Report 76.0- 2nd Quarter Release -

Johannesburg13 August 2014

General

SA Media Inflation

•Ibis Media have recently released the 2014 Q1 Media inflation data.

•Overall we see a 7.4% increase in rates over 2013.

•Print rate inflation was recorded at 4.29%....but the “devil” is in the detail.

•The compound effect of circulation declines has resulted in Print MIW inflation reaching 9.72% and a significant 12.34% for B2B inflation.

•CIW radio rate inflation was highest at 14.32% year on year!

•The lack of performance data for many platforms make more meaningful analysis impossible.

Second Screen Success – opens opportunities to press ?

•South Africans are actually using their phones while "watching" TV. Over 80% of South Africans surveyed saying they're on their phones, tablets and laptops during the primetime TV hours of 5-8pm.

•Clearly, users are integrating new technology into more traditional media consumption, rather than choosing one or the other. Both is better !

•The advice for continued success of social media should be considered for all platforms, and in particular print.

International

Newspapers' decline not due to the rise of the internet, says US professor. (Sources: Chicago Booth/Science20/American Economic Review)

•Most people assume that newsprint newspapers are dying at the hands of the internet. But a US economics professor will have none of it.

•According to a study by Chicago university's Matthew Gentzkow, "Trading dollars for dollars: the price of attention online and offline", the assumption is based on three false premises. Here goes:

•Fallacy one: Online advertising revenues are naturally lower than print revenues, so traditional media must adopt a less profitable business model that cannot support paying real reporters.

•"This perception that online ads are cheaper to buy is all about people quoting things in units that are not comparable to each other.

•Several different studies already have shown that people spend more time with newspapers and magazines than the average monthly visitor online, which makes looking at these rates as analogous, incorrect.

• By comparing the amount of time people actually see an ad, Gentzkow finds that the span of attention for similar consumers is actually higher online.

• Fallacy two: The web has made the advertising market more competitive, which has driven down rates and, in turn, revenues. That, says Gentzkow, just isn't so.

• Fallacy three: The net is responsible for the demise of the newspaper industry. No, writes Gentzkow, the popularity of papers had already significantly diminished between 1980 and 1995, well before the internet age.

• And, he finds, sales of papers have dropped at roughly the same rate ever since. He concludes: "People have not stopped reading newspapers because of the internet."

Comment: While the new technology may not be wholly responsible for the decline in newspaper circulation, I have little doubt that high level of print industry “digital phobia”, publisher conservatism and procrastination, and the general lack of marketing effort by print, have all contributed to the current situation.

Rule Amendments effective 1st January 2014:

PDF Replica Editions:

•Paid Circulation – circulation is counted when payment is received.

•Bulk sales – The publisher must prove distribution in terms of a list provided by the purchaser – limited to 10% of total paid circulation.

•Free bulk distribution is excluded.

 

Membership Statistics:

31 March 2014 Admissions Removals 30 June 2014

Magazines 524 17 -6 535 Consumer 218 10 -4 224

Business to Business 184 4 - 188 Custom 102 2 -1 103

Free Magazines 20 1 -1 20 Newspapers 366 4 -8 362

Daily 28 - - 28 Weekly 13 - - 13

Weekend 29 - -1 28 Local 55 - - 55

Hybrid 5 - - 5 Free Newspapers 236 4 -7 233

Advertising Brochures 7 - - 7

Total ABC Members 897 21 -14 904

Sector size ranked by circulation– Quarter 2 2014:

POSITION SECTOR CIRCULATIONNUMBER OF

PUBLICATIONS AVERAGE1 Custom Magazines 11 758 934 103 114 1642 Free Newspapers 6 599 464 233 28 3243 Consumer Magazines 5 917 838 224 26 4194 Weekend Newspapers 2 000 983 28 71 4645 Daily Newspapers 1 571 532 28 56 1266 B2B Magazines 1 193 671 188 6 3497 Advertising Brochures 934 546 7 133 5078 Weekly Newspapers 585 872 13 45 0679 Free Magazines 467 975 20 23 399

10 Local Newspapers 410 140 55 7 45711 Hybrid Newspapers 14 767 5 2 953

TOTAL 31 422 241 904 34 759

Overall Economic Perspective

Comment:Real GDP reduced by 0.6% quarter on quarter. The largest declines were in Mining &

Quarrying, and Manufacturing.

