronos Database)
5.7 Comparative information for the US
Although extensive economic and industry data for the United States will not be released by the US authorities until later in 2004, we include limited benchmarking data for 2001 here to provide some comparisons.
• Number of daily newspapers: 1,468 • Circulation: 55,578,000 • Circulation per title: 37,860 • Circulation per 1000 population: 273
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Publishing Market Watch Sector Report 1: The European Newspaper Market
• Number of Sunday newspapers: 913 • Circulation: 59,090,000 • Circulation per title: 64,720
• Annual circulation revenue, weekday papers: $6,689,745,000 • Annual circulation revenue, Sunday papers: $4,195,666,000
• Advertising revenue(excluding classified): $27,683,000,000 • Classified advertising: $16,622,000,000
• Advertising revenue as a percentage of total newspaper revenue: 80%
• Newspaper advertising share of all advertising: 19.2%
Source: Newspaper Association of America
5.7.1 Trends As in Europe, circulation has been falling steadily for several years. At 273 per thousand population, penetration is similar to that found in the middle-ranking European countries such as The Netherlands, Germany and the UK, and better than that found in some large markets such as Spain, Italy and France.
Advertising revenue grew until 2000, and then fell in 2001. That trend continued in 2002, but forecasters suggest that 2003 and 2004 will see the start of a recovery, although this may be slow.
The USA’s newspaper industry differs from that of European countries in that it is more heavily dependent on advertising (in European countries advertising typically accounts for between 50% and 60% of total revenue; only Luxembourg has a similar level to that in the USA.
The newspaper industry in the USA does not command such a high proportion of total advertising share as the newspapers in many European countries, and some observers believe that it will fall further. Combined with an overall fall in advertising, or even a slow recovery, this would leave newspapers vulnerable to the same problems that many European newspapers have. Direct marketing is becoming more popular with marketers in the USA, further eroding potential advertising revenue.
The demographic changes observed in Europe can also be seen in the USA: an ageing population that reads newspapers is the mainstay of the market, and younger people are much less likely to buy newspapers. This challenges newspaper publishers in the USA in the same way that it does in Europe: advertisers are most interested in reaching the age group 18-34. Some initiatives to address this being undertaken in the USA are discussed earlier in this report.
Many newspapers in the USA are owned by large groups such as Knight-Ridder and Gannett. Consolidation is also a feature of the newspaper industry in the USA, and as in Europe is also subject to regulatory intervention to maintain market choice. There are exemptions where a newspaper is deemed to be “failing”.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
The industry faces competition for advertising and for share of attention from a wide range of other media, including cable and satellite television, commercial radio, and increasing use of the internet: internet penetration is greater in the USA than it is in most European countries, and takeup of broadband services has been greater.
In general, one must conclude that the newspaper industry in the USA faces the same general situation as that faced by the European industry, but competition with other media may be more intense.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
6 Competitiveness and cultural diversity
6.1 Introduction and overview
In its “CHARTER OF FUNDAMENTAL RIGHTS”, the European Union states clearly: “The Union shall respect cultural, religious and linguistic diversity.”3 However the debate on “cultural diversity and the media” is for the most part restricted to cases and issues related to television and the consolidation in the media industry,4 or the rights and claims of minorities.5
When it comes to print media, these issues are mostly addressed under the label of “liberty of the press”. The issue that is most debated in this arena is the extent to which consolidation in the publishing industry reduces the “independence” of journalism.
Any general survey on “commercial concentration” such as that conducted recently by Cornelia Brantner, Wolfgang R. Langenbucher shows a complex pattern in the ongoing process of consolidation of the European newspaper market in both major markets and smaller countries, with examples both of local monopoly and of local diversity, and with some countries where there is predominantly domestic ownership and while in others there is massive foreign market dominance.6
Aidan White, General Secretary of The International Federation of Journalists, recently introduced a report by his organisation called “European Media Ownership: Threats on the Landscape” with the conclusion: “Every year the process of media concentration gathers pace and with it comes increasing concern for the impact on media quality, pluralism and diversity.” 7
3 (2000/C 364/01, Article 22). 4See, eg, the official European Union’s web site at http://europa.eu.int/comm/culture/action/reglem_2_en.htm, where only 2 cases are mentioned specifically under the headline of “Culture and competition law”, “Competition and books”, and “State aid and the audiovisual sector”. Competition and books In the cultural sphere, the Commission's attention has focused mainly on the question of book pricing, and the Council adopted, in February 2001, a resolution on the application of national fixed book-price systems, stressing the need for citizens to have access to the widest possible supply of books. 5See – as one example that can stand for many others – the analyses of Edgar FONCK, the director of the association for the promotion of the french language in Flanders - Directeur de l’Association pour la Promotion de la Francophonie en Flandre (APFF asbl) – on the drop of french media, both print and audivisual, in the north of Belgium: 6 Cornelia Brantner, Wolfgang R. Langenbucher: Media Concentration – Control Mechanisms within the Member States of the EU. Comparative Research Project. Short Summary From: Republic of Austria: INTERNATIONAL MEDIA SYMPOSIUM. Federal Ministry of Justice October 27th and 28th , 2003, http://www.bmj.gv.at/aktuelles/download/med03_programme.pdf . See also the complete chapter on newspaper concentration as a separate appendix: “Europe media concentration 2003 symp.pdf ! 7 European Media Ownership: Threats on the Landscape. A Survey of who owns what in Europe Author: Granville Williams. Published by: The European Federation of Journalists. Residence Palace, Rue de la Loi 155, B-1040 Brussels, Belgium. Brussels 2002, Updated 2003.
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To a second degree, critical analysts voice concern if newspaper (or other publishing) companies, by developing into multimedia conglomerates, thereby reduce the ways of cultural diversity and expression. 8
A similar debate surrounds regulatory initiatives where the predominance of media groups – and, particularly in the new member countries of the Union in Central and Eastern Europe, foreign ownership and its influence on the media landscape – are called into question.
When it comes to fostering access to media in minority languages, a proposition supported and promoted by most international declarations, the point is frequently made with respect specifically to radio and TV stations, as state owned or public broadcasting companies are seen as more likely to implement these recommendations than privately owned media companies. For instance the “Council of Europe Framework Convention for the Protection of National Minorities” dedicates Article 9 to the media, emphasising specifically that the concerned parties should “ensure the opportunity of creating and use minority radio and television media”.9
The implication is that “diversity” is a factor in fundamental opposition to economic growth and strength in the media environment, and has to be dealt with as such.
Given the currently difficult market parameters specifically for print media – due to economic recession, the sharp decrease in advertising revenues and a declining readership (particularly among young consumers) for most general print media in most European countries, the debate is increasingly taking on a defensive tone, aiming to preserve at least basic assets and values such as the liberty of expression – the preservation of the independence of editorial staff to make decisions free from the influence of economic and management considerations.
As a consequence, a number of media insiders – journalists rather than industry managers such as Juan Luis Cebrián the long time publisher of the Spanish daily El Pays – voice growing concern over the prospects of safeguarding a multifaceted and differentiated print media in the future10.
8 “The quest for the 'dominance of the mind' reaches far beyond the current perspective that is detailed in this section. With the emergence of the multimedia conglomerates the message of the media conglomerates reaches even further beyond the current limits, and the globalization of content can be driven to new highs.” Stephan Dahl: Communications and Culture Transformation. Cultural Diversity, Globalization and Cultural Convergence. Chapter 3: Trends in cross-border and intercultural communication. http://www.stephweb.com/capstone/3.htm 9 CEI Working group on minorities. Media and minorities Statement of Mr. Bojan Brezigar. President of the European Bureau for Lesser Used Languages, Trieste, 7 May 2003. http://www.ceinet.org/download/Brezigar_TS_May2003.pdf 10 Cebrián recently wrote: “But the illusion of difference, of the diversity of local or regional publications, serving minority or partial identities, is – at the same time – being demolished by the concentration of businesses in the media section. So, the fragmentation of the media does not necessarily mean plurality. The two main magazine groups working in Spain are French and German respectively. The leading economic daily in Paris is owned by Pearson, as it is in Madrid. The most avidly chauvinistic media are protected and sponsored by multinational conglomerates, which are often obedient or not combative enough regarding the excesses of local or national powers. (…) Just a few years from now, less than a dozen companies will be able to control the majority of the contents of communications in the European continent. These groups will be British, German, French and, maybe, Italian. Smaller, but more advanced countries, such as Holland, may be able to defend
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Publishing Market Watch Sector Report 1: The European Newspaper Market
6.2 Diversity in the readership
A comparative analysis of newspaper readership in several European countries conducted by Eurobarometer in 2002 found considerable diversity in reading habits – both in general terms, and for newspapers – within the European Union. 11
When asked whether people read “for reasons other than work or study” – which is usually taken as the critical factor to indicate a strong or weak reading culture in a given country – the EU average of 45% of the population masks some large differences between Member States. Generally, the country-by-country analysis in this report shows that in most Northern European countries, there is a higher tendency to read than in other regions, mostly for leisure: 71.8% of people in Sweden, 66.2% in Finland and 63.2% in the United Kingdom read for reasons other than work or study. By contrast, 58.3% of Belgians claim not to have read any books in the last 12 months, thereby following Portugal, where the proportion of non-book-readers is as high as 67.3% and it precedes Greece (54.3%) and Spain (52.7%).
6.2.1 Reading newspapers and magazines Similar differences between countries come to light in any analysis of the reading of newspapers. Nearly half of Europeans (46%) read newspapers every day (5 to 7 days a week). 78% of Swedes and Finns, 32% of French and only 20% of Greeks read newspapers every day. It is also interesting to note that in some countries the percentage of population who declared that they never read newspapers is noticeable (Figure 63). Similar differences are observed with respect to how frequently Europeans read magazines. It is in Finland (61%) and Luxembourg (52%) where most of the adult population (15+) read magazines at least once a week.
More specific analyses of newspaper readership also show a steady decline of the reach of the printed press in major European markets. This reflects similar trends seen in the US.12 For example, in Germany the official industry association “Bundesverband Deutscher Zeitungsverleger” documents the development both for the daily printed press as for regional subscription based titles:13
themselves in this territory. But many of the so-called national cultures and local identities will submit their balance sheet to foreign boards of directors. (...) The plurality of Europe, its multiplicity and diversity, which we all praise and promote, will finally be left in very few, and quite uniform, hands. One more of the many paradoxes with which we will have to live in the coming century.” Juan Luis Cebrián : Few tongues, many voices? In: Eurozine, 2002-02-21, http://www.eurozine.com/article/2002-02-21-cebrian-en.html 11 Michail Skaliotis: Statistics in the Wake of Challenges Posed by Cultural Diversity in a Globalization Context Keys Figures on Cultural Participation in the European Union. EUROSTAT, Unit E3, Health, Education and Culture. EUROSTAT, Luxembourg, October 2002. Paper presented at the International Symposium on Culture Statistics, October 21to 23, 2002, Montreal. (Unesco Institut de Statistiques), page 7. http://www.readingeurope.org/observatory.nsf/2dbf24d308832e59c2256c7d004bd9fe/$FILE/KeyFig ures.pdf See also “Europeans’ participation in cultural activities.” A Eurobarometer Survey carried out at the request of the European Commission. Eurostat. Executive summary by Rosario Spadaro, THE EUROPEAN OPINION RESEARCH GROUP, EEIG. April 2002, p. 7. 12 “The 18- to 34-year-old market increasingly turns to the web, e-mail, and other outlets for news, forcing continued adaptation by newspapers. Experts say the day of the one-size-fits-all news product is dead.” http://www.newspaper-industry.org/, April 2003. 13 http://www.bdzv.de/pressem/marktdaten/main2.htm
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Publishing Market Watch Sector Report 1: The European Newspaper Market
90.0%
14-19
80.0% 20-29
30-39
70.0% 70 and h
c over a e 40-49 % r
60.0% 60-69
50-59
50.0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year
Figure 62: “Reichweitenentwicklung Tageszeitungen in Deutschland 1992-2003 in Prozent nach Altersgruppen” (Development of reach of daily newspapers in Germany 1992-2002 in percent for age groups) (Source: Bundesverband Deutscher Zeitungsverleger)
6.3 Regulations to foster diversity versus EU competition policy
Since the early 1990s (with the preparation of an EC Green Paper in December 1993), there has been a debate over regulation of concentration in the media, with both the European Publisher’s Council (EPC) and the European Newspaper Publishers’ Association (ENPA) opposing such propositions.
