It’s January and time for obligatory forecasts. This will be a two-part post. In this first segment, I’ll lay out some of the challenges I see the content industry facing in the coming year. In part II, I’ll share some thoughts on what businesses can do to overcome those challenges and create new opportunities.
I’ll start with the obvious issue, the economy. This recession is severe and I am not among the optimists who see things turning by mid-2009. It’s clear that unemployment will go up, profits will continue to disappear and there will be widespread failures of businesses across various industries. While automotive is the poster child for our problems, many other sectors are in deep trouble. It’s difficult, for example, to see where retail will come back in 2009. The American consumer still has an astounding level of debt to work off and until people feel confident that their job will be there down the road, they’re unlikely to spend.
Some predict a quick comeback for the financial services market. Again, I can’t see how this will happen. A deeper recession and greater unemployment will lead to more defaults on mortgages and credit cards. That will put further strain on bank balance sheets. Just this week, we saw new warnings from Oppenheimer’s Meredith Whitney that most of the major banks will need to raise additional capital in 2009. With that outlook, it’s not likely that we’ll see banks loosen the reigns on lending any time soon.
So, what will this mean in the content space? Clearly, there will be a lot of challenges. Let’s look at the segments that may face the most difficulty.
Trade Media: Trade media faces a double whammy. The b2b advertisers they attract are among the first to pull back on their advertising spend in a tough economy. At the same time, conferences and trade shows will see fewer attendees and sponsorships. An example of this is this week’s Consumer Electronics Show (“CES”) in Las Vegas. The number of exhibitors is down 10% from 3,000 to 2,700 with a similar drop in the number of attendees. And that's a good show. I think we'll see many events have a 40-50% drop in exhibitors with numerous empty seats, leading many shows to close.
Newspapers: could 2009 be any worse than 2008? Well, yes, actually. Sam Zell’s Tribune Company has declared bankruptcy as it struggles under a huge weight of debt. The balance sheets at Gannett, McClatchy, Lee and others don’t look much better. The Detroit papers have gone print-free four days per week. And while the continued decline in print advertising shouldn’t surprise anyone, recent months have seen declines in online advertising for the first time in this segment. Having long ago ceded classified advertising to monster, Craig’s List and others, 2008 brought the collapse of the housing market, traditionally a stronghold for the newspaper industry. The utter collapse of automotive will put yet another dagger into the newspaper business.
Business information publishers: b2b publishers often tout themselves as providers of “need to know” information. Their customers are serious about business and can’t do without their products. Well, in some cases that’s true. But for most b2b publishers, it’s only true for about 40-60% of their business. Those are the core users who have integrated that content into their workflow. Beyond that are the casual users. In boom times, they’ll throw money at you to try your product and are likely to renew even if there’s only modest benefit. But in tough times, those peripheral users will drop you in a heartbeat. So, 2009 will be the year when many publishers will learn how much of their customer base was “core” and how many were casual users.
Consumer Magazines have already taken a beating and I expect that to continue in 2009. Ad pages have shrunk considerably for publishers like Time, Inc. and Conde Nast and with the tight economy, I’d expect paid circulation to take a big hit, putting further pressure on ad prices.
Even interactive media, which has been the golden child of the content industry in recent years, is beginning to struggle, with drops in online advertising.
So, 2009 looks pretty bleak. Is there anything content providers and technology companies can do about it? I’ll address that in part II of my post, coming up next week.