Retail sales increased by 1.8% in the 3 months ended May compared to the prior year. The main increase was in Retailers in Textiles, Clothing & Footwear.

4 Year Total Newspaper Circulation Trend by Quarter:

Comment:Total Newspaper circulation decreased by 175,000 compared to the previous quarter

4 Year Category Trend by Quarter:Daily Newspapers

Comment:• Circulation has declined annually by 4.2% since 2010, equivalent to 271,000 copies.• However, Q2 declined 4.7%, compared to Q1.

4 Year Trend Analysis by Language Daily Newspapers

Comment:

English titles have declined by 3.9% annually (182, 000 copies) over the period.

Afrikaans titles have declined by 7.1% annually (95,000 copies) over the period.

Vernacular titles have increased by 1.4% (6,000 copies) over the period

4 Year Trend Analysis: Coastal vs Inland Daily Newspapers

Comment:Inland circulation declined annually by 4.1% (169,000 copies) over the period.Coastal circulation declined annually by 4.5% (103,000 copies) over the period.

Titles Showing Largest GrowthDaily Newspapers

No

Publication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Daily Dispatch 26915 25956 3,69% 30199 -10,87%

2 Herald, The 22987 22255 3,29% 23605 -2,62%

Titles Showing Largest DeclineDaily Newspapers

No

Publication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Cape Argus 29170 33297 -12,39% 30319 -3,79%

2 Cape Times 31784 35396 -10,20% 33986 -6,48%

3 Son (Daily) 84726 91735 -7,64% 84870 -0,17%

4 Year Category Trend by Quarter:Weekly Newspapers

Comment:• Weekly newspapers reflect an erratic performance.• Q2, however, declined by a further 35,000 copies compared to Q1.

Titles Showing Largest DeclineWeekly Newspapers

No

Publication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Motorsport World 4213 7502 -43,84% 4997 -15,69%

2 Ilanga 93914 107102 -12,31% 100853 -6,88%

3 Mail & Guardian 39999 42496 -5,88% 44266 -9,64%

4 Year Category Trend by Quarter:Weekend Newspapers

Comment:Circulation has declined annually by 5.6% (542,000 copies) over the period.Q2, however, declined by 4.1% (74,000 copies) compared to Q1.

4 Year Trend Analysis by Language:Weekend Newspapers

Comment:

English titles have declined annually by 5.6% (391,000 copies) over the period.

Afrikaans titles have declined annually by 8.9% (223,000 copies) over the period.

Vernacular titles have grown annually by 11.5% (71,000 copies) over the period

Titles Showing Largest GrowthWeekend Newspapers

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Saturday Dispatch 21412 20186 6,07% 22109 -3,15%

2 Sunday Sun 177304 170843 3,78% 172741 2,64%

Titles Showing Largest DeclineWeekend Newspapers

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Sunday World 106812 127659 -16,33% 113757 -6,11%

2 Ilanga Langesonto 52361 59152 -11,48% 55224 -5,18%

3 Beeld, Saturday 53408 59944 -10,90% 55260 -3,35%

4 Year Category Trend by Quarter:Local Newspapers

Comment:Local Newspapers have declined by 3.2% (68,000 copies) over the period.Q2 declined by 5.2% (23,000 copies) compared to Q1.

Titles Showing Largest GrowthLocal Newspapers

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Review Midweek 2862 2138 33,86% 2976 -3,83%

2 Grocotts Mail 2020 1738 16,23% 2248 -10,14%

3 African Reporter 21547 19216 12,13% 20090 7,25%

Titles Showing Largest DeclineLocal Newspapers

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 The Courier 976 1329 -26,56% 1353 -27,86%

2 Rustenburg Herald 20555 24988 -17,74% 22397 -8,22%

3 Standerton Advertiser 2837 3399 -16,53% 3052 -7,04%

4 Year Category Trend by Quarter:Hybrid Newspapers

Comment:Circulation shows a dramatic decline as a result of The Times moving to

Daily Newspapers in Q4,2013.