Particular attention has been paid to regional newspaper markets as this is a key playing field for media pluralism in most countries. Additionally, provisions are sometimes made to avoid monopoly in the advertising market.
Countries as different as the UK (with some 1300 regional and local newspapers, including 647 free weekly titles that are a mixture of regionally and locally distributed titles [The Newspaper Society 2001]), Germany with its strong federal traditions (and approximately 337 local and regional newspapers that produce 1570 local editions), highly centralized France (with over 60 titles and 410 editions), and the Nordic countries all maintain various forms of regulation, from ownership rules to state subsidies to prevent a decline in pluralism for the press.
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Publishing Market Watch Sector Report 1: The European Newspaper Market
Nevertheless, based on these figures and policies, a recent Council of Europe concluded: “Indeed it is almost standard for a regional newspaper to have a monopoly in a market and it is a rare occurrence, without some form of subsidy scheme, that a truly competitive regional market exists. Even where a subsidy scheme has been adopted, monopolies are the norm rather than the exception. 14
In the Nordic countries, state subsidies for regional newspapers are the traditional tool to maintain diversity. In a subsidy scheme first introduced in 1969, the Finnish government spent €12.6 million in newspaper subsidies in 1999, Norway spent €27.5 million, and Sweden €56.0 million.15 But even these substantial payments did not prevent the formation of regional monopolies in most of Scandinavia. Therefore, at least in Sweden, the “Council for Pluralism in the Mass Media” proposed in the late nineties to replace the subsidy system with the encouragement of closer cooperation between media companies, while upholding or even increasing editorial independence. However these recommendations have not been implemented.16
In Austria, the state has subsidised daily and weekly newspapers since 1975. Small subsidies go to all daily papers on their request and whereas larger ones are paid to a few papers which are considered especially important for the diversity of opinions. In 1999, the overall amount of press subsidies reached 256 million ATS (€18.6 million). The scheme is currently under review, not the least because it disadvantaged commercially successful newspapers as, above a certain proportion of sold advertisement space, newspapers lose all their subsidies.17
In the Netherlands there is also a public “Press Fund”, established in its present form through a “Media Act” in 1988. On the basis of that Media Act, it is “up to the board of the Press Fund to decide whether or not support is to be provided in a given case. Newspapers or magazines have to live up to a number of criteria in order to qualify for this financial support. These criteria are listed in the Media Act. According to those criteria, it is only possible to provide dailies, non dailies or magazines with loans, credit facilities or subsidies – subsidies only on special occasions – for their reorganization or restructuring plans in order to make them profitable again in the near future.” 18
Even such limited examples show clearly that “there is no single European-wide approach to newspaper subsidies.”19
The European Commission has created a partial exemption for state support designed for cultural purposes. Article 92 (3) (b) of the European Economic
14 Council of Europe: CPR (9) 4 - Part II - THE STATE OF REGIONAL PRINT MEDIA IN EUROPE - Pluralism, independence and freedom in regional press (22/05/02). Report presented by Tamaz SULADZE (Georgia) in the name of the Rapporteur: Peter KITTELMANN (Germany), p. 2 and 6. 15 Source: Nordicom 2001, quoted in Council of Europe, CPR (9) 4, p. 6. 16 Jens Cavallin: Media Concentration in Sweden. Linköpings universitet 2001-04-02. Campus Norrköping, Department of Thematic Studies (ITUF). http://www.cem.ulaval.ca/CONCSu%8Fde.pdf 17 European Journalism Centre: The Austrian media landscape. http://www.ejc.nl/jr/emland/austria.html 18 Bedrijfsfonds voor de Pers: PRESS POLICY IN THE NETHERLANDS: THE PRESENT SITUATION. http://www.bedrijfsfondspers.nl/english.shtml 19 Robert G. Picard: Newspaper Subsidies in the Internal Market: Their Position in EC Competition, Industrial and Cultural Policies. European Media Management Review. Spring 1999. http://www.tukkk.fi/mediagroup/emmr/newspaper_subsidies%20Text.htm
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Community Treaty includes such support in its designation of aid that is compatible with the common market. The provision applies to "aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that it is contrary to the common interest (European Economic Community Treaty)".
So far, the Commission has not acted against any of the existing subsidy schemes, but, according to a recent analyses by Robert C. Picard, “Subsidies to newspapers would appear most likely to meet Commission competition policy approval if:
Support is part of a rescue and restructuring package rather than operating aid Support is given as regional aid to economically deprived areas Support does not disadvantage other newspapers by providing competitive advantages.”20
The considerable differences between countries across Europe make any generalisations extremely difficult. We will therefore look at a some individual countries as Case Studies.
6.4 Germany: Federal structures and consolidation
The federal organisation of Germany is also mirrored in its media landscape, with major newspapers and news magazines – even those with national influence and readership – dispersed in several major cities, namely in Frankfurt (“Frankfurter Allgemeine Zeitung”), Munich (“Sueddeutsche Zeitung”, and “Focus” – a weekly), Hamburg (“Die Zeit” and Der Spiegel – both weekly), and Berlin (“Die Welt”, “Der Tagesspiegel”). 21
An exemplary battle in the debate of consolidation versus diversity, or economics versus media culture, is currently taking place on the Berlin newspaper market. Players are the Stuttgart based Holtzbrinck group, owner of the Berlin daily “Der Tagesspiegel”, the “Axel Springer” group, owner of both the Berlin based dailies “Die Welt” and “Berliner Morgenpost”, the federal Office for Anti-Cartel Regulations (Bundeskartellamt), and the Federal Ministry of the Economy (Bundeswirtschafts- ministerium).
When the Holtzbrinck group in 2003 decided additionally to buy the Berlin based daily “Berliner Zeitung”, the Bundeskartellamt ruled against the take over, because it would put Holtzbrinck in a position to “dominate the Berlin newspaper market”22. In response to the first ruling of the Kartellamt, Holtzbrinck chose to sell the assets of the Tagesspiegekl to a former member of the board. However the Kartellamt in a second ruling declared that the sell off to a former Holtzbrinck manager did not sufficiently guarantee the future independence between Tagesspiegel and Berliner Zeitung.
20 See Robert C. Picard, Newspaper subsidies. 21 See e.g. Bundeszentrale für Politische Bildung http://www.bpb.de/publikationen/PIQHGQ,2,0,Charakteristika_des_F%F6deralismus.html 22 Financial Times Deutschland, 19 Dec.. 2003, http://www.ftd.de/tm/me/1071297921847.html?nv=rs
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In the meantime, the Holtzbrinck group approached the Federal Minister for the Economy, Clement, to allow the take over with a special permission (“Ministererlaubnis”), based on the argument that under the critical situation on the German newspaper market in general, and the stiff competition in the Berlin newspaper market in particular.
After a harsh public controvery between representatives of small and medium sized newspaper companies, and the larger media conglomerates, namely Holtzbrinck and WAZ (Westdeutsche Allgemeine Zeitung), the German association of newspaper publishers (Bundesverbands Deutscher Zeitungsverleger (BDZV)) ultimately issued a joint declaration addressed to the federal minister of Economics, Wolfgang Clement (SPD), urging him to “loosen the regulations on mergers and acquisitions for newspapers” 23
Most recently, Bodo Hombach, former key aide of German chancellor Gerhard Schröder and now Managing Director of the powerful regional newspaper group “Westdeutsche Allgemeine Zeitung” (WAZ) gave a public warning that the current structural crisis in the German newspaper market will force a new round of consolidation soon. Hombach in this statement explicitly welcomed the readiness of the government to loosen the regulations on mergers and acquisitions in order to avoid “inviting media tycoons such as Rubert Murdoch or Silvio Berlusconi” to buy into the German newspaper market.24
So far, no final settlement, either for the mergers in Berlin, or for the merger regulation law, has been reached. However, politically the situation grew significantly worse recently, as the newspaper companies have now clashed with unions over a new pay scale for journalists, with the companies urging the unions to be “more realistic” in a difficult economic situation for the whole industry,25 and the unions openly preparing for strikes.26
23 BDZV übergibt Bundeswirtschaftsminister Clement Empfehlungen für Veränderung der Pressefusionskontrolle. Berlin, 20. November 2003 Das Erweiterte Präsidium des Bundesverbands Deutscher Zeitungsverleger (BDZV) hat gestern Abend einstimmig (bei drei Enthaltungen) eine Empfehlung zur Lockerung der Pressefusionskontrolle verabschiedet und an Bundeswirtschaftsminister Wolfgang Clement übermittelt. Der BDZV begrüßt darin die Bereitschaft der Bundesregierung, die aus den 70er Jahren stammenden Bestimmungen der Pressefusionskontrolle zu überprüfen. www.bdvz.de 24 "Wer nicht Mediengrößen wie Rupert Murdoch oder Silvio Berlusconi anlocken will, kann die Reformideen der Regierung nur begrüßen", sagte Hombach. "Wir müssen die Schleusen öffnen für neue Ideen." Die bisherige Rechtslage sei "vom Gedanken getragen, die Verlage klein zu halten". Financial Times Deutschland, 3 Jan 2004. 25 „Tarifverhandlungen für Redakteure: Zeitungsverleger erwarten Annäherung in der nächsten Verhandlungsrunde Der Bundesverband Deutscher Zeitungsverleger (BDZV) hat den Deutschen Journalisten-Verband und die Gewerkschaft ver.di aufgefordert, an den Verhandlungstisch zurückzukehren. Wenn die Journalistengewerkschaften endlich die schwierige wirtschaftliche Situation der Verlage realistisch bewerteten, müsste in der nächsten Verhandlung über einen neuen Gehalts- und Manteltarifvertrag eine weitere Annäherung der Positionen erreicht werden können, sagte ein Sprecher des BDZV heute in Berlin.“ BDZV, press release, 19 Jan 2004, www.hdzv.de 26 “Zeitungsbranche steht vor Streik der Redakteure“, Financial Times Deutschland, 18 January 2004.
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6.5 Consolidation in Austria
The most advanced European case of consolidation in the market for newspapers and magazines is probably Austria, since a complex merger was completed in 2001 between the two dominant media groups; this went unchallenged by the Austrian media control agency.
In January 2001, the Austria Cartel Court accepted27 a partial merger between the already market dominant Mediaprint (which, jointly owned by its founder Hans Dichand and the German WAZ group, publishes the two largest Austrian tabloid dailies, “Krone” and “Kurier”) and the “News media” group, the publisher of all the current weekly news magazines in Austria (“Profil”, “Format”, “News”) as well as a significant number of specialised titles (“Trend”, an economy monthly, “TV Media”, the leading weekly TV programme guide, a sports magazine, a woman’s weekly, a sports weekly, and others).
