WAN Savoy Prese on 25-01-06

7/27/2019 WAN Savoy Prese on 25-01-06

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Analysts/ Institutional Presentation: London, 25th January 2006

Newspapers are thebest medium in the world

For readers

For advertisers For investors

FACTFACT

Good Evening. On behalf of the World Association of Newspapers, I am delighted to beable to present to you all on why newspapers are the best medium in the world forreaders, for advertisers and for investors.

This evening, I am going to share with you a host of graphs and figures many ofwhich can surely be dissected and discounted with contrasting statistics

But none of that should detract from the basic theme that media markets are fast-changing and evolving, and newspapers long predicted to be in terminal decline bymany advocates of TV and new media will in fact continue to play a more vital andvibrant role in the media landscape of the future.


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What is W.A.N.?

Beyond my day-to-day job, I serve as the President of the World Association ofNewspapers -- the non-profit, non-governmental industry representative body, basedin Paris, of the worldwide US$140 billion newspaper industry.

Founded in 1948, WAN groups newspaper associations, news agencies and over 18,000publications from over 100 countries.

The World Association of Newspapers has 3 major objectives:

Defending and promoting Press Freedom

Contributing to the development of newspaper publishing

Promoting co-operation between its member organizations.


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What is W.A.N.?

The core of WAN is Press Freedom -- and it strenuously campaigns against violationsand restrictions to the free flow of information in our society.

An economically-viable industry is key to this -- because only a truly independentpress is a free one. As such, WAN is the industry leader in training and event

management, the central repository of all industry information and statistics, and theleader in R&D which identifies and communicates emerging media trends. Inparticular, WANs Shaping the Future of the Newspaper project has become the keystrategy module for the industry.

Through its Fund for Press Freedom Development, WAN promotes the growth ofnewspapers in developing countries, while its Young Reader programmes activelyencourages youth adoption of newspapers. The World Association of Newspapers hasformal consultative status at UNESCO, with the UN and within the Council of Europe.


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IRELAND

National Newspapers

Regional Newspapers

Directories

Wholesaling/ Distribution

Online Services

UNITED KINGDOM

National Newspapers

Regional Newspapers

Contract Print

Online Services

INDIA

Metropolitan Newspapers

Online Services

NEW ZEALAND

Metropolitan/ Regional Newspapers

Magazines

Contract Print

Outdoor

Radio

Online Services

AUSTRALIA

Regional Newspapers

Outdoor

Outdoor-Asia

Radio

Online Services

Primary Operating Regions

Main Publishing Centres

Associate Outdoor (Asia/ Africa)

SOUTH AFRICA

National Newspapers

Metropolitan/ Local Newspapers

Contract Print

Magazines

Outdoor

Outdoor - Africa

Online Services

Publishing> 175 titles

Online Services> 70 websites

Radio128 stations

Outdoor> 76,000 panels

To set the scene and although I will not be specifically speaking about my grouptonight, I am Group COO of Independent News & Media - the geographically-balancednewspaper and communications group, which operates primarily in Australia, Ireland,New Zealand, South Africa the UK and, most recently, India.

In total, we publish over 175 titles with a weekly audience of over 100 millionconsumers, in addition to its 70+ online websites. We operate in the 3 core disciplinesof publishing and online services, radio and outdoor advertising. But as most of youknow, newspapers and online are at the core of our business representing some 80%of our total revenues.

Our strength is both our geographic and portfolio diversity, and we operate in themain - market-leading brands with strong & sustainable franchises in some of thefastest growing markets in the world. In terms of the scale of our group, our currententerprise value is just over 3 billion, and we manage assets of 4 billion.


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Market Myths

circulationsare notgrowing

circulations

are notgrowing

todaysyoung

dont read

todaysyoung

dont read

consumersare timestarved

consumersare timestarved

reluctance topay for

information

reluctance topay for

information

indifferencefrom

advertising/

creatives

indifferencefrom

advertising/

creatives

online isdestroyingclassified

pillars

online isdestroyingclassified

pillars

broadbandis industrys

demise

broadbandis industrys

demise

NEWSPAPERS ARE AMATURE MEDIUM

NEWSPAPERS ARE AMATURE MEDIUM

print is deadprint is dead

I am going to tell you a fact that you already know Newspapers are a maturemedium

Dating back to the time of Gutenberg in the 15th Century, when he produced the first

printing press and published to this day the most avidly read publication in thewestern world, the Bible. That technological leap lead, in course, to the creation ofother publishing endeavours, and of course, newspapers which have consistentlydominated the media scene for over 400 years

But all is not well in the world of newspapers or so we are being told by the so-called media experts They tell us reliably, that

Our circulations are not growing, and thats because the young arent reading; andthe reason they are not reading is because they and everyone else is time starvedand too busy; AND even if we can get them to read, these consumers apparently areincreasingly reluctant to pay for that privilege, expecting it for free; and so on and soforth

Youve heard it before and doubtless youll hear it again


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Todays Presentation

a sense of

impending doom carries

most Irishmen

through long periods of

tranquillity

Irish Playwright/ Author, Oscar Wilde (1892)

Thats why as an Irishman - I particularly like Mr. Wildes quote


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Deadwood Indust r y?

RE LITY checkRE LITY check

Tonight is about giving you a reality check providing you with an insight into what isreally happening in our industry and in the broader media matrix and dispelling therather tired, conventional wisdom that our industry is a deadwood industry

It will necessarily challenge the media experts in the broking/ investment houses and it will fundamentally disagree with and counter the many scribblers who write they believe authoritatively - about media but fail to realise that the manner bywhich they consume media is not a reliable proxy for the general public.

At the end youll have to make up your own mind, and Ill be happy to field any andall questions. In that, I should say that I am joined by Ali Rahnema Managing Directorof WAN and Jim Chisolm, Strategy Advisor and chief author of the research modules,Shaping the Future of the Newspaper.


