Newspaper Publishing
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Newspaper publishing 170 | South African entertainment and media outlook: 2012-2016 Chapter 8 Newspaper publishing Bronwyn Plantinga Associate Director, PwC Southern Africa The newspaper publishing market consists of spending on daily print newspapers by advertisers and readers and of advertising on newspaper websites, tablet apps and mobile phone apps. Spending by readers includes newsstand purchases and subscriptions as well as payments for newspapers delivered to mobile devices and fees to access online content. Circulation represents the number of copies sold. This data is sourced from Audit Bureau of Circulations South Africa (ABC) circulation figures. Readership reflects the estimated number of people who read the newspaper. This data is sourced by South African Advertising Research Foundation and All Media and Products Study (AMPS). PwC | 171 Newspaper publishing Outlook ... at a glance Newspaper 2012-16 2011 2016 publishing CAGR(%) total spending 11 360 14 590 (R millions) 5.1 2012-16 2011 2016 CAGR (%) Print 8 225 11 800 7.5 Digital 148 472 26.1 Total advertising 8 373 12 272 7.9 Print 2 986 2 266 -5.4 Digital 1 52 120.4 Total circulation 2 987 2 318 -4.9 Total 11 360 14 590 5.1 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates 172 | South African entertainment and media outlook: 2012-2016 Newspaper publishing ...in brief • South Africa is experiencing an increasing print readership and a developing digital market, in contrast to the trend in more developed countries, which are experiencing erosion in print unit circulation as readers shift from print to online for information. • As broadband penetration increases, consumers tend to migrate to lower-priced and free digital alternatives, which are expected to depress the newspaper advertising market. • The Protection of State Information Bill (POSIB) is still pending approval in spite of significant public objection. The impact of the proposed legislation on media remains to be seen. • Local and foreign newspapers are moving content behind paywalls, mostly pursuing a ‘freemium’ model. • Publishers face the challenge of determining the optimal revenue model, as consumers have historically viewed digital content as an inferior or free product. • The total newspaper market is projected to grow at a compound annual rate of 5.1%, reaching R14.6 billion by 2016. Overview The total newspaper market in South Africa rose by 5.7% in 2011 to R11.4 billion, a significant increase from the 1.9% growth recorded in 2010. This increase is mainly due to strong growth in advertising spending (10.8%) offsetting a 6.4% decline in circulation spending. Although there was an increase in overall newspaper readership of approximately 7.7% in 2011, this was mainly as a result of more people reading the same copy, rather than increased paid-unit circulation. There was a net drop in paid unit circulation of 6.7%, with a consequent decline in overall circulation spending. Total newspaper advertising is expected to increase from R8.4 billion in 2011 to R12.3 billion in 2016, a 7.9% compound annual increase. Slower economic growth in 2012 compared with 2011 is expected to lead to weaker growth in print advertising. We expect that a pickup in economic growth early in 2013 will lead to faster growth in print advertising and gains in excess of 8% annually for 2014-16. These increases will be less than the double-digit gains recorded in 2007-8 and in 2011, reflecting growing competition from the Internet as well as from an emerging digital newspaper market. Several newspapers have launched digital editions that can be accessed on mobile devices on a paid basis. Growing penetration of smartphones, tablets and e-readers will expand the potential market for paid digital circulation to mobile devices. PwC | 173 Newspaper publishing Continued development of the digital newspaper market will contribute to overall newspaper advertising growth during the latter part of the forecast period. As broadband penetration in South Africa increases, we expect digital readership of newspapers to increase, which will in turn drive digital advertising. Digital newspaper advertising rose 32.1% in 2011 off a relatively low base. It is projected to expand at annual rates in excess of 22% during the next five years to R472 million in 2016 from R148 million in 2011, up 26.1% on a compound annual basis. In contrast, we are expecting to see a sharp decline in print circulation spending in 2012 compared to 2011, followed by more moderate decreases in subsequent years. The depressed economic situation together with growth in readership for online and mobile editions will cut into print-unit circulation. We project print circulation spending will decline from