The resulting conglomerate reaches roughly 70 percent of the Austrian readership.28
The merger was followed by a broad uproar from both the remaining newspaper publishers and independent commentators but, with no legal avenue for appealing against the ruling of January 2001, this was to no effect.
6.6 The case of Central and Eastern Europe: consolidation and foreign ownership after 1989
Since the fall of the Iron Curtain in Central and Eastern Europe in 1989, most formerly state-owned media companies have been privatised throughout the region; foreign investment has played a major role in that process.
Several recent studies raised growing concern that, as a result of the inflow of large quantities of Western capital, the diversity of the media landscape – particularly in the print media – are considered to be threatened.
“Different foreign companies now predominantly own the printed press in some of these countries. At the national level, some of the press markets are highly concentrated”, a “Council of Europe” report on Media Diversity in Europe concluded in 2003.29
Another, much more exhaustive and detailed report commissioned by the Federation of European Journalists more dramatically pronounced that “the encroachment of Western media conglomerates into these countries has
27 Ruling of the OLG Wien las Kartellgericht 16.01.2001, 26Kt 342,369,380,381,382,383/00. See also: Manuela Stöger: “Eine kartellrechtliche Prüfung des Zusammenschlusses am Markt politischer Nachrichtenmagazine („profil”/“Format“, „News“) unter dem Blickwinkel der Marktabgrenzung und Beeinträchtigung der Medienvielfalt“. Wien, Mai 2001. www.it-law.at 28 Harald Fiedler: Mediaprint und News-Gruppe erreichen 70 Prozent der österreichischen Leser. In: Der Standard, 1 February 2001. 29 “Media Diversity in Europe”. Report prepared by the AP-MD. (Advisory Panel to the CDMM on media concentrations, pluralism and diversity questions), Council of Europe, Strasbourg, December 2002. http://www.ebu.ch/departments/legal/pdf_brudoc/INFOEN_060.pdf
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The Federation of European Journalists report provides detailed data and analyses on a country-by-country basis, describes the activities of major Western European media companies in Central and Eastern Europe, and concludes, with respect to the issue of diversity and the media in the region:
“Foreign investment in CEE countries can bring benefits in terms of greater resources, improved management and increased independence from national political elites. However, there are also strong indications that aggressive commercial policies are being pursued at the expense of journalistic standards, threatening pluralism and undermining journalists’ professional and social rights. Journalists in CEE countries are particularly vulnerable to this downward pressure due to the weakness of their trade unions.”
Some of their findings are as follows:
“There is a clear issue of concern about the high levels of ownership of local, regional and national newspapers and magazine publishing in CEE countries by European media groups. For example, the domination of the German print media group, Westdeutsche Allgemeine Zeitung (WAZ) in Bulgaria and a number of other CEE Countries, and the Bavarian-based PNP in the regional press of the Czech Republic and Poland. Bertelsmann also have maintained a presence through their print division, Gruner + Jahr. The Norwegian media group, Orkla, owns or has a majority share in one national and 13 local newspapers in Poland. Other Scandinavian groups are active in the Baltic CEE countries and the Finnish media group, Sanoma, through its magazines division, operates in five CEE countries.”31
A counterbalancing point-of–view is that newspaper owners in all European countries, both member states and New Accession States, believe it is hard to remain competitive and to fight declines in circulation and advertising revenue without further consolidation. Foreign ownership is high in several of the New Accession States, but is also a feature of current member states.
Some observers believe that foreign investment has been responsible for enabling a viable quality press sector in the New Accession States.32 This debate between the advocates of policies based on “open market” concepts and policies designed to protect local ownership is likely to continue as the situation in those countries develops with their accession to the European Union: it is perhaps too early to tell whether the current position will prove to be beneficial or disadvantageous to cultural diversity.
We will briefly consider the situation in three specific States – The Czech Republic, Hungary and Poland – which may provide some exemplary illustrations on the eve of their Accession. The quotes are taken from the European Federation of Journalists report (see footnote 30).
30 “EFJ Launches “Devastating” Survey on Foreign Ownership in CEE Countries”, Press release, 24/06/2003 http://www.ifj-europe.org/default.asp?index=1703&Language=EN. Full report: http://www.ifj-europe.org/pdfs/MedconJune2003.pdf 31 EFJ report, page 7: http://www.ifj-europe.org/pdfs/MedconJune2003.pdf 32 http://www.essex.ac.uk/ECPR/events/generalconference/marburg/papers/13/7/Horolets.pdf
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6.6.1 The Czech Republic “The Czech press is dominated by German publishing groups.” (page 23) “In addition, along with Ringier, the Rheinische Post group, and Sanoma Magazines it owns the Post and Newspaper Service (PNS). The four companies – two German, one Swiss, one Finnish – between them control 80% of newspapers and magazines in the Czech Republic and have an exclusive distribution deal with PNS. The only competing firm, MediaPrint & Kapa (MPK) will no longer be allowed to distribute them….” (page 7)
MKP (which also has Austrian investment)33 is also a newspaper publisher, and according to more recent reports, one casualty of the confrontation between the two competing media distributors is the closing down of its tabloid “Impuls” in October 2003, only five months after its launch in May.34 However, the Czech antimonopoly (UOHS) office ruled in August 2003 that the newspaper publishers had not acted as a cartel when they rescinded their contracts with MPK.35 However complex the consolidation and monopoly issues revealed by these developments may be, they clearly also illustrate the difficult competitive environment in the current Czech newspaper market.
6.6.2 Hungary “Foreign ownership of the Hungarian national newspaper market stood at 83% in 2001, based on circulation figures.” (page 33)
6.6.3 Poland (...) almost 80% of the press is in the hands of foreign capital.” (page 41)
“50% of shares on the market for colour magazines are distributed among the following German press giants: Passauer Neue Presse, Axel Springer Verlag, Bauer and Gruner+Jahr.” Other significant foreign investors in the sector include Edipresse, Bonnier and Hachette.
Passer Neue Presse (PNP) “moved into Poland in 1994 when it acquired some regional dailies and founded Polskapresse. It now owns 12 regional newspapers with sales of 1.3m, which are printed at presses in Gdansk, Poznan, Lodz, Wrozlaw and Krakow. It also prints three TV magazines with total sales of 2.6m In addition it has its own distribution service for its print products, a direct marketing company, Eurodirect, a media agency, Media Tak, and an online classified ad site, gratka.pl.“ (page 41). 36
Axel Springer has become an important operator in the newspaper sector: it launched its tabloid daily Fakt in October 2003. This has established itself rapidly in the market, selling over 500,000 copies to become the best-selling daily newspaper in the country: this is perhaps due to its low price and a substantial marketing investment.
33 http://praguepost.com/P03/2003/Art/0605/news2.php 34 http://www.heise.de/tp/deutsch/inhalt/co/16117/1.html 35 http://www.nera.com/wwt/newsletter_issues/6225.pdf 36 Other estimates put the normal daily Polskapresse circulation at around 620,00036. Circulation on Fridays can exceed this figure by a factor of three because television listings supplements are included in the newspapers
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One of the major investors in Poland is the Norwegian company Orkla Media, which owns 51% Presspublica, publisher of the Warsaw-based national quality daily, Rzeczpospolita: the remaining 49% is owned by the Polish state. Orkla also owns eleven local papers in Poland, and claims a 24% market share of circulation37. Orkla has been praised by the Federation of European Journalists for the extension of its European Works Council to cover its Polish employees,38 and for its publishing principles, which were described as “a model, which other international media groups operating in CEE countries should emulate”.39
In conclusion of these findings, the Federation of European Journalists urges the creation of a “EUROPEAN FREEDOM OF INFORMATION ACT as an appropriate legal instrument to foster independence and diversity of the media.40
However, it is not clear what might have happened to the newspaper industry in Poland without foreign investment. It has been asserted that foreign companies have been able to bring capital to invest in modern equipment, and provide financial stability at a time of rapid economic and political change.41.Without this, it is suggested, a modern and politically-independent press might not have been able to develop in Poland.
6.7 Newspapers in minority languages
Newspapers in minority languages do not play a major role in terms of competition or market share as compared to general print media in the respective regions and countries.
In a statement on “Media and minorities”, Bojan Brezigar, the President of the European Bureau for Lesser Used Languages, summarized the situation recently: “There are more than 40 daily newspapers in minority languages in Europe and as far as I know only few of them, less than five, could survive without any financial aid.” 42
A research project in the European Commission’s eContent program came to a similar conclusion in 2001 when it said:
“Newspapers published throughout Europe in minority or regional languages are facing the prospect of either having to find a way of adapting their traditional products to the new technologies or of becoming even more restricted in their circulation due to competition from information services which do make use of digital formats but which are mostly produced in a limited number of international languages.”43
37 http://www.orkla.no/aarsrapp/engelsk/brands/media/ 38 http://www.ifj-europe.org/default.asp?Index=1943&Language=EN 39 http://www.ifj-europe.org/pdfs/MedconJune2003.pdf 40 LEGISLATING FOR A DEMOCRATIC MEDIA IN EUROPE. Policy Document of the European Federation of Journalists (EFJ). 15 January 2003. http://www.ifj-europe.org/default.asp?Index=206&Language=EN 41 http://www.essex.ac.uk/ECPR/events/generalconference/marburg/papers/13/7/Horolets.pdf 42 CEI Working group on minorities. “Media and minorities”. Statement of Mr. Bojan Brezigar, President of the European Bureau for Lesser Used Languages. Trieste, 7 May 203 http://www.ceinet.org/download/Brezigar_TS_May2003.pdf
43 “Minority Newspapers to New Media”. EContent project 3316 (2001)
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The same restrictions can be seen in a number of specific regional cases, for example the situation of Occitan in Southern France.
“The use of Occitan is not prohibited but it is not officially encouraged either. In the daily and periodical press, some newspapers include one page in Occitan per week (e.g. La Marseillaise) or an article in Occitan (La République des Pyrénées). There are twenty or so publications (especially publications by associations of militant Occitanists and cultural and literary magazines) which use Occitan and which appear from twice to six times a year. The public authorities of Languedoc- Roussillon and of Midi-Pyrénées provide some financial aid for these publications.44
The situation is somewhat different when it comes to specialized (e.g. cultural) magazines and journals that still play a significant role for cultural studies and the humanities in smaller languages, or throughout Central and Eastern Europe. Here a wide variety of journals get published both I digital and in print versions. But again, digital publishing more and more is key for the dissemination of these publications.
Online services like the “Central and Eastern European Online Library” are effective tools to make these publications as accessible for a wider audience in and beyond their region of origin.45
http://mnm.uib.es/pages/indice.php?lang=EN&option=OBJECTIVES 44 Euromosaic - Occitan (Provençal) in France. Institut de Sociolingüística Catalana. Page 4 of 7. http://www.uoc.es/euromosaic/web/document/occita/an/i2/i2.html 45 www.ceeol.com
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7 The Sustainability of the European Newspaper Industry
7.1 Environmental sustainability
The newspaper industry uses natural resources and creates waste as an integral part of its activities. Its main natural resource consumption is obviously paper, but it also uses considerable energy to manufacture its products, and uses energy to distribute them. All the energy-consuming processes create emissions, and distribution also contributes to transport congestion.
As a knowledge-based industry, the newspaper industry is unusual in its potential environmental impact: most knowledge-based industries do not consume such large volumes of natural resources inputs or create the same scale of waste (albeit heavily mitigated by recycling).