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The plain stats

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1 99 1 1 99 2 1 99 3 1 99 4 1 99 5 1 99 6 1 99 7 1 99 8 1 99 9 2 00 0 2 00 1 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6

Newspapers Magazines Television Radio Cinema Outdoor Internet

global advertising expenditure (91a 06f)global advertising expenditure (91a 06f)

2004

TV $130bn

Newspapers $100bn

Sources: WAN World Press Trends 2004,Zenith Optimedia

Lets start with the basics first

Zenith Optimedia forecast that the global advertising market defined as client spendin traditional media will top $370 billion in 2006.

And where do newspapers sit? well, if we look at 2004, an estimated $100 billion willbe spent in newspapers, second only to Television at $130 billion and thatNewspaper spend despite the growing competition was up 5% in 2005.

What is interesting in this graph is that it confirms that spend in newspapersworldwide, exceeds the combined spend of radio, outdoor, cinema, magazines andthe internet


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The plain stats

Share of advertising by medium (2000 and 2004)Share of advertising by medium (2000 and 2004)

Sources: WAN World Press Trends 2005,Zenith Optimedia

Magazines

15.0%

Newspapers

30.7%

Outdoor

5.4%

Cinema

0.3%Other

1.5%Internet

2.0%

Radio

9.1%

TV

36.0%

Magazines

13.8%

Newspapers

30.1%

Outdoor

5.4%

Cinema

0.4%Other

1.2%Internet

3.2%

Radio

8.9%

TV

37.0%

43.9%43.9%45.7%45.7%

If we then look at market share by medium we can see that newspapers share isdown only 0.6% 2004 on 2000. Importantly, combined newspapers and magazinesrepresent 43.9% of total advertising, which shows that reading is still a vital ingredientin the human experience.


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The plain stats

the inherent attributes of the mediumthe inherent attributes of the medium

14%

13%

11%

9%

8%

8%

8%

5%

4%

3%

20%Regional press

National press

BBC TV

Commercial TV

National BBC radio

Magazines

Satellite/ cable

Teletext

Commercial radio

Internet

Local BBC radio

media I wouldn' t be without

All Consumers Choice NS - UK

por tab le convenient accessible disposable cont ent r ich review-able cheap t o buy

por tab le convenient accessible disposable cont ent r ich review-able cheap t o buy

To me, this chart sums up best the inherent attributes of the medium of newspapers

Asked which media, consumers couldnt live without; newspapers both regional andnational scored top marks. Which is not surprising, when you consider that such a

wealth of information and entertainment is delivered up to the consumer daily, forthe less the price of a caf latte.


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Something to ponder

i t s amazing t hat

t he amount of news t hat

happens ever y day , al way s

j ust exact l y f i t s

in t he newspaper

U.S. comedian, Jerry Seinfeld (1992)

And thats why US comedian Jerry Seinfelds observation on newspapers is so spot onsumming up best the serendipity that is a newspaper, when he says, Its amazingthat the amount of news that happens every day, always just exactly fits in thenewspaper


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Some basic facts about newspapers

1.1. More than 1 billion people read a newspaper eachand every day and readership continues to grow.

2.2. Newspaper circulations worldwide continue to grow.

3.3. Newspaper advertising continues to grow andremains a more effective medium than TV.

4.4. Of the established media, newspapers are far betterat managing the economic cycle than theircompetitors.

5.5. Newspapers represent the only true mass media

market channel being essentially fragmentation-proof.

Sources: World Association of Newspapers. WAN World PressTrends 2005, UPM, Veronis Suhler Stevenson, Merrill Lynch,

BARB, Metro International, TNS Gallup, News Corp.

So lets look at some basic facts about newspapers:

1. Over 1 billion people read a newspaper every day.

2.2. Newspaper circulations worldwide continue to grow.

3.3. Newspaper advertising continues to grow and remains more effective than TV.

4.4. Of the established media, newspapers are far better at managing the economiccycle than their competitors.

5.5. Newspapers represent the only true mass media market channel beingfragmentation-proof.


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6.6. Newspapers are competing far more effectively againstthe onslaught of digital media than broadcast.

7.7. Broadband penetration is not adversely impactingunderlying volumes or advertising.

8.8. In the last 24 months, more new, innovative newspaperproducts have been launched than over the prior 30years.

9.9. The new free dailies have - in a short time - capturedover 25 million readers, particularly among the young.

10.10. Newspaper companies continue to invest heavily in thebusiness.

Sources: World Association of Newspapers. WAN World PressTrends 2005, UPM, Veronis Suhler Stevenson, Merrill Lynch,

BARB, Metro International, TNS Gallup, News Corp.

Some basic facts about newspapers

6.6. Newspapers are competing far more effectively against the onslaught of digitalmedia than broadcast.

7.7. Broadband penetration is not adversely impacting underlying volumes oradvertising.

8.8. In the last 24 months, more new, innovative newspaper products have beenlaunched than over the prior 30 years.

9.9. The new free dailies have - in a short time - captured over 25 million readers,particularly among the young.

10.10.Newspaper companies continue to invest heavily in their business.


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Newspaper circulations *worldwide continue to grow

(and not just in China and India)

FACTFACT

* Paid-for newspaper volumes, ie. excludesfree newspapers

Circulations and I mean paid-for circulations continue to grow (and not just in Indiaand China) if we include frees, most markets will show good increases in volumesand readership.


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Circulations worldwide continue to grow *

377

384

385

387

395

365

370

375

380

385

390

395

400

2000 2001 2002 2003 2004

* Excludes frees Source: SFN/ WAN World

Press Trends 2005

worldwide sales grew by 5% in the last 5 yearsworldwide sales grew by 5% in the last 5 years

0

50

100

150

200

250

2000 2001 2002 2003 2004

millionsofCopies

Asia

Europe

N. America

S. AmericaAustralasia

1 year

+4.1%

-1.4%

- 0.2%

+6.3%

-1.0%

up+2.0%

millionsofCopies

This graph illustrates what has been happening to sales globally over the recent past.

