Australian newspapers get off lightly

Posted by Jennifer Lush on October 28, 2009 at 2:33 PM

The Australian newspaper industry is proving to be somewhat of a contradition to negative press surrounding the endurity of print media, with advertising revenue picking up faster than expected, share prices rising and local analysts increasing their optimisim.

"Newspapers are in a much stronger position than perhaps some of the headlines suggest," says Simon Davies, head of print at media agency OMD. "Certainly the Australian market has got off very lightly compared to other markets."

Ignoring predictions elsewhere, Bank of Scotland media analyst Fraser McLeish cause a stir last week when he put "buy" recommendations on Fairfax Media and APN News & Media and upped his target prices for both.

Fairfax, publisher of papers including The Sydney Morning Herald, The Age and The Australian Financial Review, is now trading close to $1.80 from lows of about 80c in March. Regional giant APN is close to $2.50, compared with 95c in June.

McLeish suggests the calm has come as the 'print to online' ad migration has finished: "The world was looking a very different place six months ago," he says. "We saw some pretty big declines in classifieds and in job advertising in particular. That has mainly been cyclical rather than structural. As the tide turns, you will see growth in the amount of advertising return to online and to newspapers ... I expect a big chunk of it to come back."

Just six months ago forebodings that the industry might not recover its advertising revenue until 2012 were ringing sharply in publisher's ears. Indeed the news of a much earlier recovery presents a stark contrast to that of the US newspaper industry, which seems to have suffered the heaviest post-recession blows, recently posting a ten per cent drop in circulation numbers across the country and the lowest advertising revenue in decades.

But these figures don't translate to Australian newspapers says Davies, "A lot of the projections here were based on what people were seeing in the US and the UK...But here you don't have the financial pressures that the US papers have and the competitive pressures that the UK papers have."

Australian industry body The Newspaper Works has long argued that the local sector has been "wrongly saddled with the doom and gloom coming out of the US and Britain".

"Firstly, the markets are neater in Australia," says Newspaper Works chief executive Tony Hale. "In the US and the UK all of the markets are overlapping and (a lot of newspapers) compete against each other, while ours are more clearly defined and there are only one or two papers in there."

This means that individual papers can reach more people and according to Newspaper Works, Melbourne's Age and Herald Sun together reach 70 per cent of the population and Sydney's Daily Telegraph and Sydney Morning Herald reach 56 per cent. Comparatively, New York's Daily News and New York Times have a reach of 39 per cent and London's Sun and Daily Mail reach 34 per cent.

"Australian papers are more efficient vehicles for advertisers to get to their targets," Hale says. "And not only do you have less competition from each paper's point of view but the industry is far more consolidated."

None-the-less, despite the breathing space analysts have offered publishers, they warn that the good news come with an expiry date. One analyst expects Australian newspapers to survive 'the next seven-year business cycle' without too many problems.

"But we're still quite bearish long term on print and free-to-air TV, " she says. "In general, the trend is still a negative one.

Source: The Australian