Legislation, regulation or voluntary agreements concerning management and reuse of paper are in force in several member states. The newspaper industry is affected by environmental taxes on energy, on water and on vehicle fuel in particular.
Although newsprint consumption and wastage is the most visible aspect of the relationship between newspapers and the environment, all aspects of newspaper operations have an impact. Transport in particular is essential to newspapers, and the environmental impact of transport is closely monitored and often controlled.
7.1.1 Editorial Editorial operations can place more stress on the environment than a conventional office environment: unlike many offices, newspaper offices operate 24 hours day and so consume more energy, leading to more emissions and resource consumption by energy providers.
7.1.2 Production
7.1.2.1 NEWSPRINT Despite falling circulations, newsprint consumption by the industry has either remained static or declined only slightly (magazines also consume newsprint, and the figures available do not distinguish between the two). The main reason is that the total number of pages in newspapers has increased with the use of new features and supplements. Newsprint accounts for approximately 13% of world paper consumption.
European consumption in 1997 was 9.4 million tonnes:
1990 1994 1997 Production Millions Tonnes 10 11 11 Consumption Millions Tonnes 10 10 9.4 Consumption Kg Per person 12.6 15.5 13.1
Table 6 European newsprint consumption and production 1990 – 1997 (source: Unesco)
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Growth of 2% year from 2001 onwards is forecast by several industry organisations.
Newsprint is a very visible form of use of natural resources, as newspapers are highly disposable and are rarely retained after they have been used: there has been strong pressure on both the newspaper industry and its suppliers to recycle paper, both to save the ensure the best utilisation of managed forests and to reduce disposal through landfill or incineration. As a result, it is now commonplace to recycle newspapers.
Voluntary agreements between the newspaper industry and national governments have been signed in some European countries, including Germany, France and the UK. Some counties have agreements that have yet to be ratified or implemented (Austria, Finland). In the UK, for example, the newspaper industry has agreed to move towards a target of 70% of the content of newsprint coming from recycled paper by 2006 and it seems feasible that this target can be reached as 65% of paper content is already from recycled paper.
Overall recycling targets are the other side of the recycling picture, and although many countries have targets for the amount of paper they will collect and recycle, this is outwith the control of the newspaper industry or its suppliers, and depends on the ability of municipalities and private enterprise to collect and recycle household and office paper as well as on the willingness of consumers to recycle (some countries enforce recycling through legislation). Many newspapers are thrown away at the workplace and at locations such as hotels and hospitals, where they are disposed of in general waste rather than recycled (one industry expert interviewed suggested that in the UK hotels were the largest source of unrecycled copies). In some countries copies disposed at work are much less likely to be recycled than copies disposed of at home.
Recycling itself uses energy both in the process itself and in the transport involved in collection, but usually the total energy used is less than that for papermaking from fresh wood.
Before it can be re-used in newsprint, paper has to be de-inked: this creates a waste product that can include highly toxic components, but these are in relatively small quantities and are not thought to cause significant environmental impact. In the case of glossy supplements produced using gravure processes, special inks are used that contain solvents that can produce atmospheric toxins.
A proportion of newsprint is wasted during the printing process: this varies, but 10% is reported in some cases. This waste itself is recycled.
Newsprint made from 100% recycled paper cannot be achieved, as fibres eventually become too degraded to produce paper. Newspapers that publish “glossy” supplements are not always able to use recycled paper for these.
Unsold copies are a source of wastage. Figures are not available for all countries.
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• In the UK one informed estimate suggest that around 14% of national daily papers are returned unsold. These are recycled, but their production and distribution is wasteful. • The UK broadsheet The Guardian reports 20% returns
This problem is likely to be more widespread in countries where single-copy sales from retail outlets are the most common form of distribution.
• In the case of Italy, up to 20% of the newspapers delivered to kiosks (90% of copies are distributed through kiosks) went unsold and were collected by distributors • The percentage in Ireland is the same. 33% of unsold papers are recycled. A Producer Responsibility agreement is under discussion.. • In Austria, the figure is 12.6%. • Finland has a high proportion of subscription/delivery sales; of the copies distributed for retail sales, for daily newspapers 50%-60% of weekday copies are unsold and 45% of Saturday and Sunday copies. Other newspapers estimate 23%-26% of copies are unsold. It is believed that almost all unsold copies are collected for recycling. • Spain: an estimated 1.2 million copies are unsold each day
7.1.2.2 OTHER PRODUCTION PROCESS IMPACTS The newsprint production process (in common with many other production industries) consumes water and electricity, and plant manufacturers are involved in creating equipment that is both more energy-efficient and reduces water consumption. The printing process also consumes electricity and will benefit from the increase power-efficiency of new equipment.
7.1.3 Other environmental impacts Extensive paper usage is the most visible environmental impact of the newspaper industry (although newspapers are by no means the greatest generator of waste paper: packaging accounts for 46% of paper consumption, compared with 13% for newsprint). The other environmental impacts of the newspapers industry are shared by many other industries, and are mainly a result of the transportation stage, which consumes energy, creates greenhouse gas emissions and other pollution (diesel particulates), consumes materials such as tyres and contributes to traffic congestion and noise pollution.
There is no data available that isolates the proportion of transport activity created by the distribution of newspapers, but all changes to the costs of transport and distribution will inevitably affect newspapers.
7.1.4 Costs of compliance Some initiatives for waste paper recovery are based on the “producer responsibility” principle, whereby the originators of the product (in this case, newspaper publishers) must pay the cost of recovery and recycling. Similar schemes operate for collection of packaging waste. The cost of recovery can either be met directly or through a levy.
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Other costs of compliance are likely to be no different for the newspaper industry than for any other industry that using energy and transport and might take the form of increased taxes on fuel to encourage more fuel-efficient vehicles, for example, or tolls for entering congested city centres (conversely, newspapers could benefit from subsidies for electric or LPG-powered vehicles). Although businesses are concerned about the costs of compliance with environmental regulation, some changes in regulation could ultimately result in increased efficiency, especially those related to saving energy and reducing waste.
At the moment, it does not seem likely that the impact of environmental factors alone on the overall newspaper cost-base would drive increased use of digital services.
All costs of compliance have to be viewed in the light of the very different operating margins obtained by newspapers in the different countries. A number of countries have average margins of 10% or less, and almost all saw reductions in 2001. Compliance costs are going to be harder for these industries to bear unless the effect of compliance is to improve efficiency. That is likely to imply a requirement for capital investment.
7.2 Social sustainability
7.2.1 Demographic changes Most European countries have a falling birth-rate and increasing life expectancy. This is leading to a higher average age for the population, and to older people making up a higher proportion on the population. In 1985 people aged over 65 accounted for 12% for the population; by 2025 it is forecast to reach 19.2%.
In the longer-term, it is predicted that without inward migration the population of many European countries will fall: this is already the case in Germany, Italy and Greece. According to the United Nations, the European population may have peaked in 2000.
A second significant trend in Europe is the continuing expansion of the urban population, predicted to increase from 71% in 1985 to 82% in 2025. The urban population is, however, likely to be distributed in towns of up to 500,000 people rather than concentrated in very large cities.
The third significant trend is the rise in the overall number of households, with a reduction in the number of people in each household. In 1990 there were 262 million households in Europe; by 2025 there will be 328 million: this growth will happen even though the total population is falling, reducing the average household size from 2.75 to 2.19.
These trends are not radically altered by the accession of new states, which also have ageing populations and a trend to urban living.
7.2.2 Literacy and education Literacy rates are already high in most European countries, and are expected to increase in the lower-ranking countries. Some of the Accession States are among those with lower rates of literacy.
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Across members states there has been a steady increase in the proportion of the population that has completed at least secondary education:
1995 1996 1997 1998 199 2000 2001 % of 56.6 57.9 59.4 n/a 64.3 65.4 65.7 population
Table 7: % of European population aged 25-64 having completed at least upper secondary education (Source: European Commission)
% of population aged 25-64 having completed at least upper secondary education (2001) B 61.8 DK 81.5 DE 83.9 G 55.4 E 42.4 F 65.4 IRL 61.5 I 46.2 L 60.8 NL 68.4 A 79.3 P 21.2 FIN 76.5 SW 82.7 UK 82.0
Table 8: % of population aged 25-64 having completed at least upper secondary education (Source: European Commission)
Education will become increasingly important to employment as many new jobs created involve some form of knowledge work. At least 50% of all jobs already require the use of a computer. The European Commission itself has as one of its objectives the promotion of knowledge-based work.
7.2.3 Implications for newspapers The implications for newspapers are mixed. Older people tend to purchase more newspapers than younger people, but evidence presented elsewhere in this report suggests that circulation of newspapers is declining among all age groups. There is no direct evidence for or against the proposition that as the present younger population grows older they will become more likely to buy and read newspapers.
However, it is likely that the younger population will be familiar not only with other media, but with the principle of adopting new media as they become available. This may suggest that they will be less loyal and more diverse in their use of media for both news and entertainment.
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Educational progress driven by the desire to develop knowledge-based economies is likely to favour the use of media that require literacy, but this includes online services as well as printed text. It is also a necessary rather than sufficient condition for the take-up of text-based media: people using high literacy skills at work may still prefer to absorb audio-visual entertainment during their leisure time.
Employment itself may demand that workers are better informed, but they may draw their information from online resources rather than newspapers.
It is possible that publishing for ethnic minorities may grow as a niche opportunity in view of the numbers of immigrants who may enter Europe to make up for the existing and anticipated labour and skills shortages: it may be easier to set up a newspaper for a community than to set up broadcasting channels, as these are subject to licensing and regulatory processes that are expensive and time- consuming.
In summary, although some of the social changes might appear favourable to sustaining the readership and circulation of newspapers, this is not guaranteed while the forces that might continue (or even accelerate) the decline are strong ones.
7.3 Economic sustainability
7.3.1 Sustainable circulation As can be seen from the statistical analysis in this survey, newspaper circulations are declining and have done so for many years in some cases. That is no reason to assume they will continue to decline until they reach zero: even among the youth market, there are newspaper readers.
However, they may decline to the point where viability becomes doubtful. That has happened to other industries but it has not yet happened to an entire medium. Media have transformed and been through periods of crisis (the film industry, for example) and have nevertheless survived, albeit transformed. That transformation may result in newspapers that are different from those that the market is familiar with today, and which survive on much smaller subscription numbers.
Newspapers in some EU member countries must contend with low margins: it will be harder for them to survive falls in circulation without change. Where there is a higher margin, the industry should have more time to adapt. Margins are often historically low (rather than just having turned down in the past year or two), suggesting that newspapers in those countries will have limited resources for meeting the challenge of falling circulation: they may have low retained profits to fund those developments that might make them more attractive to a wider (or different) customer base.
The number of copies sold per thousand population is not closely related to margin: Sweden, for example, has high readership but the industry has never reached a 10% operating margin in the period 1995-2001, whereas Spain, where penetration is little more than a quarter that of Sweden, has returned operating
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Publishing Market Watch Sector Report 1: The European Newspaper Market margins of between 12% and 20% over the same period. It is therefore not clear that a high circulation per thousand population leaves a newspaper in a stronger position: the combination of high operating margin and high penetration is likely to prove the best combination for long-term sustainability, as it suggests that the “newspaper habit” is secure and that there is enough financial headroom to invest in change.
7.3.2 Sustainable advertising After a period of growth, advertising revenues across all media have declined since 2001. Forecasts suggest that they will recover in 2004, but not regain previous levels in the foreseeable future. It is likely that newspapers' share of this revenue will also have declined even if there is a short-term recovery, as there are more media fighting for visibility.