4 Year Category Trend by Quarter:Free Newspapers

Comment:Distribution has increased annually by 6.1% (1,339,000 copies) over the period. Q2 remained static compared to Q1.

Titles Showing Largest GrowthFree Newspapers

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Northern Eyethu 21361 6002 255,90% 21360 0,00%

2 Midvaal Ster 15739 9055 73,82% 15540 1,28%

3 Eden Express 53410 38400 39,09% 53400 0,02%

4 Ilembe Eyethu 27485 19942 37,82% 27485 0,00%

Titles Showing Largest DeclineFree Newspapers

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Makhado Review 864 5800 -85,10% 924 -6,49%

2 Veereniging Ster 16972 24010 -29,31% 16806 0,99%

3Rekord Central/Sentraal 18391 22540 -18,41% 18391 0,00%

4 Express 43928 53657 -18,13% 43928 0,00%

4 Year Magazine Circulation by Quarter

Comment:Total magazines declined by 63,000 copies over the previous quarter.Consumer magazines increased by 0.4% (35,000 copies) over the previous

quarter

4 Year Category Trend by Quarter:Consumer Magazines

Comment:Circulation declined annually by 1.7% (456,000 copies) over the period,although the decline has reversed in Q2 compared to the previous 6 quarters

Titles Showing Largest GrowthConsumer Magazines

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1Green Home (Six monthly) 7 125 3 163 125,26%    

2 Finweek 23 782 15 191 56,55%

11 955 98,93%

3 Modern Athlete 33911 21850 55,20% 21900 54,84%

Titles Showing Largest DeclineConsumer Magazines

No

Publication NameTOTAL

CIRCULATIONCorresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1Tech-Smart Magazine 16432 61874 -73,44% 14767 11,28%

2 HQ Pony 3593 8230 -56,34% 3782 -5,00%

3 Today's Child 10083 20087 -49,80% 10069 0,14%

4 Year Category Trend by Quarter:Consumer Magazines - Home

Comment:Circulation has declined by 25,000 copies over the period,Q2, however, increased by 17,000 copies compared to Q1.

4 Year Category Trend by Quarter:Consumer Magazines - Sport and Hobby

Comment:Circulation declined annually by 3.4% (68,000 copies) over the period.

Q2 remained static compared to Q1.

4 Year Category Trend by Quarter:Consumer Magazines - Travel

Comment:Circulation increased annually by 31.3% (333,000 copies) over the period,fluctuating considerably as a result of biennial reporting titles.Q2 increased by 64,000 copies compared to Q1, mainly because of new entrants.

4 Year Category Trend by Quarter:Consumer Magazines – Woman’s General

Comment:Circulation declined by 2.8% annually (190,000 copies) over the period.Q2 remained static compared to Q1.

4 Year Category Trend by Quarter:Business to Business Magazines

Comment:Circulation has remained static over the period.Q2, however, increased by 21,000 copies compared to Q1.

Titles Showing Largest GrowthBusiness to Business Magazines

No

Publication NameTOTAL

CIRCULATIONCorresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1 Pedmed (Six monthly) 7 014 3 663 91,48%    

2MIMS Guide to OTC Products (Annual) 2 857 1 778 60,69%    

3 Debate (Annual) 11 845 8 302 42,68%    

4 Public Sector Manager 10429 7529 38,52% 12367 -15,67%

Titles Showing Largest DeclineBusiness to Business Magazines

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1

Impumelelo SA's Top Empowerment Co. (Annual) 481 9853 -95,12%

 

 

2 RISKsa 2644 7064 -62,57% 2004 31,94%

3

South Africa's Top Performing Companies. (Annual) 4639 9534 -51,34%

 

 

4My Office (formerly Shop-SA) 3974 6497 -38,83% 3969 0,13%

4 Year Category Trend by Quarter:B2B Magazines – Hospitality, Catering and Tourism

Comment:Circulation declined annually by 8% (31,000 copies) over the period.Q2 has remained static compared to Q1.