R3 billion in 2011 to R2.3 billion in 2016, a 5.4% compound annual decrease. Total circulation spending is expected to decline at a 4.9% compound annual rate to R2.3 billion in 2016. As a whole, the decline in total circulation spending will be compensated for by strong growth in digital advertising, resulting in the newspaper publishing market expanding at an overall 5.1% compound annual rate to R14.6 billion in 2016. Newspaper publishing market (R millions) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Advertising Print 7 050 7 900 7 025 7 445 8 225 8 640 9 250 10 030 10 890 11 800 Digital 63 87 91 112 148 181 231 301 381 472 Total advertising 7 113 7 987 7 116 7 557 8 373 8 821 9 481 10 331 11 271 12 272 Circulation Print 3 540 3 519 3 427 3 190 2 986 2 787 2 635 2 496 2 378 2 266 Digital — — — — 1 4 10 19 36 52 Total circulation 3 540 3 519 3 427 3 190 2 987 2 791 2 645 2 515 2 414 2 318 Total 10 653 11 506 10 543 10 747 11 360 11 612 12 126 12 846 13 685 14 590 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Figure 8.1: Distribution of newspaper publishing market 2011vs 2016 Digital advertising 3.2% Digital circulation 0.4% 2016 15.5% Print circulation 2011 1.3% 26.3% 0.01% 72.4% 80.9% Print advertising Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates 174 | South African entertainment and media outlook: 2012-2016 Newspaper publishing Newspaper publishing market growth (%) 2012-16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CAGR (%) Advertising Print 15.3 12.1 -11.1 6.0 10.5 5.0 7.1 8.4 8.6 8.4 7.5 Digital 46.5 38.1 4.6 23.1 32.1 22.3 27.6 30.3 26.6 23.9 26.1 Total advertising 15.5 12.3 -10.9 6.2 10.8 5.4 7.5 9.0 9.1 8.9 7.9 Circulation Print 4.0 -0.6 -2.6 -6.9 -6.4 -6.7 -5.5 -5.3 -4.7 -4.7 -5.4 Digital — — — — — 300.0 150.0 90.0 89.5 44.4 120.4 Total circulation 4.0 -0.6 -2.6 -6.9 -6.4 -6.6 -5.2 -4.9 -4.0 -4.0 -4.9 Total 11.4 8.0 -8.4 1.9 5.7 2.2 4.4 5.9 6.5 6.6 5.1 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Industry players South Africa has a circulation of approximately 45 million newspapers a year. This includes local, small commercial and community newspapers. Four major groups dominate the South African newspaper industry in terms of both the number of titles they own as well as the readership of these newspapers: Naspers, Independent News & Media, Caxton & CTP Publishers & Printers and Avusa. Caxton & CTP Publishers and Printers Ltd, with 120 titles, holds the most newspaper titles (either company-owned or co-owned through a major partnership) (15) including The Citizen as its most prominent publication. At present 14 publications are distributed in African countries other than South Africa, to countries such as Namibia, Swaziland, Botswana, Mozambique, Zambia and Lesotho. Naspers publishes approximately 72 newspaper titles through its print media subsidiary, Media24. These include the Daily Sun, which draws the biggest readership per day in South Africa. It also publishes Die Burger, Beeld, Volksblad and The Witness, as well as the following Sunday papers: Rapport, City Press, Sunday Sun, Sondag Son and Son. The Independent News & Media Group is a foreign-owned company with daily, weekly, and weekend titles such as The Star (their largest title), Isolezwe, Saturday Star and Sunday paper titles including the Weekend Argus, Sunday Tribune, Independent on Sunday and Isolezwe NgeSonto. Avusa Media Ltd operates as a newspaper, magazine and digital publisher, as well as a distributor. It comprises more than 20 national, regional and community newspapers, the largest title being The Sunday Times. Its stable includes Sunday World, The Times, The Sowetan, Business Day, The Herald and Daily Dispatch. The New Age newspaper is a South African national daily newspaper owned and operated by TNA Media. TNA Media was established in June 2010 and the first edition of The New Age was published in December 2010. The newspaper arena is set for a shake up with the ownership of both Independent News & Media and Avusa looking to change hands. A bid by The Times Group was accepted in Access data and digital August for Avusa. The Times Group is a unit of the Mvelaphanda Group. Various bidders functionality across your have shown interest in Independent News & Media, but at the time of writing a successful organisation. bidder had not yet been announced. www.pwc.co.za/outlook PwC | 175 Newspaper publishing Figure 8.2: Top five daily newspapers by circulation Figure 8.3: Top five daily newspapers readership (thousands) (number of copies) 74% 74% 73% 73% 414 276 5023 380 683 5561 143 084 128 683 125 490 117 862 115 101 105 775 103 467 100786 1722 1522 1097 1039 912 696 585 556 Daily Sun The Star Sowetan Son (Daily) Isolezwe Daily Sun Sowetan Son Isolezwe Daily Voice 2010 2011 Last quarter 2010 Last quarter 2011