There are long-term changes in advertising generally: as noted earlier, direct marketing is becoming more popular, and other media are competing for the share of traditional media advertising that is left. Even classified advertising, at one time monopolised by newspapers, is coming under attack through the internet. For example, online auction service Ebay has already demonstrated the threat to classified advertising by offering an outlet for goods that would previously have been advertised in newspapers classified sections. It has recently moved more directly into the classified advertising field by purchasing Mobile.de, an online second-hand car advertising service in Germany which has 800,000 listings.
In response, some newspapers in the US have invested in online services such Tribe.net, which challenges conventional classified advertising through a bulletin board model that appeals to younger people.
Collaborative ventures have provided newspapers with an alternative strategy to the expensive internal development of online classified services. Services such as Fish4 in the UK, Hebbes in Belgium and AutoTrack in the Netherlands make a single platform available to several newspapers or groups.
The challenge to newspapers in the recruitment advertising arena is discussed elsewhere in this report (see Section 9.4.2). In the US, newspapers have responded by setting up CareerBuilder, an online jobs advertising service to compete with online services such as Monster. This has proved successful.
However, all of these initiatives may be delaying the impact of the problem rather than neutralising it. Advertising on the internet is now worth more than it was at the height of the dot-com boom, and although this seems to have been mainly achieved at the cost of print magazines rather than newspapers, the threat is substantial.
Newspapers may find it hard to increase their own share of online advertising revenue: they sell primarily banner and other forms of display advertising, whereas much of the increased volume of internet advertising is not from display advertising but is revenue gained by the large search engines for sponsored search in one form or another: newspapers are not familiar with this approach as
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Publishing Market Watch Sector Report 1: The European Newspaper Market they have tended to concentrate on online versions of the familiar display advertising model.
7.3.3 Consolidation Consolidation is perceived as an important issue for the sustainability of the newspaper industry in the EU. Average circulation of newspapers is often low, affecting their ability to attract anything other than very local advertising, and the cost of maintaining editorial quality is high for a small newspaper. Papers with a larger market should be able to realise economies of scale in operations such as sales management systems, manufacturing (whether in-house or outsourced) and IT support. It is less likely that they will be able to make savings in editorial costs.
It is likely that newspapers will see consolidation as an attractive option if circulation and advertising revenue continue to fall; whether it will be as attractive to competition authorities is not clear.
7.3.4 Online business models for newspapers The newspaper industry worldwide has been struggling to find viable online business models to counter the threat of online news services and erosion of advertising income. Although display advertising on the internet has not provided a sustainable business model for many websites, it still has the potential to erode enough conventional newspaper advertising to be of concern. Classified advertising is also now coming under threat.
7.3.4.1 ADVERTISING Online display advertising has yet to prove that it can generate sufficient revenues to reverse the loss of advertising revenue to other sources. Online advertising revenue currently accounts for approximately 1.3% of advertising in Europe, but is reported to be growing much faster than the overall advertising market as the economy recovers. The share is highest in Norway (2.5%) and Sweden (5%).
Newspapers, however, have found it hard to claim much of that revenue. Search listings account for at least 25% of expenditure, and display advertising market is very competitive.
The online advertising market across Western Europe is forecast to grow faster than other forms of advertising, however, and may reach €4.2 billion by 2006. If this level of growth continues it will start to approach the lower levels of share commanded by newspapers in countries such as Greece or Portugal, where newspapers attract up to 15% of all advertising.
With some exceptions (for example, Schibster’s Finn.no service, which sells online-only classified advertising and then tries to persuade customers to advertise in the newspaper as well), newspapers have not been able to monetise the online classified advertising market, and for the most part are offering bundles of online and print advertising, but priced at little more than print alone.
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7.3.4.2 CONTENT Several newspapers have introduced charges for content in some form. These include subscription models, pay-per-article charges for use of the archive, and time-limited models.
Newspapers have also sought affiliate relationships, whereby they provide content to, for example, a portal service, in return for either a fee or a share of advertising revenue.
Subscription models vary, but usually newspapers provide an area of free access to main news stories, sometimes in abbreviated versions. Business models include subscriptions, pay-per-article and timed access.
There is no evidence at present that many users are willing to pay for subscriptions to online newspapers: there is a wide range of substitute news content available free of charge, through portal services, broadcasters and news agencies. Some newspapers have therefore experimented with making their unique content chargeable (commentary, analysis and features) but the revenues arising are still very small.
Offering paid access to the archive has been a popular strategy: searching the archive is usually free, but viewing an article incurs a charge. Other newspapers offer a timed access model: the user can search and view content for a day or shorter period. Neither model has yet transformed online revenues for newspapers.
A number of newspapers have introduced charging specifically for access to the photo-archive. Local newspapers have in the past derived useful revenues from sales of copies of photographs to interested parties, and this model attempts to recreate this online. None of the companies offering such services have yet revealed any results.
7.3.4.3 AFFILIATE CONTENT MODELS Some newspapers are gaining revenue from affiliate content schemes, where a third party such as a portal service, uses their content for its newsfeeds and pays a licence fee or a proportion of the revenue. Such arrangements are cost- effective, but low volume and have not generated significant reported revenues for newspaper publishers. They may also compete with the publisher’s own offering.
7.3.5 Impact of online models Very few newspapers have earned significant revenues from their online operations, and they remain a cost centre rather than a profit centre for most publishers. It does not seem likely that newspapers will be able to transform their fortunes in the online market place, or to substitute a significant part of the revenue they have lost to television in particular.
In conclusion, newspapers are expected to have difficulty in retaining their share of advertising expenditure, and are not finding alternative revenue in the online
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Publishing Market Watch Sector Report 1: The European Newspaper Market arena. This suggests that they may continue to decline until they reach a “natural” level, depending on local conditions at the time.
Unless newspapers begin to innovate much more rapidly than they have in the past, their main option seems to be to manage costs carefully in order to remain competitive in an era of falling revenues.
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8 SWOT analysis of sector
8.1 Strengths
• Newspaper buying is habitual. National, regional and local newspapers can command strong brand loyalty at both national and regional level, especially where subscriptions or home delivery are strong.
• Even though the readership base is declining, it is still very large and reaches a significant proportion of the adult population in many countries. The function of newspapers as advertising and information vehicles is clear and well-understood by the audience and advertisers alike, and the proposition is clear. They are low-cost and good value for money.
• Local and regional newspapers can be the most important source of local information and the most important outlet for truly local advertising. They are closely linked to their communities, which gives them high influence and strong personal connection with their markets. There is often little competition between newspapers in localities or regions, and niche dominance can lead to high margins.
• The frequent publishing schedules and flexibility of design of newspapers offers them the ability to adapt rapidly to changing information and advertising requirements.
• Newspapers’ role as marketplaces through their ownership of classified advertising as well as display advertising both provides advertising revenue and helps to maintain circulation.
• Newspapers have strong operational strengths and are good “fast followers” of innovations. They make constant improvement in product scope and product standards.
• The management of free newspapers is entrepreneurial in outlook and more willing to take risks.
• Strong subscriber or home delivery bases in some countries provide predictable income, maximise loyalty and minimise churn.
• Well-established newspapers usually generate good cashflow and many have a secure financial base.
8.2 Weaknesses
• Circulation has been declining in most European countries for a long period and it seems that newspapers are not of interest to many younger people. This is eroding revenue from advertising as well as from copy sales and subscriptions. The limited demographic range that newspapers reach in some countries can make them less attractive as advertising vehicles.
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• Newspapers are very susceptible to swings in the economy, especially as they depend heavily on advertising revenue.
• Producing a newspaper incurs high and inflexible fixed costs, which reduces margins immediately there is any form of problem. Smaller publishers have a higher proportion of fixed costs.
• Newspapers are increasingly dependent on advertising, and yet this revenue has often been declining both in absolute terms and as a proportion of total advertising expenditure.
• Newspapers are not always attractive to advertisers: the format has limitations and newspapers are not retained. Reproduction quality is not as good as other printed media. Buying space in regional newspapers is complex.
• Newspapers are often reactive rather than proactive, especially when dealing with innovations introduced by other operators. Many newspapers underspend on marketing, with an industry average reported to be less than 2% of revenue.
• Managers are often focused on controlling costs rather than improving the product. There is limited vision in many sections of the industry, and coupled with hierarchical management structures and weak family managements in some smaller firms this has made innovation difficult – leading to conservatism in business and financial structures.
• Reader and advertiser typically expect that online services should effectively be provided free of charge. Many newspapers have invested heavily in online services but have not succeeded in monetising them either through advertising revenue or subscription income. For most newspapers online service are a financial drain, but one that they feel compelled to offer.
• In some places, consolidation has proved difficult and therefore efficiencies of scope and scale have not been developed.
• Newspapers do not always have the loyalty of their market, especially advertisers. The large differential between recruitment advertising and other forms of advertising has led some recruitment advertisers to set up online services of their own.
• The low numbers of young readers make newspapers less interesting to many advertisers, who see the youth market as the most lucrative and the most important to reach.
• Reliance on single-copy sales in some countries leaves newspapers vulnerable to churn and increases wastage through distribution channels.
• Newspapers in countries which have a high proportion of single copy sales have to work harder to attract advertisers as results are less predictable.
• Freesheets are often not read by those to whom they are delivered.
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8.3 Opportunities
• Benefiting from the widespread use of the internet online services offer newspapers the opportunity to extend their offering and their brand to a wider audience, and to increase the number of contact times with readers. Online services can offer both highly transitory information and archival services that cannot be offered in print. Often these are too local and specific to be of wide enough interest to support advertising.
• The globalisation of content supply: as the internet stimulates the creation of new news services, newspapers may be able to make their content available to resellers. It also offers them the opportunity to increase the range of their own content by acquiring from other news providers.
• Niche publishing and marketing: newspapers have the ability to segment their content and publish for niches that they do not currently reach.
• Lessening costs of entry: new technology has lessened the cost of entry into markets that might have been unprofitable in the past.
• Collaboration (especially between regional newspapers): to save costs and extend reach by creating new classified advertising platforms and brands.
• New modes of delivery: developing compelling relevant information services for mobile devices, including smartphones, WAP devices and SMS.
• Loosening of the regulatory environment (in some countries): if competition authorities loosen restrictions on mergers and acquisitions this may open the way for newspapers to consolidate, forming a smaller number of larger publishing groups. This would give them the ability to benefit from economies of scale, and would also give them access to investment funding.
• Introduction of professional management: in some family-run newspaper firms, introducing professional senior managers has helped transform the business; there are opportunities in other similar businesses to follow this example.
• Underdeveloped national markets: in some countries the regional press dominates and there are fewer national newspapers. This may represent an opportunity for stronger regional newspapers to position themselves as national papers.
• Underdeveloped immigrant markets: launch of newspapers aimed at communities from non-EU member states as these develop to make up shortfall in EU workforce due to ageing population.
• Brand leverage for new products or services and affiliations: newspapers are already making use of their brand to market special “reader offers” and there may be potential for wider-ranging offers.
• Exploit over-45 market: the increasing numbers of people in the core newspaper readership group aged 45 and over enlarge the market.
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• Untapped younger market: launch of paid newspapers aimed specifically at 18-35 year olds to build readership habits.
• Growth of “lifestyle” publishing: newspapers have already been able to benefit from the growth of “lifestyle” advertising through special supplements and other initiatives.