Newspaper circulation grew worldwide in 2004 by 2 percent, taking global sales to anew high of 395 million copies. Over the past five years, volume growth was 4.8percent, obviously skewed by stronger growth in developing economies.

On the chart on the right, here you see the recent trend in different regions aroundthe world for paid for newspapers.

sales are up 4.1 % in Asia in one year

down 1.4 % in Europe

down 0.2 % in North America

up by 6.3 % in South America

down 1 % in Australasia

In Europe, of the 21 countries surveyed, 8 reported circulation increases in 2004. Ishould also add that the vast majority of circulation decline, particularly in the USA,is accounted for by the decline in evening newspapers, as consumers change theirconsumption patterns, tighter ABC rules and policies on bulks and sampling and, thus,many mornings are actually showing some modest growth.


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For every hour American

people consume their media,

advertisers invest 8 times more

on newspaper readers than

they do on TV viewers.

FACTFACT

This next section deals with advertising the major blood supply for our industry.


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Television

Radio

Internet

Newspapers

Follow the money

40.1

19.3

65.4

316.3

50.9

22.4

130.5

369.6

2005 2009

Millions of advertising dollars per hour the American

people spend with each medium.

Millions of advertising dollars per hour the Americanpeople spend with each medium.

Source: SFN/ Veronis Suhler Stevenson

inmillionsofUSdollars

If you accept that the key to media exposure (and thus advertising effectiveness) isthe time that people spend reading, watching, using or listening to the medium, letme ask you -- for every hour that the American nation spend in front of theirtelevision, how much do you think that advertisers invest trying to reach them? Ie.how much are they willing to invest in reaching their audience?

Every hour of TV viewing attracts advertisers to spend 40.1 million.

For each hour of radio listenership, its only $19.3 million

And for the Internet -- for all those hours people are now glued in front of theirscreens, advertisers only spend $65.4 million, over 50% more than TV.

And for newspapers which people always think less well, actually advertisersspend $316.3 million for every hour of Newspaper reading.

As I say, the key is to always follow the money.


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In 2005, global newspaper advertising revenues saw the

biggest increase in five years and were up 5.3% in 2005.

This follows a strong 2004, where: USA + 4.8% Europe + 4.0% Japan + 0.1% China + 28.9% India + 25.1% Australia + 7.6% New Zealand + 14.7%

While web advertising growth was impressive in percentageterms -- 26.7% -- it remains proportionally tiny comparedwith newspaper advertising.

Follow the money

Source: WAN World Press Trends 2005

In 2005, global newspaper advertising revenues saw the biggest increase in five yearsand was up 5.3% alone in 2005.

This follows a very strong 2004, where:

USA + 4.8%

Europe + 4.0%

Japan + 0.1%

China + 28.9%

India + 25.1%

Australia + 7.6%

New Zealand+ 14.7%

And while web advertising growth was certainly impressive in percentage terms at26.7% -- it remains proportionally tiny compared with newspaper advertising.


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Newspaper brands outperform TV

Newspapers consistently target the richNewspapers consistently target the rich

Sources: SFN/ WAN World Press Trends 2005/World Bank, Zenith Optimedia

- 10 20 30 40 50 60 70 80 90 100

Cambodia

Russia

Roman ia

Portugal

Poland

Philippines

Hungary

Myanmar

Mexico

Colombia

Greece

Uruguay

Venezuela

Czech Rep.

Bulgaria

Belgium

France

Italy

Netherlands

Puerto Rico

Argentina

Saudi Arabia/Pan Arab

Thailand

Vietnam

Japan

Indonesia

South Africa

Spain

Laos

Taiwan

Ch i le

Turkey

Ch ina

USA

Pakistan

Latvia

Brazi l

Lithuania

Canada

Austria

Hong Kong

NewZealand

Australia

India

Singapore

South Korea

UK

Norway

Germany

Ireland

E stonia

I srael

Switzerland

Malays ia

Sweden

Denmark

Fin land

Newspapers

TV

Radio

Cinema

Outdoor

Finally what matters to advertisers most is connecting with the right demographics,and this slide only serves to prove that wealthier markets are dominated by pressadvertising whereas poorer markets are dominated by TV. This is true at a micro andmacro level.


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Of the established media,newspapers are far better atmanaging the economic cycle

than their competitors

FACTFACT

But as we know, advertising has a cyclical quality to it and it is a fact thatnewspapers have consistently been able to manage the vagaries of the economic cyclebetter than other competitive media.


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Newspapers manage the cycle better

0

10

20

30

40

50

60

70

80

90

100

Regional

newspaper

National

newspaper

Consumer

magazine

Trade

Journal

Radio

Station

TV Station

Variable Fixed

0

10

20

30

40

50

60

70

80

90

100

Regional

newspaper

National

newspaper

Consumer

magazine

Trade

Journal

Radio

Station

TV Station

Variable Fixed

40% of regional newspaper and 30% of national newspapercosts are variable (compared with 21% of radio costs and

3% of TV costs) = better OPERATING LEVERAGE.

40% of regional newspaper and 30% of national newspapercosts are variable (compared with 21% of radio costs and

3% of TV costs) = better OPERATING LEVERAGE.

Source: Merrill Lynch

One factor which particularly benefits newspapers is their relatively high variablecosts mix. These figures from Merrill Lynch show that 40% of regional newspaper and30% of national newspaper costs are variable, compared with only 20% of radio costsand 4% of TV.

Newspapers are particularly robust in coping with the economic cycle, particularly asone of our highest cost consumption elements newsprint at circa 15%-18% isdirectly related to revenue.


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Newspapers manage the cycle better

Sources: Merrill Lynch/ UBS

in addit ion:

Better and more diversified revenue mix (advertising,circulation, and other a growing category).

Upward circulation pricing capacity and betterrealisation per copy.

