Rethinking strategy for the new economy

Charles Dunbar is research manager for the Canadian Daily Newspaper Association. Last month, he delivered a speech to a Montreal meeting of the Newspaper Advertising Executives Association. The following is an edited version of his comments.The past year has been a...

Charles Dunbar is research manager for the Canadian Daily Newspaper Association. Last month, he delivered a speech to a Montreal meeting of the Newspaper Advertising Executives Association. The following is an edited version of his comments.

The past year has been a difficult one for the daily newspaper industry, but positive signs in advertising linage, circulation and copy pricing are beginning to show.

The boom times of the ’80s are not coming back, but consumer confidence is slowly re-establishing itself.

Total run-of-press and insert linage is up 1.5%, and, in June, every category, every circulation group, and every region of the country showed an increase over the previous year.

This was the first time that this has happened in five years.

Circulation is close to stabilizing, down 0.8% last year, after having declined about 5% in the previous three years.

The largest part of this loss came immediately after the government imposed a 7% goods and services tax on the price of a newspaper – the first time any sales tax had applied to the print media.

The recession has not helped either, but, in the last recession in the early ’80s, circulation only dropped 0.6%, and for just one year.

The entire decrease in circulation last year can be accounted for by intentional decreases in distribution by The Province in Vancouver, The Vancouver Sun, and The Edmonton Journal, plus a circulation decrease caused by labor difficulties at Le Journal de Montreal.

Up until about a decade ago, copy pricing took the lead from what was being done in the u.s.

No longer.

50 cents or more

With the exception of three newspapers, all Canadian newspapers cost 50 cents or more for a weekday edition.

In the u.s., only one-third of the papers have raised their price to 50 cents, and almost nobody has gone past it.

And, there is upward movement, which is being led by dailies in mid-sized markets.

More than 30% of cdna-member dailies now charge 60 cents or more per weekday edition, and two newspapers – Montreal’s Le Devoir and the Nelson Daily News in b.c. – are now at 75 cents.

Eventually, one dollar will become the going rate.

One out of three weekend editions now costs a dollar or more.

Stagnant advertising revenues are forcing publishers to consider ways of getting readers to carry more of their fair share of the cost of producing a newspaper.

More price emphasis

We have not yet reached the situation in Europe in which most newspapers cost a dollar or more. But, we are certainly moving away from having the advertisers pay 80% or more of the freight.

Circulation revenue figures as a per cent of the total revenue of a paper used to be 80/20. Now it’s probably 72/28.

More copies are being sold on a single-copy basis than ever before.

ore and more readers are becoming ‘regular, but not everyday’ purchasers.

Saturday circulation, traditionally the strongest of the week in most markets, is holding its own better than weekday circulation.

Circulation of Sunday newspapers, which virtually did not exist 20 years ago, is growing at a healthy pace.

Total advertising revenue for daily newspapers in 1993 was marginally lower than in 1992.

But the drop since 1990 amounts to more than $200 million.

Marginally ahead

On a constant dollar basis, we are now just marginally ahead of where we were in 1984.

All the gains in revenue and market share that we made in the second half of the ’80s have been erased.

Restructuring and re-engineering have reduced the cost base of every daily in the country, so that any substantial increase in advertising revenue should drop through to the bottom line.

The encouraging news is that first quarter 1994 advertising revenue figures for the industry were up 2.7%.

General run-of-press advertising could find some new strength based on the automotive industry’s strong comeback.

The average age of Canadian cars is now five years, two more than it used to average in the ’80s. Consumers seem to be moving to replace their cars in preference to any other major item.

Retail run-of-press advertising will probably remain weak, for the simple reason there are a lot fewer stores out there than there were before the recession began.

The disappearance or dismantling of major chains such as Woodward’s, Simpson’s, Birks, Town & Country, Steinberg, Grafton Group, Peoples Jewellers, Pascal – the list can go on and on – means their large advertising budgets that used to be spent in daily newspapers have simply disappeared, not to be replaced.

Reduced budgets

Even those chains that have survived, have survived with reduced numbers of outlets, and that almost always means with reduced advertising budgets.

Canada was ‘over-stored,’ and since daily newspapers have always been the medium of choice of the retail industry, we are now suffering with them.

The arrival of Wal-Mart in Canada is another disquieting element in the retail field.

However, its purchase of Woolco’s stores means that its introduction will not be as disruptive of shopping traffic patterns as it would be if it had located its stores on greenfield sites.

Consumer confidence has a direct influence on the third rop advertising category – classified.

The mainstays of classified are employment, real estate, automobiles, and household goods and services.

When there are lots of advertisements offering employment, the other three sections will eventually do well.

If there is no improvement in classified employment advertising, the other three areas cannot do well.

While classified still shows weakness in all sectors, employment is hovering around break-even, and could soon move into the black.

Insert linage was the one bright spot among the advertising categories last year.

After three years of insert linage declines – unheard of in the previous 15 years of spectacular growth – insert linage has now increased for two years running.

However, competition from Canada Post has reduced growth in volume of pieces handled and profit margins in this area.

At a time when dailies have restructured and chopped to reduce their cost base, the last thing anyone wants is for costs to increase substantially, but it looks like it is about to be happening with newsprint prices.

If these prices come into effect, then daily newspapers are going to have an increased need for revenue to pay for the paper they are printed on.

The money cannot come out of the thin margins that are currently common in the industry.

Since advertising revenue growth is going to be slow for the next year and a half, the possibility is strong that publishers will be turning to the circulation or distribution side of the paper to find the money they will need.

And publishers will also be looking to new sources of revenue, especially through electronic services.

Everywhere you turn these days, you read articles about the information highway, or, to use the most concise term for it, the infobahn.

But, while everyone is talking about it, nobody has figured out how to make a lot of money out of it, except by writing articles and holding seminars on the subject.

Actually, many Canadian dailies have found out that telephone personals are probably the most financially rewarding vehicle yet found on the infobahn.

But, there is a lot of hype out there. Especially about newspapers being replaced by something other than ink on paper.

Well, don’t believe it.

When the 21st century begins, and for a good time afterwards, there will still be the familiar, portable, lightweight, user-friendly, random-access, recyclable product we know and love.

Because daily newspapers are still the central information medium in our society.