4 Year Category Trend by Quarter:Custom Magazines

Comment:Circulation declined annually by 1.6% (843,000 copies) over the period. Q2 declined by 60,000 copies compared to Q1.

Titles Showing Largest GrowthCustom Magazines

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1

The SA Journal of Epidemoilogy & Infection (SAJEI) (Annual) 2 462 1 069 130,31%    

2 Mercedes (Annual) 31 355 15 840 97,95%    

3

SA Franchise Warehouse. (Six-Monthly) 11 737 6 382 83,91%    

4 TFG Escapes 61 057 37 271 63,82%

59 080 3,35%

Titles Showing Largest DeclineCustom Magazines

NoPublication Name

TOTAL CIRCULATION

Corresponding Previous Period

Variance - Prior Year

Previous Quarter

Variance - Previous Quarter

1Q-One Student Diary (Annual) 54 054 103 060 -47,55%    

2

Strategic Marketing Magazine (Six monthly) 11 585 16 862 -31,30%    

3Furniture City Club (Annual) 5 978 8 301 -27,98%    

4 Year Category Trend by Quarter:Custom Magazines – Entertainment

Comment:Circulation declined annually by 2.4% (296,000 copies) over the period.However, Q2 increased by 9% (37,000 copies) compared to Q1.

4 Year Category Trend by Quarter:Custom Magazines – Retail

Comment:Circulation declined annually by 3.3% (969,000 copies) over the period.Q2 declined by 195,000 copies compared to Q1.

4 Year Category Trend by Quarter:Free Magazines

Comment:Circulation declined annually by 18% over the period.Q2 decreased by 11.4% (60,000 copies) compared to Q1.

Observations:

• There is little doubt that our economy still faces significant economic challenges during 2014. The declining GDP growth, coupled to the growing labour issues, means that both publishers and purchasers will be cash strapped for the foreseeable future.

• In terms of membership we’ve recorded an 8% growth since March this year, this growth coming from Consumer Magazines.

• Daily Press: In reality more depressed than the numbers reveal. Although the circulation has dropped 4.7%, we’ve seen growth by major titles in the “distribution below 50%” of the cover price category. This component is now 5 times larger than PMIE distribution, which is concerning.

• Weekly Press: Also in decline but a small category. Marketing / promotional experiments by M&G resulting in an immediate decline, have since been corrected.

• Weekend Press: While the category has dropped by a further 4.1% on Q1, it’s concerning to see that Afrikaans tiles are generally declining twice as fast over the period.

• We again see the appearance of distribution at less than 50% of the cover price by certain titles, to soften circulation declines. This element, in some instances, makes up 10% of the total circulation.

• Local Newspapers: While down due to the numeric weight of titles in decline, several titles continue to show strong growth, e.g. Review Midweek +33% (albeit off a small base) and larger titles such as African Reporter which produced a +12% growth.

• Free Newspapers: The growth continues.

• Consumer Magazines: The category decline appears to have reversed over the past six months….but there’s still a great deal of red ink around plus we’re seeing a disturbing growth in distribution below 50% of the cover price.

• The Q2 2014 report reveal now that almost 5% of total consumer magazine paid circulation comes from distribution at less than 50% (on average) of the title cover price.

• On closer investigation this development is being driven mainly by one publisher across several categories.

• Business 2 Business: Growing.

• Custom Magazines: Despite appearing to turn the corner in Q1, this category has slipped slightly. That said there is still strong growth coming particularly from annuals.

• Store titles generally follow the health of the retail sector.

• Free Magazine: Declined overall by 11%.

In conclusion:

There is a real need for leadership in print, and a renewed effort by newspapers, in particular, to invest in their own future, and to compete with new technologies.

Improved content, strong marketing efforts and perhaps the adoption of several of the known digital marketing strategies, could turn the trend around. Doing nothing, however, rarely produces a change in fortune!

One thing is clear from my perspective, and it’s that the solution won’t be found in further distribution at less than 50% of the cover price. Marketers and decision makers should take account of such tactics in their negotiations.

As quoted in my introduction, the decline in press circulation started well before new technologies established themselves, so the issue is not competition, it’s relevance…and that can be addressed if we invest in understanding the problem.

Thank you.

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