Archive for the ‘Crisis’ Category

Indebted Media Companies

March 2, 2010

Every 10 years media companies realize that their debt is a extremely heavy burden. At the beggining of the 90’s, News Corporation was close to collapse, and the empire of Robert Maxwell (at that time owner of the Mirror Group) was destroyed. In 2002 AOL Time Warner fired its CEO, Bob Pittman, and Vivendi Universal its CEO, Jean Marie Messier; Bertelsmann did the same with Thomas Middelhoff: those (and other) big media coroporations have increased their debt in order to follow strategies of fast growth.

Companies should choose between the aim of been the faster and bigger player of the market or, by the contrary, the aim of preserving the organization’s future. They can not do both things at the same time: one of the two options is always the priority.

The crisis is a good oportunity to learn. Sooner or later the “perfect storm” arrives: advertising decreases, consumtion goes down, the banks are not so willing to lend…. Well managed media companies are prepared to face such unavoidable disasters: innovation is part of the game, but prudence is the neccesary complement.

Profits vs Quality

February 23, 2010

Media companies always look for the right balance between quality and short-term profits. Quality requires big investment in several areas: production, good supplies, research and innovation, distribution, customer service and on top of everything… people.

When recession arrives, managers tend to cut expenses. Some of the “cutting” is healthy: in fact, the crisis are excellent excuses to get rid of inefficient people and innecesary burdens. But the danger is to cut to much, to destroy the organization’s muscle.

When the crisis arrives, the goals should be i) short-term survival, and ii) to arrive at the end of the crisis helthier and stronger than rivals. Companies that “at the end of the tunnel” have not not big debts, preserve the prestige of their brands and keep their teams happy and motivated have good option to capture a big part of market´s growth. In times of crisis, managers should have drive and inspiration to keep the balance: they should reach the financial targets while protecting quality.

2010: A Year of Mergers in the Spanish TV Market?

December 15, 2009

2009 has been a year of dramatic changes in the Spanish television market: a new legal framework, a decrease of advertising income close to 24%, and a more fragmented audience. Other issues have been less innovative: during the last 12 months we have seen again several controversies about the quality of programming and about the role of the public television. Also, in spite of the launching of new entertainment substitutes, TV consumption remains high.
Spanish television companies are feeling the pinch because of both the advertising decline and the launching of new channels. Only two operators -Telecinco and Antena 3- will be profitable in 2010 and their margins probably will be below 12% of their income.
In this context, mergers and acquisitions seem inevitable: a majority of competitors are not profitable and the law allows consolidation of companies with a limit of 27% of audience’s market share.
What are the barriers for implementing such deals? Firstly, the small TV companies have big debts. And secondly, two merged companies only can have one boss: that last fact will be the main obstacle for consolidation of companies in the Spanish TV market next year.

All together to the Web

November 27, 2009

It is interesting this article from The New York Times in which the author writes about the merger of several companies for the Web. That means two things:

Firstly, as we said in a previous post, media are trying to fight against economic crisis through joint ventures. Advertising investment is still decreasing and does not seem that is going to stop in short term. Companies have to save costs and sharing expenses is a way to do it. If media enterprises work together they will be better afterwards.

Secondly, print circulations are going down and this is not only a temporary situation but a very deep structural damage related with new technologies. More and more people are getting used to obtain the information on Internet through iPhones, BlackBerrys and e-book. Now publications have to develop not only contents for Internet, but software standards for contents viewing on these platforms.

20 Minutos and Metro join forces

November 25, 2009

The economic crisis is forcing free dailies to become partners. Metro International and 20 Minutos closed a deal wherebythe Swedish Company will manage the international advertising of SchibstedSpanish free daily.

The agreement means that every advertising campaign managed byMetro in the world could include Spain as a country and 20 Minutos as a medium. Until now, international campaigns had very little representation in the Spanish paper.

During the third quarter of 2009, the advertising income of 20 Minutos shrunk 12.5%. These figures complicate the future of Schibsted in Spain. Even though the free daily reduced costs dramatically, including staff, the effects are still not evident.