8.4 Threats
• A continuing recession might further erode advertising and circulation. Small local papers in particular might find it difficult to survive a long recession.
• Low margins for newspaper publishers in some countries may render them vulnerable to economic downturns.
• Increases in VAT on sales of newspapers might result in price rises for the buyer and a further reduction in circulation.
• The continuing migration of recruitment advertising to the web (often to services not owned by newspapers) and the launch of non-commercial online recruitment services by public sector organisations reduces an important source of premium revenue for newspapers.
• The provision of high-quality news services by the public sector broadcasting organisations is a threat top one of the core reasons for newspapers’ existence, especially as some of these also provide regional as well as national news.
• The proliferation of online news sources at national and regional level from commercial sources, including television and radio stations and local authorities.
• The range of alternative outlets for advertising (including online services, multi-channel television and local radio) is already taking some revenue from newspapers and this trend is likely to grow.
• Demand placed on consumers’ “media time” are increasing with new services such as digital television, new products such as games machines, and newspapers commend less of that time than most other media.
• The disaggregation of content and its use in other channels such as online services creates copyright issues in some countries, where journalists retain copyright even for material written as part of their paid employment. Online distribution also opens up the possibility of widespread copyright infringement.
• Marketers are increasingly interested in direct marketing at the expense of advertising: this shift has long-term implications and may be permanent.
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• Greater use of regulation preventing consolidation might prevent newspapers from joining together to ensure their financial stability and strength.
• Regulation of advertising content might further erode the volume of advertising.
• Home delivery services could be affected by price increases enforced by monopoly postal authorities, or by loss of performance by the delivery operators.
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9 Key business issues and trends
Although there is no doubt that the newspaper industry is an important contributor to the economies and culture of EU Member States and has an assured future, it faces many challenges.
The major concern expressed by representatives of the newspaper publishers' trade associations and consistently confirmed by interviews with industry experts and financial analysts, reports from industry conferences and a range of business and scholarly publications is that the most important challenges facing the newspaper industry in the EU are long-term structural ones. In particular, these are a decline in circulation that has been visible for many years and a more recent loss of advertising revenue. Both are important issues in themselves but are also creating an environment in which any other adverse conditions may have a disproportionate effect on the industry, and in which any easing of difficulties gives more benefit than it would in a less challenged industry.
The reductions in advertising revenue that newspapers have experienced in the past three years can easily be attributed to generally adverse economic conditions that are likely to be corrected in the next two to three years. The view of many of those whose views were sought for this report is that this is not the case. It is indeed very likely that some of the advertising revenue will return, but the decline in circulation will not be reversed simply by an upturn in the economies of EU Member States. Advertising revenues themselves may never return to their peak. The temporary advertising revenue problems mask concerns about the strength of the newspaper advertising business.
Newspaper advertising faces increasingly intense competition from other media. The challenge comes from the internet, from interactive television and from magazines. In common with all these media, it also faces a possible decline in total advertising revenue as marketers increasingly turn to direct marketing where in the past they would have advertised using mass media. In the US, direct marketing expenditure exceeded mass-market advertising expenditure in 1999, and by 2002 was growing 2% faster per year than mass-media advertising.
Given the reduction in overall advertising, all media are likely to compete much harder for the budgets that do exist. The rise of new media channels such as the internet and interactive digital television may not yet have made a dramatic transformation of the media landscape, but has the potential to erode revenues and margins still further as the public adopts them.
9.1 A critical period
This report is being prepared at what may be a critical period for the newspaper industry. There has been a poor economic environment globally, and all advertising-based media have felt the effects. Although some recovery is forecast, the experts and trade bodies interviewed for this report all considered that the problems facing the newspaper industry (falling circulation and falling advertising revenue) would not simply correct themselves if or when the European economies started to grow again: in their view, the years 2002 and 2003 are part of a process of structural change in the industry and many of their concerns about key
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Publishing Market Watch Sector Report 1: The European Newspaper Market business issues reflect their belief that a revival in the overall economic situation will help newspapers but will not remove many of its problems.
The statistics available at the time that the research for this report was carried out extend to 2001 in most cases. Some trends, such as the decline in productivity and value-added, were visible by then. However, other trends, such as the major decrease in advertising seen recently, were not so clearly visible until 2002 and 2003: in Germany, for example, 2001 was the peak year for newspaper advertising sales but a rapid decline set in during 2002. These are not reflected in the statistical analysis, but it is important to bear such factors in mind when analysing the current position of the industry.
9.1.1 Drivers of structural change The main drivers of structural change are:
• the continuation of a long-term decline in newspaper circulation
• more intense competition for advertising between newspapers and other media
• the challenge of many media for the consumer's attention and the development of new channels - mainly the internet, but also including interactive digital television (iDTV) and mobile phones
The decline in circulation is clearly structural, as it has continued through both good and bad economic conditions. The decline in advertising is less clearly structural, as until 2002 there was a steady increase in the value of advertising for many newspapers, and newspapers in several EU Member States have been successful in growing advertising revenues faster than the growth in total advertising revenue across all media.
However, perceived increases in competition from other sources and the loss of "reach" derived from falling circulation suggest that there is a longer-term challenge for the newspaper industry's competitiveness.
These issues are discussed in detail in the relevant sections of this report.
9.1.2 Response to structural changes Although the response to structural change is often seen mainly as migration to new media, there are other developments within the industry that may also move it forward. These include new print-based products, new ways of working with advertisers and new production methods.
There are also enterprise-level responses such as consolidation through mergers or acquisitions and diversification into other media industries such as radio and television.
These are discussed in detail in the relevant sections of the report.
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9.2 General economic outlook
There is some evidence that the overall economic situation may not be as bad in 2004 as it has been in the past three years, especially for advertising. Forecasts by both European and US commentators identify a number of factors, including a short-term recovery for advertising in 2004/2005, which is now widely forecast. Recruitment and property advertising would be expected to recover as economic conditions improve and these are important sources of advertising revenue. This will address some of the newspaper publishing industry's immediate concerns but will not arrest a structural decline, and other advertising media will benefit from the improvement just as much as newspapers. Indeed, a recovery may prompt new media competitors to newspapers to compete more aggressively as the opportunities increase.
There is, however, no strong evidence that the improvement in economic conditions will affect the decline in circulation, which continued through the boom of the late 1990s.
Should the economic recovery falter or reverse, the structural problems in the industry will become even more apparent.
9.3 Falling circulation
The most significant structural issue for the newspaper industry is circulation. In many key markets, newspaper circulation has been falling for some years. The decline in circulation in Europe has now been going on for as long as two decades, and shows no sign of lessening. This decline in circulation is mirrored in the United States, where readership has declined consistently from over 62 million in 1990 to just over 55 million in 2002 in the face of increased competition from television and other media. Circulation in Japan has also been falling for the last six years.
The decline is important in itself as it reduces revenues, but also effects newspapers' competitiveness as an advertising medium - already under pressure as discussed elsewhere in this report.
Although commentators often focus on the declining number of younger readers, evidence from research suggests that the decline is general across all age groups. The problem will be exacerbated in the long term by an overall fall in population in many EU Member States.
There are several reasons for the fall in circulation: in some markets, perceived increases in cost have caused a loss of circulation, but the over-riding reason seems to be the presence of many other types of media that can provide news and information, or which simply take up time. Television is the most powerful of these, but the internet also creates a new focus for the reader's attention. It now takes up to 10% of the available "media time" for European users, compared with 13% taken up by reading newspapers. Some experts believe that a major factor (but not the only one) in the decline is that there are as many newspaper buyers as there were in the past, but that they do not buy the paper every single day in the way that readers used to.
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Few of the experts consulted for this study believed with certainty that the decline could be reversed, although the hope that it could was expressed by many and some solutions are considered. One report, from consultants PriceWaterhouseCoopers, suggests that an increase in the population of people aged 45 and over (the most important age group for newspapers) combined with new marketing techniques, could increase spending by 8% between 2001 and 2006. This is the most optimistic forecast identified during this research, and although it would reverse the long-term trend it would still not restore newspapers to anywhere near their highest circulation.
9.3.1 Newspapers and other media Newspapers face increasing competition from other media that consumers now have access to. Although the internet is the most high-profile competitor in recent years, it is television that takes most of the time that consumers allocate to media use.
Medium Percentage of media hours TV 41% Radio 28% Newspaper 13% Internet 10% Magazine 8% Table 9 Allocation of “media hours” by European consumers (Source: Millward Brown media consumption study, November 2003) (for European Interactive Advertising Association)
Patterns of usage also vary. Television attracts more "heavy" users: 20% of those watching TV spend on average 3-5 hours a week doing so, compared with only 1% of newspaper readers. 81% of newspaper readers spend an hour or less each week reading their newspapers. Internet usage also attracts lighter use than television, but is more used than newspapers.
Medium Up to 1 1-2 2-3 3-5 5-10 > 10 hour hours hours hours hours hours TV 16% 31% 25% 20% 7% 1% Internet 55% 25% 8% 6% 3% 1% Newspapers 81% 15% 2% 1% - - Magazine 75% 17% 3% 1% - 3% Radio 35% 23% 13% 12% 12% 3% Table 10: Hours per week spent on different media: % of European population (Source: Millward Brown media consumption study, November 2003) (for European Interactive Advertising Association) In the United States, research suggests that the percentage of adults who spend at least an hour a day on the Internet is now significantly greater than the percentage of adults who spend an hour a day with the print edition of a daily newspaper.
Circulation and readership of newspapers are not the same. Readership of newspapers varies in a similar way to circulation per thousand, however: countries where newspapers are read regularly by a high percentage of the population are
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Publishing Market Watch Sector Report 1: The European Newspaper Market generally among the higher-ranking countries in terms of circulation per thousand population
Country 5 to 7 3 to 4 1 to 2 Less Never Circulation days a days a days a often per 1000 week week week population Austria 61% 18% 13% 6% 2% 302 Belgium 31% 12% 14% 17% 23% 150 Denmark 56% 11% 18% 10% 5% 272 Finland 78% 11% 6% 3% (.) 445 France 32% 14% 21% 16% 16% 146 Germany 65% 14% 9% 6% 6% 289 Greece 20% 11% 19% 19% 30% 67 Ireland 53% 20% 17% 7% 3% 153 Italy 33% 17% 17% 18% 15% 105 Luxembourg 63% 10% 11% 9% 7% 272 Netherlands 56% 13% 12% 10% 10% 273 Portugal 25% 16% 15% 18% 25% 69 Spain 25% 14% 22% 16% 23% 107 Sweden 78% 10% 7% 5% (.) 416 United Kingdom 56% 12% 17% 6% 9% 300 EU average 46% 14% 15% 12% 13% Table 11: Reading newspapers (% of population 15 years and over) (Source: Statistics in the Wake of Challenges Posed by Cultural Diversity in a Globalization Context: Keys Figures on Cultural Participation in the European Union)
However, even in the countries with high levels of readership, circulation remains flat or falling.
9.3.2 Ageing readership A key issue highlighted by all the industry experts and bodies consulted is the need to draw younger people to newspapers. At present, readership of newspapers is slanted towards people aged 45 and over.
Countries that have been successful in reaching younger readers tended to perform well in circulation terms. The World Association of Newspapers reports that Portugal, Spain and Italy have attracted younger readers and are stable or have made small gains: this suggests that there is real benefit in attracting young readers. However, younger readers are sometimes regarded as less likely to become subscribers or home delivery customers and as single-copy purchasers may be less loyal to a particular paper.
