Display and Classified Advertising Both Down 9%, Job Classifieds plunge 14%, Yet Half-Year Profits Increase 7% for the UKs DMGT. Has It Found The Secret To Growing A Traditional Media Business?

It would appear so, but the solution will not exactly bring joy to those who still hope that traditional media can produce the margins it once did. The DMGT’s key to success is diversification. Nearly half of its profits this year will likely come from its business to business (B2B) division – a business it didn’t even have 10 years ago – and its digital business is doing great, too. As for the newspapers it’s the same old story of declining advertising, particularly in the classifieds, meaning declining profits.

DMGT’s B2b is involved in such projects as Risk Management Solutions, Environmental Data Resources and its Trepp (commercial mortgage-backed securities) and Landmark (property) businesses. B2B increased its profit by 52% and Finance Director Peter Williams says that side of the business alone could produce nearly half of the groups 2006 profits.

It’s web investments are paying off handsomely, too. Jobsite, Find a Property and Prime Location – all geared to the strong UK property market – propelled web revenues growth by 53% -- 26% if not including sites bought this year.

ftm background

“What We Have Here Is A Failure to Communicate” -- No, Not Cool Hand Luke But The Daily Mail to Gannett And Others As The Northcliffe Regional Newspaper Group Is Taken Off the Table.
When the Daily Mail and Trust Group (DMGT) put the Northcliffe regional newspapers up for sale last November they let it be known they were looking for numbers in the £1.5 billion range -- about 11 times the group’s annual cash flow and reflecting a prosperous well-run entity. What it got was numbers in the £1.2 – £1.3 billion range -- not quite fire sale figures but certainly taking into account the current soft UK regional newspaper advertising picture. Result: DMGT says it is keeping the newspapers after all.

It’s Looking Like Gannett Would Prefer Buying British, But It Could Still Get Involved in The Knight-Ridder Sale
There are two major newspaper group sales on offer internationally – the Northcliffe regional newspapers in the UK, and Knight-Ridder in the US, and both make a lot of sense for Gannett, the largest US publisher. But some $2.1 billion for the UK group and perhaps $4 billion plus for the US group could cause some financial indigestion, and not everything in the US purchase fits Gannett’s needs. Indications are it is leaning towards the British buy but it might team up with another group in the US for Knight-Ridder (K-R).

Upheaval in UK Newspaper Market: Northcliffe Newspapers Put Up for Sale, News International Announces Three-Year Editorial Spending Freeze, and Trinity-Mirror Starts Dumping 5-7% of its Work Force
The decision by the Daily Mail and General Trust (DMGT) to put its Northcliffe regional group of 112 titles up for sale is for exactly the opposite reason why Knight-Ridder in the US is looking to sell itself.

“When Will They Learn” – ftm in July Decrying the British Newspaper Marketing Practice of Giving Away DVDs. “ They’ve Got to Learn. That’s Got to Stop” – Rupert Murdoch, November, 2005
The very British newspaper marketing practice of giving away DVDs to boost circulation has now been damned by the publisher who probably is responsible for giving away more DVDs than any other. To Rupert Murdoch it just doesn’t make sense any more.

A Clear Internet Message for Traditional Media: Besides Developing Your Own Branded Information Web Site, Buy Whatever Else Is Available On the Web Whether It Has Anything To Do With News or Not!
Three trends are now apparent for traditional media to retrieve lost profits: their own branded web sites are the most popular news destinations for local news, they must invest heavily in new media, and new media doesn’t mean just news and information -- as long as enough unique visitors flock to a site, buy it!

And even its free newspapers are doing well. Associated Newspapers publishes the free Metro (not associated with the Swedish title) in several UK cities with a combined circulation of more than 1 million daily. It is said to be earning about £10 profit per reader for this year.

But when one looks at the traditional paid-for newspaper business it is another story. DMGT, via Associated Newspapers, publishes two UK national newspapers, The Daily Mail and The Mail on Sunday plus the London Evening Standard. It also owns more than 100 regional publications under the Northcliffe umbrella. Yet all of that business is producing declining profits in stark comparison to how the new business is doing.

So, the DMGT’s secret of success as a newspaper business is to move the focus of its business away from newspapers. Not very satisfying for those who still are looking for positive growth solutions for traditional print.

Williams explains, “We’re very pleased to increase our profits when what have been our core businesses have been under pressure. Ten years ago we had no B2B operations at all, so in 10 years we have massively shifted the focus of the business.”

The company has spent £80 million in the past six months buying up web sites. It also sold two of its Northcliffe daily publications in Aberdeen, but says it has no plans to sell more. It had put the entire Northcliffe business on the market last year but withdrew the group when bids came in too low.

Since then Northcliffe has embarked on a strong cost cutting exercise with staff numbers down by about 850 in the past 12 months.

Classified advertising has shown no sign of recovery for either group and Williams said the company is now considering establishing its own free classified web sites along the lines of Craigslist. In other words, if you can’t beat them, join them.

Comparing the fortunes of the newspaper business against the B2B and digital business is stark. Whereas the newspaper groups reported declining profits, B2B and digital report double-digit percentage growth,

At Associated Newspapers, that prints the Mail properties, profit was down 11%. At Northcliffe it was down more modestly, 2%.

But all is not completely bleak. Display advertising is showing some encouraging signs of returning, the Mail properties are holding onto circulation, and the London Evening Standard has stopped its circulation decline. Circulation revenues for Associated and Northcliffe remained stable.

But when it comes right down to it has DMGT found a secret to expanding profits for newspapers as a stand-alone business?

“Consumer advertising revenues have been depressed and our newspaper divisions have been reducing costs to protect their profits,” the company says.

Display and Classified Advertising Both Down 9%, Job Classifieds plunge 14%, Yet Half-Year Profits Increase 7% for the UKs DMGT. Has It Found The Secret To Growing A Traditional Media Business?

Shareholders were delighted when the Daily Mail & General Trust (DMGT) announced profits increased by 7% with the dividend upped 7.5%, and the shares got a nice bounce in the market. Has this primarily newspaper group found the key to increased revenues that so many newspaper groups are seeking?