Digital Growth to Prop Up Magazine Revenue Amid Print Losses, PwC Forecasts
The halcyon days of print-based media are not returning in the near future, a new report said, as flat or declining revenues are expected at magazines and newspapers over the next five years. But digital growth will help hold the line, at least at magazines.
Consumer magazine revenue will be essentially flat this year at $24.6 billion compared with 2013, according to the annual Global Entertainment and Media Outlook from PricewaterhouseCoopers, which was released on Tuesday. It will remain at approximately $24.6 billion through 2018, PricewaterhouseCoopers predicted.
During that time, overall ad sales are expected to climb at a combined annual growth rate of just a half percent; circulation is forecasted to inch up 0.1%.
"Flat looks pretty good now," said Greg Boyer, partner at PwC's entertainment, media and communications practice.
The good news is that consumer magazines' digital ad revenue is projected to climb 22.4% to $3.9 billion this year and reach $7.6 billion by 2018. But print advertising, which continues to attract the bulk of ad revenue, is expected to decline 4% to $12.8 billion this year, the report found. It is expected to hit $9.3 billion by 2018.
It's a similar picture with consumer magazine circulation, according to PwC, where digital revenue is not growing at a fast enough pace to overcome declining print sales. Revenue from digital circulation is expected to hit $743 million this year, a 42% boost from 2013 and an impressive 148% jump from 2009.
Digital circulation revenue will reach $1.5 billion by 2018, according to the report.
Print circulation revenue is expected to fall 5% this year to $7.1 billion compared with 2013 and hit $6.2 billion by 2018.
"While the magazine industry bounced back from the advertising recession of 2009, the industry outlook going forward is tenuous, as burgeoning digital revenue fails to counteract the declines in print," the report said.
Innovation and affection
Despite the gray outlook, Mr. Boyer hit an upbeat note for the magazine industry. "People still love glossy magazines," he said. "While consumers may have cut back from eight magazines to three magazines, they're still going to purchase the content they think is extremely valuable."
"I think you're going to see more innovation from that space moving forward," he added.
Newspaper revenue will fare worse than that of magazines.
"With the economic turmoil of 2008 ebbing away, it would be tempting to conclude that the worst of the negative years are drawing to a close," the report said of newspapers. "However, year-on-year declines in both the advertising and circulation segments of total newspaper revenue are forecast to speed up again from 2014 and for each of the next five years, with the total industry newspaper revenue annual shrinkage in 2018 (at -5.8%) at its greatest, proportionally, since 2009."
Total revenue will drop 3% to $31.5 billion this year compared with 2013 and continue falling until it reaches $26 billion in 2018.
"Pre-downturn dollars are not coming back," the report said, further nothing that last year's $32.5 billion in revenue was just two-thirds of 2008 revenues. "And the declines are now expected to accelerate."
Digital advertising sales are expected to climb 7% to $4.7 billion this year and reach $5.3 billion in 2018. Print advertising will be $16.8 billion this year, a 7% drop from last year. In 2018, newspapers' print-ad sales are expected to hit $11.3 billion.
Nimble digital-only media rivals are outflanking newspapers for ad dollars, according to the report.
"Although many newspapers remain profitable on an operating basis, many publishers are struggling with debt and pension undertakings," the report said. "Back-office and editorial staff cuts continue periodically, as do incremental re-organizations that work to create blended newsroom environments."
Newspapers' bright spot
One bright spot for newspapers is the growth of paid digital subscribers.
"The newspaper industry finally got religion around charging for content," said Mr. Boyer. "Giving it away for free hasn't been good for newspaper industry."
Digital circulation revenue is forecasted to reach $493 million this year, a 27% boost from 2013. It will climb to $787 million by 2018.
Print circulation is expected to decline 1% to $9.5 billion in 2014 compared with the prior year. It's expected to fall to $8.5 billion by 2018.