Holmen Paper Magazine Study
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THE FUTURE OF MAGAZINES MARKET STUDY BY HOLMEN PAPER With the past decades’ rapid digital evolution, print media in almost all forms has taken a step back. As a company selling printing paper, Holmen Paper has observed and experienced this decline first hand. Newspapers was the first segment that suffered a rapid decrease in readers and is, as a result, no longer the largest end-use segment for graphical paper. Instead magazines now hold that position. Hence the future of the magazine market is crucial to the future of graphical paper. This is why we decided to conduct this study, where we look at how publishers meet the new challenges, how pricing is affected and how the readers demands are changing. TABLE OF CONTENTS MARKET SELLING PRICE 3 OVERVIEW 13 VS ADVERTISING How is the magazine market developing? What sets the price of a magazine? SHIFT IN MILLENNIALS’ BUSINESS READING 7 MODELS 16 HABITS Are the publishers’ changes radical enough? What does this group want in a printed magazine? Understanding where the magazine market is heading, helps you to gain insights and make sound future business decisions. This study therefore starts by looking at the current state of the magazine market, including historic developments as well as forecasted development. It then proceeds to look at the market from a publisher’s perspective, based on qualitative interviews with European publishers. The outcome is an extensive summary of the challenges that many publishers are experiencing, but also how they adapt their business models to to overcome them. The study also includes a thorough analysis of a large number of consumer magazines, where attributes such as price versus advertising density are investigated. And nally, to really capture what will happen to printed magazines in the future, we have conducted a survey regarding the magazine reading habits of over one thousand European millennials’ and how they believe they will read magazines in the years to come. We believe that print is part of the future, and by understanding the consumers and the market prerequisites we can work to ensure that print will continue to create value. We hope this study will help you in your future business decisions, and wish you an enjoyable read. Holmen Insight Team 21 MARKET OVERVIEW HOW IS THE MAGAZINE MARKET DEVELOPING? The decline in European graphic paper was 7.2 Mtonnes between 2010 and 2015. 62% of this drop was a consequence of the decline in advertising and circulation revenue for newspapers and magazines. The biggest decline during the period has been found in the newsprint segment, making magazine the largest segment since 2015 and hence greater than newsprint. However, the magazine segment is forecasted to decrease by 49% between 2015 and 20251. Thousand tonnes EUROPEAN 10 000 9 000 PAPER DEMAND 8 000 BY END-USAGE 7 000 6 000 Magazines 5 000 4 000 Newspapers 3 000 Supplements 2 000 Books 1 000 0 Directories 2010 2015 F2020 F2025 1Forecast made by Numera Analytics Between 2015 and 2025 the paper consumption for the magazine market will be halved. 3 During the period 2010-2015 the magazine market decreased, largely due to factors connected to the global recession in 2008-2009 and the European recession in 2011 and 2015. This in turn affected the advertising expenditures, especially for print advertising. It also intensied the structural issues of declining circulation and led to a weakened ofce paper consumption. Simultaneously, media and entertainment content saw a rapid increase in digitalisation. Million US $ ADVERTISING 250 EXPENDITURE CAGR +16% IN US$ MILLION 200 CAGR +3% 2010-2018 150 Newspapers 100 Magazines TV 50 CAGR -6% CAGR +2% Radio CAGR -4% 0 Internet 2010 2011 2012 2013 2014 2015 2016 F2017 F2018 Source: Advertising expenditure forecasts, Zenith Optic Media Sep 2016 Looking ahead, print media metrics for 2015 to 2020 is forecasted to mirror the development during the previous 5 years (2010 to 2015), meaning that for example newspapers and magazines will continue to see their advertising and circulation revenue decline. DEMAND DECREASE Until 2020 demand is forecasted to decrease by 277 000 tonnes/year for mechanical magazine paper. That equals more than one paper machine per year. France, Germany and UK are the three major European maga- zine markets. Looking at ten of the largest magazine segments DIFFERENCES (special interest, TV guides, yellow press, home, lifestyle and usiness) in the above markets, the development has been IN READERSHIP steadily declining. Comparing circulation for titles in these segments, during the rst half of 2010 to the rst half of 2017, & CIRCULATION the compounded annual growth rate (CAGR) was -8% in BETWEEN FR, Germany, -4% in France and -6% in the UK. DE AND UK 4 