It is not clear that it is within the power of the industry to effect such a change. The lack of younger readers may be a permanent trend, further reinforced when these younger people do not become readers as they grow older.
It may be that this trend is counterbalanced by increased opportunities for newspapers among older people. This aged-45+ segment of the population will grow by over 10% in several European countries over the period 2000-2005, adding to a substantial market:
France: 25 million Germany: 36 million Italy: 26 million Netherlands: 7 million
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UK: 19 million Spain: 17 million
This group of the population is also affluent. The combination of size and spending power may make it attractive to advertisers and assist sales.
Many advertisers, however, continue to be mainly interested in channels that reach young people as they have the opportunity to establish a brand loyalty that will continue to pay dividends. Older readers, by contrast, are perceived (rightly or wrongly) ads more settled in their buying habits and brand loyalties, and therefore less susceptible to the impact of advertising.
9.3.2.1 YOUNG READERS AND FREE NEWSPAPERS There is some evidence from publishers of free daily newspapers that they attract a younger audience. 77% of the readers of the London free daily Metro are between 17 and 44, and the average age is 32, compared with 44 for other daily papers. Research carried out in Zurich on the readership of its three free newspapers suggests the same pattern, with the papers reaching between 22% and 40% of the 14 to 34 age group. Research in the Netherlands confirms that 55% to 57% of free newspaper readers of free newspapers are 35 or younger, compared with 34% for paid newspapers.
9.3.2.2 INITIATIVES ADDRESSING YOUNGER READERS Some publishers have launched initiatives specifically targeted at younger readers in order to draw them in to the world of newspaper reading. The most significant are the launches in Chicago of RedEye and Red Streak, two newspapers aimed specifically at the 18-34 age group. These have been launched by the city's main newspapers, The Washington Post has launched a similar paper, Express, and other ventures have been launched in New York and Dallas. Such initiatives are not yet a feature of the newspaper industry in Europe. However, there is as yet little information about the success of such targeted papers.
Some initiatives aim to start to turn children, rather than young people, into readers. In Europe, the French company Play Bac Presse, publishes four dailies for different aged children: these have reached a combined circulation of 200,000 copies. It is working on implementing the idea in other countries including making content available through an agreement with The Associated Press. France may provide state aid for helping newspapers reach young readers.
The Toronto Star has created a newspaper for 9-14 year olds, which looks at various subjects such as local politics, violence and computer games. The newspaper, Brand New Planet, is written mostly by children belonging to the same age group and is distributed weekly with the main newspaper.
9.4 Falling advertising revenues
The fall in advertising revenues reflects both the general economic situation that has seen advertising fall for other media as well in many EU Member States. This is not just a single-year effect: according to the World Association of Newspapers, nine European countries recorded a fall in the period 2001-2002. Global share of advertising revenue taken by newspapers fell from 32.1% in 2000 to 30.8% in 2002.
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In Europe, this is taking place in an environment in which newspapers are becoming increasingly dependent on advertising revenue. In most European countries, the proportion of newspaper revenue derived from advertising has been rising, albeit slowly, as circulation declines. This magnifies the effect of any decline in overall advertising revenue. This dependence is even more pronounced in the USA.
Free newspapers are less affected this trend: they lost a small amount in 2002, but before that had grown advertising revenues by 55% over the previous 5 years.
The existence of other media is also putting pressure on the advertising that newspapers can attract and the prices they can command. Television is the most powerful competitor in some countries, but radio also poses a threat to regional or local papers. The internet is a threat in specific areas such as recruitment advertising.
As editorial, production and distribution costs do not automatically fall in line with reductions in advertising any fall in advertising revenue can have an immediate impact on margins.
9.4.1 Is the loss of share permanent? It is possible that the loss of advertising in recent years may result in a permanent loss of share of advertising revenue. However, the World Association of Newspapers notes that other media have also suffered loss of advertising, and that in comparative terms newspapers may be holding their own.
There are nevertheless some indicators that the loss of share may be a structural issue rather than an economic one. There is increasing competition from other media, especially television and the internet, and new channels such as interactive digital television will soon also be contesting restricted advertising budgets. Even if many internet services do not succeed in generating significant revenues individually, collectively they have the potential to reduce the money available for advertising in newspapers even further. Interactive channels will also be able to deliver more targeted advertising, something which is now important to advertisers.
Advertisers have expressed discontent with some aspects of newspaper advertising. Newspapers suffer from being fragmented across regions and demographics, complicating the buying process for media buyers, especially where the regional press is more important than national newspapers. The buying process can be complex when they are seeking wide coverage in countries where regional papers dominate: they may have to negotiate many different deals based on different rate-cards, with many different sales teams. A television campaign typically involves far fewer but much bigger deals. Alliances between different regional newspapers in order to present a single point of contact for sales have been developed in the USA and are now being taken up in Europe: examples are Karkimedia in Finland and SPQR and Plein Cadre in France.
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Some advertisers are also concerned about the auditing of newspaper circulation. This is part of a general interest in measuring effectiveness that is leading towards a general shift of marketing budgets away from advertising towards below-the-line marketing activities and direct mail in particular.
Some advertisers have also indicated concerns about the limited potential for innovation in print formats, especially when compared with direct mail. Inserts go part-way to meeting this need, but are not yet as widely used in Europe as they are in the US.
There are no statistics available on the specific impact on classified advertising, which is the mainstay of many regional newspapers. Anecdotal evidence suggests that it has not declined as much as display advertising in some countries. However, it is coming under pressure from online classified advertising for some sectors such as cars and property, and some newspaper groups have launched their own online classified services to counter this. Regional newspapers may be well-positioned to maintain loyalty if they are able to execute such strategies effectively across print and online channels.
9.4.2 Recruitment advertising Recruitment advertising is one of the sectors that newspaper managers and commentators in most European countries are particularly concerned about. It yields high returns to newspapers: in many markets, recruitment advertising is charged at premium rates by newspapers (compared to other forms of display or classified advertising). The factor is around twice the standard rate; in the UK it has reached as high as ten times the standard rate.
The general economic situation has restricted the number of recruitments, which has inevitably held back advertising expenditure in the past two years. This has been compounded by the success of online recruitment services, which have been one of the few success stories from the internet boom and are capturing a significant share of recruitment advertising revenue.
In most markets, government, local government and other public sector organisations are the most important advertisers, and in some markets are seeking alternatives to advertising in newspapers. This may take the form of creating their own online advertising vehicles. This is happening in Germany and the UK and presents a real threat to newspaper sustainability.
9.5 Consolidation
As both circulation and advertising contract, newspaper owners consider consolidation as a major strategic tool for dealing with the long-term structural issues. Unfortunately, no statistics on the amount or the impact of consolidation are available: this would require analysis of country data to identify links between concentration and performance. Such data is not easily available and would need to be collected through a dedicated research project.
While the industry is sometimes described as fragmented, the situation varies considerably from country to country, often for historical reasons. In the United Kingdom, for example, most of the regional newspapers are owned by one of four
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Publishing Market Watch Sector Report 1: The European Newspaper Market large companies: very few independents or small groups still exist. However, competition regulators impose restrictions when takeovers or mergers would give one firm too strong a position in a local market. The picture is similar in the Netherlands.
By contrast, in Spain there are several groups each owning a small number of regional papers: the biggest of these groups tends to own around ten or twelve papers at most - although these can have substantial circulation numbers.
An unusual situation is found in Germany, where at first sight it appears that there are many apparently independent local newspapers. However, many of these are edited and produced centrally, or are linked together in other ways. Many also have links to larger regional newspapers.
In many cases throughout the EU, the position is that although in theory there is competition, in practice there are strong local monopolies that continue because no-one wants to launch a newspaper that will need many years of investment before it can mount a serious challenge to an incumbent. In such cases, competition may well come from local radio rather than another newspaper.
The main advantage of consolidation to owners is that cost savings can be found from combining some parts of the operation (for example, information technology infrastructures and support, printing and back-office functions such as billing and accounting). This can make a borderline newspaper viable. It is of less interest to try to achieve savings through newsroom consolidation, as some of the value of the regional or local coverage can be lost this way. One possible way of dealing with front office consolidation might be to share facilities between a local newspaper and a local radio station.
However, because consolidation can reduce competition for both readers and advertisers it is often subject to regulation: this is discussed in more detail below. It can also create problems with diversity of content and regulators in several European countries see this as the prime use of pro-competition regulation. Companies wishing to merge with or acquire another company often have regulatory issues to deal with, even if they are operating in different channels but still serving the same market. These are discussed in more detail in the next section.
9.6 Regulation
Although the situation differs from country to country, in most EU Member States newspapers are subject to both constraining and enabling regulation and other government policies.
Each EU member state has developed its own approach to regulation, legislation and other interventions in the newspaper industry. This reflects not only the differing politico-legal systems in each country, but also the very different evolutionary paths that newspaper industries have taken across Europe, resulting in considerable differences between markets, business practices, ownership and editorial practice.
There are several main objectives to regulation. The most important are:
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• protecting readers and advertisers from predatory pricing because of monopoly
• ensuring that readers have access to a diversity of newspapers under different ownership and reflecting a wide range of views
• maintaining the health of the newspaper industry through ensuring that the potential for competition exists in all cases
• maintaining social and ethical values
In many Member States, there is no legislation or regulation dealing specifically with newspapers or other media industries. Instead, the general law on competition is applied to proposed mergers or acquisitions in the newspaper industry.
Newspapers will also be affected by regulation of advertising generally, especially if certain types of advertising are banned.
Recent and ongoing EU regulatory initiatives and policies that may affect the newspaper industry include:
• Database Directive (implemented) • Copyright Directive (implemented) • Market Abuse and Insider Dealing Directive (due to come into force in October 2004; may have an impact on financial journalists) • Changes to the VAT Directive Annex H (under discussion; possibility that current provisions in Annex H to allow lower rate of VAT to be applied to newspapers may be revised or removed) • Proposed Gender Discrimination Directive (under discussion, but provisions that might have affected media apparently dropped by Commissioner Diamantopoulou in late 2003)
Issues under discussion in the European Parliament:
• Tobacco advertising (potential impact on advertising revenue) • Nutritional claims in advertising (potential impact on advertising revenue)
9.6.1 Competition Much regulatory activity in the field of commerce consists of creating the conditions for fair competition between enterprises. Competition helps to maintain diversity of choice and value for money for consumers. In the case of the newspaper industry, it can also assist in ensuring that a range of political, social and economic views are expressed in newspapers, and that freedom of reportage is maintained.
This does not map directly onto improvements in competitiveness. In fact, the two can run counter to each other. A firm with a monopoly in an area can become highly competitive, in that it can reduce costs and increase prices to the point
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Publishing Market Watch Sector Report 1: The European Newspaper Market where the market begins to fall away. However, in some cases this can be mitigated by cross-media competition: local radio stations, for example, compete with local newspapers; and the market for national consumer advertising is hard- fought between televisions, newspapers, magazines and online services. Competition authorities in some countries seem mainly concerned with the ability of a local monopoly to charge what it likes and provide limited service to both buyers and advertisers.
Regulation is the major control on newspaper consolidation in most European countries: capital availability does not seem to be a problem. However, despite the desire to see competition make the market livelier and more efficient, in many cases regional newspapers in particular do not face any real challenge in their home territory.
With falling circulation, consolidation is an important option for publishers trying to obtain the best financial performance from their newspapers: it allows cost saving and can also lead to increases in prices for readers and for advertisers. Investors find it more attractive to invest in consolidated rather than highly fragmented industries, giving better access to capital for innovation and development. Regulation of consolidation to maintain competition might therefore be counter- productive to overall competitiveness of newspaper publishing enterprises. It may be desirable for a number of social reasons to regulate nevertheless.
