Saturday, March 7, 2009

In the FT, a most unlikely kind of story

IT was an old and familiar story: When times got tough in London, and financial workers were put of out their jobs, they stopped getting on the train in the morning, which meant they quit buying their paper of record, the Financial Times, and the pink lady saw circulation fall.
But while times are again tough in London, and indeed just about everywhere else, the FT is not suffering as in past downturns, nor is its parent, Pearson. Profits are actually up, a fact that came out when the company released its numbers earlier this week.
Analysts are impressed. Given the current economic environment, the results were surprisingly robust, says Alex DeGroote at Panmure Gordon, a London investment bank.
At the FT, circulation revenue was up 16 percent in 2008, thanks to a cover price hike and stable circulation, and subscriptions for were up 9 percent.
But the real story is higher up the media food chain, at FT Group, which is made up of FT Publishing, which includes the newspaper and a 50 percent stake in the Economist, as well as specialist data companies such as Mergermarket and Money-Media.
DeGroote believes FT Group is better placed to weather the storm than it was in the aftermath of the bubble, and it's able to do so because of a major shift away from a reliance on advertising revenue. It has sold businesses that were largely print and advertising based, notably newspapers Recoletos in Spain, Les Echos in France and FT Deutschland in Germany.
Over those same years it has ramped up its international digital potential by purchasing specialist data companies like Mergermarket and Money-Media. Pearson has also invested in the Financial Times, and Interactive Data, a financial market data company.
Taken together this means that the wider FT Group now derives 67 percent of its revenue from digital services, compared to just 28 percent in 2000. Meanwhile ad revenue now accounts for just 25 percent of FT Group revenue, down from 52 percent eight years ago.
“What we are seeing is that stand-alone print media is having a tough time and that is accelerating. But those products that have developed adjacent businesses that are subscription based or data intensive are doing well,” says DeGroote.
“There is no doubt that the FT Group and Pearson overall are less vulnerable to this sort of downturn than they would have been six or seven years ago because of the changes,” he says. The big picture is that circulation is stable, market position is good and they have been rounding out the product with targeted data products. Strategically they are on the right track.”
That’s not to say everything is entirely rosy. While the company doesn’t release ad revenue figures for the FT alone, it's clearly hurting. FT Publishing it was down 3 percent for the year. In fact, the 3 percent disguises a rather dramatic dip in the fourth quarter.
DeGroote estimates that ad revenues were running at 2 to 3 percent ahead of 2007 in the first three quarters of the year, before falling roughly 10 percent year on year in the fourth quarter.
And that slump continues, believes DeGroote. He estimates FT Publishing ad revenues are probably running roughly 15 percent down so far in the first quarter of this year compared to the same period the year before.
“Advertising is being impacted, but only as you would expect it to be,” says DeGroote.

Source: Media Life

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