The ranking of segments varies between the three markets. In Germany, the biggest segment is TV guides, followed by yellow press and lifestyle, in France lifestyle is number one, followed by TV-guides and home. In the UK, yellow press takes the lead, followed by lifestyle and TV guides. Despite what many might think, TV-guides obviously matter, placing top three in all these markets and constituting a considerable part of magazine circulation. This can in part be explained by the fact that many titles have expanded their scope; today many TV-titles include gossip on celebrities and “behind the scenes” specula- tions. Yellow press as well has a large market share over all, making it clear that consumers still like to read gossip in print despite all social media development. CAGR% 5% CAGR FOR H1 2010 - H2 2017 1% Special interest TV guides Yellow Pages Home Lifestyle Business -1,0% -3% -1,9% -3,4% -3,4% -4% -4,3% -4,1% -4,9% -4,9% -5,5% -7% -6,3% -6,8% -7,2% -8,5% -8,7% -11% -10,5% -11,5% -12,5% -15% GERMANY, FRANCE & UK - CIRCULATION OF 10 Germany France UK BIGGEST MAGAZINES Source: Z-online Oct 2017 (Germany), ACPM Oct 2017 (France), ABC Oct 2017 (UK) PER SEGMENT Digitalization in the media and entertainment market is forecasted to continue to grow as a consequence of the increased usage of smart E-MAGAZINES phones and tablets for all age groups. The growth in e-magazines will be no exception and is estimated to have 125 million readers CONTINUE TO worldwide in 2021, a threefold increase since 2015. The EU smart- phone penetration rate is estimated to be 62% in 2017 and above GROW 80% by 2025, and tablet penetration 45% in 2017 and over 50% by 2025. This development has, and will continue to come at the expense of traditional media. E-magazines continue to be dependent on advertising revenue. 5 Billion US $ DIGITAL 30 CONSUMER 25 MAGAZINE 7,52 REVENUE 20 6,47 WORLDWIDE 15 5,59 4,37 3,22 10 2,41 Advertising 5 8,17 9,15 10,24 12,13 15,04 18,73 0 Circulation 2015 F2016 F2017 F2018 F2019 F2020 Source : TechNavio, Statista, 2016 The total e-magazine revenue is forecasted to increase as well, with the main revenue source being advertising. This, in combination with the increased advertising in social media, has contributed to a steady decline in print advertising, which is estimated to have a CAGR -6% for newspa- pers and CAGR -4% for magazines between 2010 and 2018. However, the revenue for printed magazines is distributed quite evenly between circulation and advertising, where the latter contributes slightly more. For e-magazines, less than a third of the revenue comes from circulation, the rest is dependent on advertising. And even though e-magazines continue to grow, it’s still the revenues from the printed titles that continue to be the backbone in publishers’ portfolios. 6 This part of the report is based on qualitative interviews conducted by Holmen Paper with a total of 33 companies2, of which 30 were publishing businesses. At the time, 30 of the interviewed companies were based in Europe and 3 in the US. A number of 26 companies were then selected for further quantitative analysis, which was made based on comparable data from identical question- naires. Extra emphasis in the analysis phase was placed on France, UK and Germany since they are the largest magazine publishing markets in Europe. SHIFT IN BUSINESS MODELS BUT ARE THE PUBLISHERS' CHANGES RADICAL ENOUGH? The publishing market is undeniably a tough market, which INTERVIEWED can be conrmed with just a quick look at the past years’ development in circulation gures and print advertis- PUBLISHING ing. This notion is also validated by respondents at COMPANIES all of the interviewed publishing houses. A very 3 / U.S.A common reaction has been to reorganize to be better equipped to face a changing 1 / Belgium market. In most cases the change is 6 / Germany incremental; very few publishers 2 / Czech Republic have dared to do disruptive changes to their business model and hence organiza- tional setup. The question is if a gradual change is enough? 4 / Nordics 6 / UK 4 / France 4 / Netherlands 2The companies can be found at the end of the report. 7 Several publishers have changed their business models, often spurred by two factors; changed MARKET consumer behaviour and digital development. But perhaps these should be considered to be one and DRIVEN the same? One of the challenges mentioned by many publishers is to anticipate what the market wants and CHANGES subsequently get the upper hand on their competi- tors. With the rapid changes during the past years it is a challenge for almost all organizations, regardless of their business, to keep pace. Many publishers are additionally under economic pressure due to increased costs and declining readership, conse- quently it becomes a challenge to invest money to innovate.