Underlying operating margins improving despite onlineopex as newspaper companies progressively downsize,outsource and invest in more cost effective methods ofproduction and distribution.

Newspaper companies debt levels at historically lowend of scale.

In addition, newspapers have a better and more diversified revenue mix (advertising,typically 65-70%), circulation, and other which is a growing category) not tomention a broader spread of advertising categories, from classified to display toretail ie. our business is about much more than just classifieds

Newspapers also have the capacity to push cover pricing and achieve a betterrealisation per copy.

And this is borne out by the fact that the underlying operating margins of mostnewspaper groups are improving despite increasing online opex as newspapercompanies progressively downsize, outsource and invest in more cost effectivemethods of production and distribution.

Finally, it is worth noting even in this low interest rate environment thatnewspaper companies debt levels are at historically low end of scale.


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Newspapers represent the onlytrue mass media market

channel beingf ragmentat ion-proof

FACTFACT

As Fragmentation takes a major (and growing) bite out of TV, Internet, and Radioaudiences, newspapers remain the only true mass media market channel a keydemand for advertisers, who want an estimable, steady and reliable demographic.


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fragmentation [ frgm_n tyshn ]noun

1. breaking up of something:the process ofshattering or breaking up into fragments

2. loss of unity and cohesion:the loss of unityand cohesion and the breakup of something

into isolated and often conflicting elements

And though we have used this word as some form of distant prophesy, fragmentationis happening as I speak and at an alarming rate. The proliferation of channels, ofweb sites, allied to the advancement of technology, whether Tivo (to screen out ads)or PVRs means that the consumer is becoming a real-time editor.


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In 1994, ITV enjoyed a share of TV audience of 39.5%.

Today that figure is 23.6%. Most interesting is theconsumption of news:

In 1994 the UKs News at 10 enjoyed an audienceof 6.6m. Today it is 3.3m.

In 1994, Coronation St enjoyed an audience of 19million. In 2004, it enjoyed an audience of 15 million.

In 1994, there were 40 UK commercial TV stations.

Today there are 250+.

In 2014, this is expected to be in the region of 400.

Sources: BARB/ Starcom

Just consider these facts from the UK which can be mimicked in any major Westernmarket (and increasingly in developing markets).

In 1994, ITV enjoyed a share of TV audience of 39.5%. Today that figure is

23.6%. Most interesting is the consumption of news

In 1994 the UKs News at 10 enjoyed an audience of 6.6m. Today it is3.3m.

In 1994, Coronation St enjoyed an audience of 19 million. In 2004, itenjoyed an audience of 15 million.

In 1994, there were 40 UK commercial TV stations.

Today there are 250+.

And by 2014, this is expected to be in the region of 400.


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Circa: 138.8%Was 114

Now 123

+49.8%Newspapers(UK)

Circa: 24.3%Was 40

Now 250

+51.8%Television (UK)

Index ofrevenues

Number of/channels/titles

Revenues

Sources: BARB/ Starcom, ABC (UK), UK NewspaperSociety, Zenith Optimedia

The impact of fragmentation on revenue spread across the brands in TV andnewspapers is shown in this chart.

In the last ten years, UK TV revenues have grown by 51.8%, while advertising revenues

in UK newspapers rose by 49.8%

The number of TV stations has grown from 40 to 250. While the number of dailynewspapers paid and free has grown from 114 to 123.

The result is the average station revenue is 24.3% of what it was while that of theaverage newspaper is 138.8%.

Of course not all TV stations, or newspapers for that matter, have the same cost base,

but the implication is clear.

Newspapers revenues are far better concentrated, easier to control and consolidate,with greater synergies.


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Source: Veronis Suhler Stevenson

0

100

200

300

400

500

600

700

800

900

1000

1100

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004(e) 2005(e)

Newspapers Cable & Satellite TV Broadcast TV

hour s per year spent w i t h t he medium(logari t hmic scale)hours per year spent wi t h t he medium(logari t hmic scale)

Overal l USA TV v iewer ship

contr acti ng; as cable/

sat e l l i t e cannibal i ses

broadcast TV

Finally, aggregate TV viewership is not growing.

In fact, this US graph depicts the internecine battle between broadcast and cable andsatellite in the USA where broadcast viewership is contracting

And this is not just a U.S. phenomenon, most Western markets can point to shrinkingviewership. Whereas, newspapers have remained broadly stable.


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Broadband penetration is notadversely impacting underlying

volumes or advertising.

FACTFACT

One of the great myths that has been allowed to propagate has been the rise inbroadband and the supposed adverse impact it has on newspaper consumption bothcirculation volumes and advertising and particularly classified advertising.

Curiously, broadband is never seen for what it is which is a major, major dilemma(and seismic) for broadcast (whether free to air or paid/ cable/ satellite). Increasingly with higher access speeds and capabilities the internet is fast-becoming a quasi-broadcast medium and its happening daily.

Think about practically There is no web-designer armed with the capacity forbroadband speeds that is today designing web sites for static print they aredeveloping AV capabilities, new AV channels and ultimately, the consumer will makeabsolutely no distinction between the flat HDTV screen in their living room (is it acomputer? Is it a TV?) Id suggest itll be both and most web designers seem to

agree.


