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It hasn't gone unnoticed that regional press has been heavily battered due to its exposure to the fall in ad revenue from the three hardest hit business sectors - Property, Recruitment and Motoring. These sectors represent a huge proportion of the overall ad revenue in regional press and the consequential knock on to the associated free newspapers is inevitable. Johnston Press has been hit hard by the economic downturn with the overall revenue droppiing 12.4% in 2008 compared to 2007. This has accelerated in 2009 with ad revenue down over 35% so far. Areas such as recruitment and property dropping over 40% and 54% respectively in the last quarter of 2008 as the situation deteriorated at an accelerated rate. Over 1000 jobs have been shed and its likely to shed its Irish titles to reduce debt. Given that Ireland is likely to be the next country to do an 'Iceland' where it will need to be bailed out in the coming years then thats probably a good call. The economy's boom over recent years has been too heavily based on property and the consequence of this in a downturn are likely to be severe. Already Northcliffe is expected to lose about 1,000 staff as they cut costs in an ongoing process to reduce headcount by around 20%. - double what was previously forecast. Ad revenue for Q1 2009 is down 37% so the impact on Northcliffe's profitability will be harsh. Advertising revenue at Daily Mail parent group is down 24% on a national basis which shows the weakness in the regional division by comparison is very stark indeed. Trinity Mirror's figures are pretty awful with the closure of 32 weekly titles since 2008, the sale of 4 titles and 1,300 staff cut. The Black Country Mail Extra, the Wolverhampton Adnews, the Daventry Post, and the Ashby Herald are all to close shortly. Ad revenue at Trinity also plummeted 30% in the first two months of 2009. The share price fall from grace mirrors that of the banking sector with the share price dropping from 314p to 25p over 12 months. Newsquest has apparently asked staff to reduce their hours and/or take unpaid leave as it looks to save costs as quickly as possible. This is on top of the pay freeze and job cuts announced in December. Q4 2008 showed nearly a 60% drop in revenue from property advertising for the group with overall classified revenue down over 35%. Newsquest are owned by US company Gannett where the Gannett CEO, Craig Dubow, said the ongoing deterioration in the advertising market had affected results substantially. "Our results for the quarter reflect the unprecedented turmoil in the economies of both the US and the UK and in the financial markets ... Despite economic conditions, we pressed forward to transform Gannett and position it for the future and more favourable business conditions," Dubow said. Other groups have been similarly affected with The Observer Standard Newspaper group actually slipping into administration. So what is the likely knock on for free newspaper? Its not hard to see that there is and will be an increasing drop off in free newspaper coverage across the UK as titles continue to close. Of course we accept some of this reduction will manifest itself in form of vastly reduced overlap between free newspapers but overall it makes the channel less viable as channel of mass coverage. Particularly when trying to target certain demographics then its going to become far less cost effective to reach certain groups. Some will argue the reduction in this channel which has been cluttered and clumsy is not a bad outcome but where some of these free newspapers still provide a meaningful local source of news then it is a sad demise. Ten years ago free newspaper coverage of UK households was around 76% nationally but this is decreasing at an accelerated rate and the levels of 50% coverage are not far around the corner. When it comes to choosing your door to door distribution channel then it may be prudent to take into account this forecast before investing too heavily in the channel. On a brighter note the clutter will reduce and ROI could increase.
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