Schibsted and Metro International maintain good relations since May 2008,  when Metro divested 35 percent of MetroSweden to Schibsted, who then decided to close their title Punkt.se.

The deal with Metro will not only support advertising incomes of the Spanish free daily, but will also allow it to trade with important European brands. The same agreement was signed by Metro UK (Associated Newspapers), so Global Sales of Metro International will negotiate the international advertising packages of both publications. This is one of the strategies free dailies are implementing to fight the crisis.

The same crisis for everyone?

November 5, 2009

 

It is a recognised fact that the advertising industry is crossing a deep period crisis due to the economic crisis faced by the different world economies. In fact, the world advertising investment has fallen during the first semester of 2009 in 16.4%. However, a detailed analysis of the data leads us to conclude that the effects are not the same for all countries and all media. As long as geographical areas are concerned, America and Europe are the most influenced ones.

Regarding media, we find that conventional media are being influenced to a greater extent than non conventional media. Among conventional media different responses before crisis are found. For example, the Internet is the only medium that where the total advertising expenses have not declined, but experienced a slight growth. The medium most influenced by the crisis has been the cinema, with a fall of 63.3% from January to September 2009. Next follows the investment in magazines, falling in a 37%. Investment in advertising in newspapers and television has fallen in a 28%, whereas expenses in radio have been reduced in a 17%.

This leads to conclude that the crisis has not been the same for all the media. Research suggests that in a period of crisis advertising in audiovisual media is less influenced than investment in printed media. Data from the current recession period seem to confirm it. Radio has emerged as a more resistant medium in crisis times and advertising expenses have experienced a strong decline. The surprising data can be found in the fall in advertising investment in television. Its share in total investment has declined and during two quarters in a row in 2009 has lost more investment than the industry average.

The Spanish Radio Market

October 27, 2009

The radio business in Spain has been very dynamic. Early deregulation and great creativity are behind the success stories of Spanish radio.  Most part of big networks and local stations have been quite profitable. Traditionally, radio advertising acounted for 11% of total above the line advertising.

But nowdays radio companies in Spain are feeling the pinch. Of course, one of the reasons is the crisis, but there are also some other problems: lack of reliability of audiences measurement systems; launching of new networks and fragmentation of audiences; new competition from Internet, pay TV and videogames…

Radio advertising income was 641 million € in 2008, 9% of total above the market advertising and 5,3% lower than the previous year. (The decrease in the US market was 7,4%). Managers of Spanish radio companies should look for new strategies to face the increasing competition. Consolidation, new distribution windows (like Internet), pay services and more innovation in programming are some options to pay attention to.

Same crisis: different impact in different companies

September 16, 2009

In the development of their activities firms are influenced by many forces, some of them positive but other negative, that make up the environment the company. Within these factors, the economic is a key element with a large impact on the behaviour of all organizations. The current economic crisis we are now crossing has affected all firms in all industries to a great or small extent. However, we could say that the media industry has been one of the most negatively affected by the crisis. This has involved a substantial decline in the activity of media firms, with consequences for the employment of professionals, in the definition of the strategy of the most outstanding companies and in their profits.

This fall is the outcome of a vicious circle that far from being broken keeps working with the new data that appear. The economic situation is depressing, firms do not see the way out in the short term and try, as far as possible, to cut expenses. In these saving efforts, one of the items easier to cut if the advertising budget, since even today commercial communication is considered by most companies as an expense and not as an investment. The repercussions that these sharp declines in advertising investments have had on newspapers, magazines, radios, televisions and in general on conventional media, has multiplied for these firms the negative impact of the crisis. A yearly two digits fall in income implies an important readjustment in the size of the workforces of these firms and a decline in the profits that for many companies leads entering in the world of losses. In this context it is important for firms to make and effort to remain in the market, knowing that the economy is cyclical and that after the crisis recovery comes. However, if the negative situation continues, the time that firms achieve to stay in the market, will depend on the quality of strategy formulation, so that bad managed firms will be the first to leave the market. Cristina Etayo.