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Connections

1 United States 40,876,000

2 China 35,010,0003 Japan 20,913,000

4 South Korea 11,994,000

5 France 8,927,000

6 United Kingdom 8,860,000

7 Germany 8,411,000

8 Canada 6,332,000

9 Italy 5,905,000

10 Spain 4,387,000

11 Taiwan 4,215,000

12 Netherlands 3,830,000

13 Brazil 2,905,000

14 Australia 2,364,000

15 Belgium 1,857,000

16 Sweden 1,682,000

17 Hong Kong 1,611,000

18 Switzerland 1,550,000

19 Russia 1,414,000

20 Poland 1,359,000

21 Denmark 1,225,000

22 Israel 1,145,000

23 Austria 1,068,000

24 Finland 1,003,000

25 Norway 884,000- Other (Rest of World) 10,578,000

WORLD TOTAL 190,305,000

BroadbandRanking Country

Broadbands impact

Sources: WAN World Press Trends 2005,Point Topic Limited

TOP 20 NewspaperPenetration Markets/ 1,000

Norway 651Japan 644Finland 522Sweden 489Switzerland 398Austria 372UK 347Cayman Islands 343Germany 313Luxembourg 303Netherlands 303Denmark 300Iceland 292Singapore 272Hong Kong 249Ireland 234NewZealand 233Estonia 228

USA 225Slovenia 208

To set the scene the chart on the left shows the top-25 countries for Broadband not in penetration, but in actual lines installed.

The chart on the right shows the top 20 markets for newspaper penetration.

You will see a high degree of overlap reflecting those wealthier countries wherenewspaper penetration is highest.


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Broadbands impact

Sources: WAN World Press Trends 2001 - 2004-estimates/ calculations/ Point Topic Limited

92

94

96

98

100

102

104

2001 2002 2003 2004

100

110

120

130

140

150

160

Circulation Classif ied Adver tising Broadband

94

96

98

100

102

104

106

108

2001 2002 2003 2004

100

110

120

130

140

150

160

Circulation Classif ied Advertising Broadband

USA:Broadband Penetration:

137.23 per 1,000 people

JAPAN:Broadband Penetration:

165.07 per 1,000 people

AdRevenues/Circ.

Volumes

AdRevenues/Circ.

Volumes

BroadbandGrowth

BroadbandGrowth

If we look at two major markets over the period 2001 - 2004 and I should say thathad I looked at any of the other markets and particularly the Scandinavian ones, theresults would have been broadly the same.

So, if we look at Japan, broadband has risen by 58% since 2001, and classifiedadvertising revenues have been relatively flat, while circulation volumes have comeoff just over 1%.

Similarly, in the States, broadband is up c. 60%, advertising classified is up 6% andcirculation volume is down nearly 1.5%.

Obviously, these stats do not take account of the economic cycle or ratecardincreases in advertising, but nonetheless, they are instructive and go along way todispel the unfounded myth that rising broadband adoption has a negative affect oncirculations or advertising.


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Newspapers are competing farmore effectively against the

onslaught of digital media thanbroadcast.

FACTFACT

But of course, it is digital media that everyone ones to talk about today and the factis that newspapers are consistently competing more effectively against this newmedium than other media and particularly TV and building more compelling andprofitable media channels and overall penetration.


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Newspapers are competing more effectively

We t end t o over est imat e t he

shor t t erm impact of

t echnological change and

under est imat e t he long t erm

impact

Roy Amara, The Institute for the Future

That is not to say that newspapers always did this

My reading is that traditional media originally first ignored the Internet, then overreacted and concentrated on the threats it posed (without ever embracing it). That ishistory. That has changed it is the opportunities that newspaper companies are

singularly focused on these days.

Internet companies, meanwhile, rightly focused on the opportunities.

All that said, the cost of over reacting early is often greater than the cost of catchingup later. Time Warner dissipated more value in the AOL merger than News Corp. gaveup doing nothing.

As with everything, Timing is everything.


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Internet penetration tracks newspaper readershipInternet penetration tracks newspaper readership

Source: WAN World Press Trends 2005/ SFN

Newspaper circulation and Internet penetration

Australia

Austria

Belgium

Bulgaria

Canada

CroatiaCzech Republic

Denmark

Estonia

Finland

France

Germany

GreeceHungary

IndiaIndonesia

IrelandItaly

Japan

Latvia

Luxembourg

Macedonia

Netherlands

Norway

Poland

Portugal

Russia Serbia-Montenegro

Slovakia

Slovenia

South Korea

Spain

Sweden

Switzerland

Turkey

United KingdomUnited States

0

10

20

30

40

50

60

70

80

0 100 200 300 400 500 600

Newspaper penetration

Internetpenetration-householdaccess%

Yet one still hears continually the unfounded suggestion that the Internet is damagingnewspapers -- yet one irony is that where newspapers are strong, so too is theInternet.

There is not a shred of empirical evidence, here or in the USA, or in Scandinavia, orthe Far East to confirm that the internet per se is damaging newspaper circulations.

Indeed a recent study by WAN demonstrated that those newspapers with strong webactivities were actually the ones that were showing circulation growth.

Moreover, this chart shows household internet penetration versus newspaperpenetration, confirming that higher internet penetration actually tracks highernewspaper consumption, confirming my earlier point about wealthier countries beingdrawn to newspapers.


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Newspaper on-line consumption rose

dramatically from 2000 - 2004

Newspaper on-line consumption rosedramatically from 2000 - 2004

+32%+350%

2003 / 2004

One yeargrowth

2000 / 2004

Five yeargrowth


Source: WAN World Press Trends2005/ SFN

Moreover, the Internet is now very much a part of the life of every newspapercompany, and WAN continues to try and identify and track trends as the Internetdevelops and finds its place in the media markets.

The good news here is that the continuing boom in the audience of newspaper websites.

While many publishers are still experimenting with various business models to makethe web more commercially viable and profitable, we can certainly say that ourreaders - old and new - are coming with us on line.

For the selection of newspaper web sites for which we have data over several years,traffic grew another 32 % last year and 350 % over the five year period.


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Media consumption trendsImpact of online experience in reading online newspapers

0%

10%

20%

30%

40%

50%

60%

70%

yrs

years of online experience

%o

fonlineuserswhoreadanewspaper

UK

Germany

France

Italy

Spain

average

Online usage grows with experienceOnline usage grows with experience


Source: Forrester Consumer Technographics 2004

This graph from Forrester shows how likely internet users are to turn to theirnewspaper website, depending on their experience with the internet.