Regulation can also prevent newspaper companies from diversifying into other media: in some countries they are restricted from ownership of local radio or television stations because a local monopoly in advertising might be created, as well as a dominant source of news.
9.6.2 Distribution issues Regulation can affect more than just ownership concentration. Competition authorities may also regulate areas such as distribution.
In the Netherlands, competition authorities have prevented the main newspaper groups from collaborating to form a shared distribution service. There are no incumbent companies that would have been threatened by such a move: the competition authorities are reported as having taken the view that the existence of such a shared service would be a barrier to anyone who might wish to enter the distribution market later.
In the UK a rather different situation is under consideration: distribution is currently in the hands of three major wholesaling groups who service different regions of the country and do not compete directly: these local monopolies have been granted an exemption from normal competition regulations. In return, the wholesalers have an obligation to serve all outlets in their region at standard prices.
Major retailers such as supermarkets would like to see competition between wholesalers so that they could negotiate cheaper prices. This could permit them to discount the cover price of newspapers. However, the newspaper publishers and the wholesalers claim that this would lead wholesalers to deal only with large accounts or in metropolitan areas, leaving small retailers with no source of supply.
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The UK government, for its part, would like to bring its practice into accord with European competition legislation and abolish such exemption.
9.6.3 Advertising Regulation of advertising content is of deep concern to the newspaper industry. This has been discussed from time to time by the European Parliament, which has considered banning advertising for certain types of product (the main category, in addition to tobacco products, is alcohol) or certain types of content in advertisements (sexist stereotyping, sexual content).
The newspaper industry believes that such regulation would hurt its ability to both recover from the short-term loss of income it has been experiencing, and also to deal with the structural changes it may be facing. The timing of such legislation, given the state of the industry, is, in the view of the industry, unfortunate.
In the context of a general decline in advertising expenditure available to newspapers, the impact of any new regulation of advertising should be considered carefully. Newspaper commercial managers and their trade associations are concerned about suggestions that some products may face restrictions on how and where they can advertise, and that certain forms of content may be banned. It is not within the scope of this report to assess how likely it is that these changes in the legal environment will happen, but if they do then the impact on newspapers may be serious. Unlike television, they lack a control structure that would allow them to claim that children in particular will not have access to inappropriate advertising content (a problem they share with web advertisers).
9.6.4 VAT Many EU Member States provide some form of support to their newspaper industry through preferential treatment of VAT. In some countries, VAT is not charged at all for newspapers (for example, Belgium, Denmark or the UK), and in others a lower rate than the standard national rate is applied. The tax treatment is usually considered important as supporting cultural and political diversity by maintaining lower prices to buyers.
The increase in most EU countries would be substantial.
The publishing industry is concerned that such treatment would be affected by the European Commission's proposals to harmonise the VAT regimes in different EU Member States. The debate about the treatment of newspapers and other publishing products is continuing, but the industry view, expressed through the European Newspaper Publishers Association, is that there should be a single rate of VAT across all EU Member States, and that the rate should be 0%. This is a view shared by the European Publishers Council, which proposes that the principle should be extended to book and magazines (the impact on books and magazines will be addressed in subsequent reports). The EPC also proposes that "institutional and educational" electronic products should benefit from being zero-rated: at present, electronic products are subject to the standard rate (except in Ireland, where they attract half the standard rate).
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Country Books Periodicals Newspapers CD-ROM/ Standard online VAT Rate Austria 10.0% 10.0% 10.0% 20.0% 20.0% Belgium 6.0% 6.0% 0.0% 21.0% 21.0% Denmark 25.0% 25.0% 0.0% 25.0% 25.0% Finland 12.0% 22.0% *0.0% 22.0% 22.0% (22.0%) France 5.5% 2.1% 2.1% 20.6% 20.6% Germany 7.0% 7.0% 7.0% 15.0% 15.0% Greece 4.0% 4.0% 4.0% 18.0% 36.0%/ 16.0% Ireland 0.0% 12.5% 12.5% 12.5% 21.0% Italy 4.0% 4.0% 4.0% 19.0% 19.0% Luxembourg 3.0% 3.0% 3.0% 15.0% 15.0% Netherlands 6.0% 6.0% 6.0% 17.5% 17.5% Portugal 5.0% 5.0% 5.0% 17.0% 17.0% Spain 4.0% 4.0% 4.0% 16.0% 16.0% Sweden 6.0% 6.0% 6.0% 25.0% 25.0% United Kingdom 0.0% 0.0% 0.0% 17.5% 17.5% Table 12: VAT rates for publications in EU Member States *rate in Finland varies according to distribution channel: subscription purchase is 0%; single-copy 22% (Source: European Publishers Council) In the case of newspapers, the structural changes currently affecting the industry might make the application of additional VAT problematic. It might be hard for publishers to absorb the increase and not pass it on in the form of increased cover prices, and a cover price increase could exacerbate the long-term decline in circulation. This in turn might have an impact on advertising revenue.
At present, VAT regulation is not harmonised in the EU. Should this change, then the different national approaches to VAT might be harder to maintain.
The differential VAT treatment in many member states for electronic publications is already an issue for newspapers considering charging for access to their websites, but this has to some extent been masked by the fact that most newspapers that have instituted charging have introduced a business model that does not equate the prices for print and online versions.
9.6.5 Financial support At the other end of the spectrum, governments have from time to time subsidised newspapers in Europe. This in theory is an interference in fair and free competition between enterprises. Financial support is provided in several countries today, including Finland, France and Sweden, where it accounts for around 3% of total press revenue.
The objectives of these subsidies are commonly to preserve cultural diversity and diversity of views - this is discussed in more detail in the section on diversity in this report.
However, most financial support has been provided to help with operating conditions only, and not long-term structural problems. It can therefore discourage change. This can also serve to mask the need to respond to structural changes.
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Financial support for newspapers does not seem to have a major impact on competition outside the country providing aid, as there few cross-border newspaper activities or markets.
Much financial support might be open to challenge at European level – it may not entirely satisfy conditions for exemption from EC rules as much aid is ongoing rather than "recovery" support.
9.7 Impact of the internet and other media
The newspaper industry has seen its dominance eroded by television over many years. Television viewing now takes up over 41% of "media consumption" time for Europeans; newspapers 13%. Increasing use of the internet is seen as the next threat. At present, less time (8% according to one study) is spent using the internet than reading newspapers, but these relationships are changing all the time. The increasing use of broadband internet access by consumers is making the experience easier, more attractive and cheaper in many EU member countries, and many commentators believe that it will lead to more use of online news services as a substitute for newspaper purchase
For the newspaper industry, the internet so far has been an interesting experiment that has mainly been seen as a cost centre rather than a profit centre. Incremental advertising revenue has been slow to reach the necessary levels to support the online presence of many papers, and only one or two newspapers have tried charging users for access to content. However, having a website has become important for most papers, both to ensure that they remain as attractive to readers as their competitors, and to position themselves to take advantage of opportunities such as online recruitment advertising.
At the same time, the internet has enabled a number of challengers to various aspects of the newspapers' business to emerge, and some of these have the potential to strengthen the structural trends and inflict some damage on the sustainability of newspapers. These may have an impact on editorial content as well as on advertising: Yahoo has recently been strengthening its in-house journalism team to include comment as well as pure news: this has traditionally been one of the key areas of differentiation for newspapers. This raises another important issue for newspapers: how to develop and make use of their own brands in new ways that will allow them to compete with online and other new media operators.
However, for several of the newspaper industry experts interviewed, the key internet development is the significant web presence of public sector broadcasters in several countries. These organisations often have considerable news-gathering resources and strong audience loyalty and branding. They have been able to develop their web presence using their general funds and do not have to show a return on investment. Although they do not take advertising revenue directly from newspapers or their websites, some in the newspaper industry are concerned that they will take sufficient audience to reduce newspapers’ share of attention enough to damage advertising sales. There are no public studies that would illuminate this issue, but for the time being it should be noted as something that could affect the competitiveness of newspapers.
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Some newspapers are innovating in this field: Die Zeit offers downloadable audio versions of its main news stories through its website, for example. However, publishers are not over-enthusiastic about investing heavily in interactive services in view of the costs and historically small returns. This is equally true of services based on either current second-generation or forthcoming third-generation mobile phones, often thought to be the next significant platform for text publishing. They include a built-in user-pays business model (share of revenue with the operator) but have so far not proved especially attractive in terms of revenue generation.
9.7.1 Advertising Although display advertising on the internet has not provided a sustainable business model, it still has the potential to erode enough conventional newspaper advertising to be of concern. Classified advertising is increasingly under threat as well: almost all newspapers have recognised this. The main developments have been in the USA, where Knight Ridder and the Washington Post have invested in Tribe.net, which acts as an alternative classified service with appeal to younger readers. In Europe, services such as Mobile.de (a German service offering online classified advertising for cars that also covers the UK and France) are attracting advertisers and interest: the service was recently bought by Ebay. In the UK, the newspaper industry has responded through the creation of Fish4, a consortium of local newspaper companies which has developed a common technical and branding platform for online classified advertising. In Norway, the newspaper publisher Schibsted has launched a dedicated classified advertising portal, Finn.no.
Collaborative ventures have provided newspapers with an alternative strategy to the expensive internal development of online classified services. Services such as Fish4 in the UK, Hebbes in Belgium and AutoTrack in the Netherlands make a single platform available to several newspapers or groups.
9.8 Distribution
The main distribution issues affecting the industry are dependence on state or monopoly postal systems for home delivery of subscription copies in some countries, and broadening outlets for single-copy sales where these have been restricted - this is mainly a problem in Italy, where only municipally-licensed kiosks can sell newspapers. In order to reach the largest number of people, newspapers need wide distribution, especially in single-copy markets. Restrictions on selling in supermarkets, petrol stations etc may constrain growth, especially among younger readers who do not habitually buy a newspaper.
In countries where home delivery is carried out by retailers, the continuing health of the retail chain is significant: in the UK, the decline in the number of small independent newsagents in recent years has affected home deliveries badly.
9.9 Freesheets
Freesheets have some specific challenges of their own. They have proved popular in some markets (Metro now claims to be the "second largest paper in France",
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Publishing Market Watch Sector Report 1: The European Newspaper Market distributing 470,000 copies across several cities)46 but are also volatile: 91 closed in 2000.
As noted earlier, they appear to appeal to younger readers, and also to appeal to advertisers who wish to reach a larger audience but do not have the money to spend on conventional newspapers. Overall, freesheets have done very well but are still at a stage where they require access to capital if they are to consolidate their progress and advance to the next stage of growth.
9.10 Copyright
In some EU members states, newspaper managers are concerned about the ownership of copyright. Journalists in these countries have copyright control, and their work cannot be re-used without consent and sometimes further payment. In Sweden, for example, journalists receive small annual payments for re-use of their copy in electronic formats. Managers would prefer a situation more like that of the UK, where copyright for an employee’s work automatically belongs to the employer unless specifically agreed otherwise.
In most other European countries, the journalist has at least some rights to their own work but the publisher can obtain ownership by agreement, in some cases without restricting the right of the journalist to re-use the material in other, non- competing, contexts (e.g. as a book).
It is not clear that this issue is actually holding back innovations at present: the concern is more for flexibility in the future.
46 http://mtroa.client.shareholder.com/downloads/04-01-19_Toulouse_Launch.pdf
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