Listening to conventional wisdom, one might think that as experience grows, people

might abandon their traditional brands, but on the contrary, they turn to them moreand more. It shows that the more years that people have used the internet, the morelikely they are to turn to their newspaper online.

The graph also shows that this tendency is stronger in markets where newspapers andthe internet are less established. Again this is a trend that exists at both a micro andmacro level.

So newspapers are re-establishing themselves very well in the digital world.

The data is compiled from the Forresters European Technographics survey, a poll ofonline users. I would suggest to you that such a panel is made up of heavy internetusers, who are the last people youd expect to have traditional attachments tonewspaper brands.


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daily newspaper sites

Media consumption trendsUsage of online services (VPN email excluded)

games alone

Web-based email

national news sites

instant messaging

Research purchases

text-based chat

games sites

Send photos by email

sports sites

Look up recipes

games with others

Competitions or sweeps

yellow pages/directoriesDownload software

Download music files

music sites

Look up classifieds

government non-health

movie reviews

adult entertainment

Streaming video

Research home

Publish own Web pages

photo-sharing sites

personal ads

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

0% 5% 10% 15% 20% 25% 30% 35%

% using at least once a week

%saying"importantinmylife

"

Source: Forrester Consumer Technographics 2004

This chart - again from Forresters European Technographics survey, shows all the variousdifferent things that people can do online. Those they do at least weekly are positionedhorizontally. Those that are important in my life are positioned vertically.

Newspaper websites are at the top right, suggesting they are visited frequently and areimportant to users.

The chart should be taken with a grain of salt, however -- the fact that adultentertainment is in the bottom left, might suggest that some of respondents are notexactly being truthful! Nevertheless, people are less likely to lie about something like on-line newspaper usage.

Web sites increase consumption of newspaper brands, increasing the valuation ofnewspaper companies through impact on goodwill alone, as well as broadening customertouch points and providing new and better diversified revenues.

And things are changing on-line: people are increasingly willing to pay for content. Veronis

Suhler data shows a steady rise in the proportion of media revenues from access, ratherthan from just advertising. Equally, mobile is demonstrating that people are paying forcontent. And new mobile streams of classified are emerging, particularly in Scandinaviaand Switzerland.


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Source: Borrell & Associates, World Association ofNewspapers

Definition of Market? Borrell & Associates estimate that atypical U.S. metro newspaper has only c. 15% of localadvertising (ie. does not have 85% of the potential!)

More examples of newspaper online successes in classifiedthan the few poor examples from the USA/ UK.

Clear trends emerging in Articles, Jobs and second-handCars but less pronounced for Homes.

Even then, good pricing momentum for both true playsand online extensions of classified print products.

Publishers are winning share back from true plays providing double coverage (print and online) for both thepassive and active classified users.

CLASSIFIED MIGRATION MYTH OR REALITY?CLASSIFIED MIGRATIONCLASSIFIED MIGRATION MYTH OR REALITY?MYTH OR REALITY?

But what everyone worries about is classified migration even though it is only onepart of the advertising mix.

Arguably, most newspaper companies where slow to act, but not any more. Thenewspaper executive now believes that attack is the best form of defence andnewspaper companies are now being very aggressive about the opportunities andthey are many.

First of all, we have had to redefine our understanding of our market potential.Borrell & Associates probably one of the most reliable commentators on the internet,as they have been doing it for 10 years - estimate that a typical U.S. metro newspaperactually takes only c. 15% of local market advertising (ie. it does not have 85% of thepotential!). Thats changing and new advertising channels and propositions are beingpursued, and newspaper online divisions are reclaiming lost categories (article forsales, for example) which was lost not to the internet, but because of prior pricingdecisions. The online channels represent the opportunity to broaden the advertisingbase.

Also, I should say that there are more examples of newspaper online successes inclassified, than the few poor examples from the USA/ UK. In that, it is important toreflect on the fact that the UK and US markets are not a proxy for the worldwideindustry and probably have more to do with poor company-specific strategies ratherthan market forces.


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Source: Borrell & Associates, World Association ofNewspapers

Definition of Market? Borrell & Associates estimate that atypical U.S. metro newspaper has only c. 15% of localadvertising (ie. does not have 85% of the potential!)

More examples of newspaper online successes in classifiedthan the few poor examples from the USA/ UK.

Clear trends emerging in Articles, Jobs and second-handCars but less pronounced for Homes.

Even then, good pricing momentum for both true playsand online extensions of classified print products.

Publishers are winning share back from true plays providing double coverage (print and online) for both thepassive and active classified users.

CLASSIFIED MIGRATION MYTH OR REALITY?CLASSIFIED MIGRATIONCLASSIFIED MIGRATION MYTH OR REALITY?MYTH OR REALITY?

Yes, there are some clear trends emerging in Articles, Jobs and second-hand Cars but its less pronounced for Homes.

But even then, one needs to remember that there are essentially two types ofclassified users the active users (who are looking for a job, looking for a house,looking for a car). For them, because of its inherent search-ability and interactivity,the internet is simply perfect for them. And then, there is the passive user (who isnt

actually in the market, but is interested in browsing if only to see what price thathouse made down the road) And although it is a very obvious point to make (butremarkably overlooked by commentators), there are more people at any one time whoare not looking to change jobs, not looking to buy a new car, not looking to movehouse.) For them, printed products are their preferred medium. Need any convincing,just consider the copious quantities of free home magazines that are distributeddaily to homes in the London market.

But even then, there is now much better pricing momentum for both true plays andonline extensions of classified print products, as rates move upward to justify weighty

valuations.

In market after market and contrary to the simple rhetoric - publishers are winningshare back from true plays providing that unique double coverage (print and online)for both the passive and active classified users.


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Classified migration a taste of INMs classifieds

Source: Independent News & Media PLC

Heres a snap shot of some of Independent News and Medias leading classified brands.And while I dont intend to discuss them in any depth, the slide conveys our winningstrategy.

Our philosophy was a simple one we own the market off-line, were going to own iton-line.

Moreover its about building new channels, new revenues expanding in to broaderclassified categories (like auctions, dating, search) and reclaiming lost categories likearticles for sale.

Thus, our online classified verticals allow us to target and expand our classified base.


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40


Classified migration

Turnover $18 million.

Bought by eBay for$340 million.

Sources: Google/ marktplaats

If I give you another example you can see how newspaper publishers are winning thefight.

Five years ago an antique dealer in Amsterdam launched a website called, marktplatz,

which grew from second hand household items to every kind of product. It grew tosuch a size that when his turnover reached $18 Million, eBay bought it off him for$340m.

A ratio of 18 times turnover!


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Source: de Telegraaf Holdings

In response, De Telegraaf the largest newspaper in Holland - developed their ownservice, Speurders, that combined the best features of eBay with the incrediblemarketing penetration of de Telegraaf and its sister titles and radio stations.


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Dec 2005May 2004Dec 2005May 2004

15,183

8308

17,133

9342

5,102

3,072

7,365

3,055

6,46411,885Opel

3,0678,231Mercedes

7,38116,165Volkswagen

3,6777,210Ford

eBayMarktplaats.nlDe TelegraafSpeurders.nl

Wegener

AutoTrack

19,792

7,779

17,385

13,878

Dec 2005

Source: Company websites

The results were and are phenomenal.

In May 2004 de Telegraaf was carrying twice as many Fords, Volkswagens, Mercedes,and Opels as the eBays marktplaats. What is more in December, Speurders was

accelerating ahead.

A year and half later, and a repeat of our survey of the time, showed that Speurderswas growing far faster than eBays marktplaats.

By this time, I should add that Wegener, another leading local newspaper publisher inthe Netherlands, had pointed out that they too had a great story to tell, and theirdata is highlighted in blue.


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The last 24 months have seena record number of new

launches

FACTFACT

Every business every industry needs to evolve and change with the times. Andthats just as true for the newspaper industry, as any other. Over the past 24 months,we have seen more new title launches that at any other period in our industryshistory.


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World paid-for daily newspaper titles *

6,289

6,166

6,244

6,450

6,580

5,900

6,000

6,100

6,200

6,300

6,400

6,500

6,600

6,700

2000 2001 2002 2003 2004

UP 4.1 % in AsiaUP 4.1 % in Asia

UP 1.3 % in EuropeUP 1.3 % in Europe

DOWN 0.1 % in N. AmericaDOWN 0.1 % in N. America

UP 1.1 % in S. AmericaUP 1.1 % in S. America

UP 1.4 % in AustralasiaUP 1.4 % in Australasia

UP 10.4 % in AfricaUP 10.4 % in Africa

* Excludes free dailies -- Source:World Press Trends 2005

Number of paid-fornewspaper titles (excl.

frees

Last year, alone the number of new paid-for new title launches increased by 130.

The year before it was over 200.

2005 will I believe prove to be another record year.

And it is a worldwide phenomenon,

- up 4.1 % in Asia

- up 1.3 % in Europe

- down 0.1 % in North America essentially reflecting the consolidation ofevenings and morning titles.

- up 1.1 % in South America

- up 1.4 % in Australia & Oceania- up 10.4 % in Africa


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Innovation

product innovation investment in products

new formats

value-add sections

magazines

marketing etc

investment in capital

colour, productionflexibility etc..

And beyond new title launches, we are seeing innovation at every level of everynewspaper group...

Heres just some of our own [Independent News & Medias] recent new product

innovations from compact editions of the London Indy (which lifted our core sale bya staggering 22%) to new value-added magazines and supplements all catering to themore discerning advertiser and reader.

Allied to that has been the new focus on marketing and promotion beyond meregiveaways - as well as investment in new equipment to provide more colour, morepagination and more flexibility.


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Across the world, free dailies areintroducing more young readers,

than for the last generation

FACTFACT

In the last 12 months alone, weve seen 38 new free dailies being launched worldwide,expanding the relevance of newspapers in the minds of young consumers.


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Free newspapers/ dailies

0

5000

10000

15000

20000

25000

1991

1992

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Metro Other s

Over 160 titles worldwide

Nearly 25 million copies

Over 160 titles worldwideNearly 25 million copies

Source: WAN World Press Trends 2005

Thousandsofcopies

Today there are over 160 free titles world wide with a total circulation of nearly 25million copies.

Metro has been the biggest player in this field though their growth is being eclipsed

by other publishers who are strategically launching frees as a support, flanker brandto their paid fors.


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Free newspapers/ dailies

0

5

10

15

20

25

30

35

13-24's 25-34's

Free daily

Paid daily

Source: Gallup TNS Metro International

%

ofagegroup

Readership patterns in European citiesReadership patterns in European cities

This chart from TNS Gallup shows the readership of newspapers in European cities.

Among 13-24s free dailies have attracted far more new readers.

What is better news for paid-for publishers is that, for those people who are ten yearsolder, the picture is actually reversed. So we are seeing more young people enteringour food chain, and this has to be a good thing.

Perhaps more critically, 2005 Research in the United States by Scarborough Researchindicates that free newspapers are actually attracting readers to paid-for newspapers.

Generally-speaking, the audience for free dailies are younger and more ethnicallydiverse with generally below average levels of newspaper readership. But the

Scarborough study in 4 major US markets found that most readers of free dailies werealso reading one or more paid dailies, and that there was no risk of cannibalisation.


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49


Newspaper companies continue toinvest heavily in the business

FACTFACT

Supporting all of this new found optimism, is the fact that the industry is investingheavily in the future of its business.


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Analysts/ Institutional Presentation: London, 25th January 2006 Source: WAN estimates/ Company releases

Capex: Capital Projects (2005-6)

Over $4.0Over $4.0billionbillion

We stopped counting at $4 billion dollars.

Thats at least the amount that major publishers have announced that they areinvesting in new printing and production equipment. From News Corporations 600

million investment in the UK to papers across the USA, its a good time to bemanufacturing printing presses.

If this was a deadwood industry youd have to wonder why

The reasons are clear:

Firstly, there is enormous growth in the demand for colour in our industry botheditorially and advertising. Secondly, product shapes and formats need to change withand reflect consumer demands. And finally, printing is being used as a strategic tool

to better dominate markets, to better control supply pricing, and to raise the barriersof entry higher especially for those dot.com pretenders who increasingly want toreverse print from online.


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Couplesperweb

Capex: Growth in the Colour Capacity

Source: MAN Roland

Reflecting consumer preferences, the trend towards more and more colour innewspapers continues unabated. Today, full four-colour capacity for all webs is agrowing reality.

This is how MAN Roland the biggest press manufacturer in the world - havecharted the rise in colour. And its not just colour the markets buying its buyinglabour savings, workflow optimisation, and higher and more quality consistentprint.


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SUMMARYSUMMARY

Why Newspapers?...

So how do we summarise all of this?


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Closing Remarks

I t h ink t he papers in t his count r y ar ebet t er t han t hey ve ever been. Some of

t he ci r culat ions ar e decl i n ing - but i f you

look at t hei r f u l l reach, i f you add up

t hei r pr i nt ed ci r cula t ion to t he in t ernet

ci r cu la t ion, t hey r e probably ext end ing

t hei r reach.

Rupert MurdochChairman and CEO, News Corporation

Source: Interview in The Daily Telegraph,23rd January 2005

Ill start with a quote from Rupert Murdoch one of the most successful mediaproprietors..

This quote was in response to Jeff Randalls question, did Rupert believe that Britains

newspaper industry was in terminal decline

Clearly not.


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Summary/ Conclusions

ADVERTISING

Advertising recovery continues UBS/ Zenith Optimedia estimate06 growth of 5.9% (with no region ahead by less than 4.6%).2006 World Cup will fuel recovery.

Substantial capex to further stimulate advertising growth, withenhanced colour and production capabilities/ yields.

CIRCULATIONS

Volumes will likely remain flat in mature markets (and continueto boom in developing economies) but overall there will beupward pricing and better realisation per copy on circulation.

Enhanced production qualities/ options and better marketingunderpin volumes.

Frees building a new consumer base for paid-for titles

In terms of Advertising,

Advertising recovery continues UBS/ Zenith Optimedia estimate 06 growth of5.9% (with no world region ahead by less than 4.6%). Further, the 2006 WorldCup will fuel recovery.

Substantial capex will further stimulate advertising growth, with enhancedcolour and production yields.

Looking at circulations,

Volumes will likely remain flat in mature markets (and continue to boom indeveloping economies) but overall there will be upward pricing and betterrealisation per copy on circulation.

Enhanced production qualities/ options and better marketing underpin thosevolumes initiatives.

Frees are actually building a new consumer base for paid-fors


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ONLINE

Timing is everything!

Re-defines our classified market expands market reach (t he

missing 85%).

Extending already strong brand franchises and yielding newrevenue streams (auctions, gaming, dating, travel etc)

Online advertising spending to increase and newspaperpublishers are increasingly well positioned (average onlinerevenues between 3 5% currently*) particularly in classifieds.

Greater broadband penetration becoming increasing threat to TV(free/ cable/ satellite), increasing fragmentation further, andunderpinning newspaper ratecard pricing.

* Source: UBS Global Media Conference 2005

In terms of Online,

As I said, if I am critical about our industry, it is because it was slow to react to theonline promise. Thankfully that is now history. And as I said, Timing is everything!

The industrys online efforts now allow us to properly re-define our classified market

expanding market reach (and reclaiming the missing 85%).

It also allows us to extend our already strong local brand franchises and yield newrevenue streams (be it auctions, gaming, dating, travel etc)

Online advertising spending is certainly set to increase and newspaper publishers areincreasingly well positioned (average online revenues between 3 5% currently) particularly in the area of classifieds.

Finally, the greater incidence of broadband penetration is fast becoming an increasingthreat to TV (free/ cable/ satellite), increasing that fragmentation further, andunderpinning newspaper ratecard pricing.


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OPERATING LEVERAGE

Highly cash generative.

Margins improving despite online investments/ opex asnewspaper companies downsize, outsource and invest in morecost effective methods of production and distribution.

Newspaper companies debt levels at low end of historical scale.

Newspapers are not expensive on historical measures (* eg.European media is trading at a c.15% discount relative to itshistorical average (1990 2005)).

Inherent value of newspapers underpinned by cash basis, ongoingmarket consolidation and the VCs buckets of cash.

* Source: UBS Global Media Conference 2005

Finally, lets not loose sight of the fact that ours is a very cash generative industry.

Underlying margins are improving despite ongoing online investments and opex asnewspapers continually downsize, outsource and invest in more cost effective

methods of production and distribution.

As I mentioned earlier, newspaper companies debt levels are at the low end of thehistorical scale.

And newspapers are not expensive by reference to any historical measures (* eg.European media is trading at a c.15% discount relative to its historical average (1990 2005).

Finally, I believe that the inherent value of our industry is underpinned by its stronglocal brand franchises, strong cash flows, and the ongoing market consolidation andnot forgetting the VCs buckets of cash who seem enamoured, rightly so, withnewspaper companies these days.


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Analysts/ Institutional Presentation: London, 25 th January 2006

Ziarul Financiar, Romania

the power of the medium

So, in closing, I hope that you can sense my enthusiasm for newspapers very much themass-market medium of the future,

Perhaps, rather ironically in the context of all of what Ive been saying Ill finish with aRomanian TV advert for a newspaper, which clearly demonstrates the enduring loyalty and

relevance of the newspaper as the most powerful medium available to advertisers.


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WAN Savoy Prese on 25-01-06

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