SPH is a
media company and many believe it has a dying media business. However, in the short to medium term, I think we cannot be so sure to deliver such a verdict.
First, let us look
at the table below.
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Click to enlarge. |
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revenue has some correlation with economic activity, and the number we look at here
is the GDP.
Margin is also not declining in a straight line but is rather
volatile, with better margin during boom years, as can be seen in 2010 and 2004.
But, what
about the onslaught of digital platforms? Do they not have an impact on SPH?
Well, the answer is "no". Huh? Am I contradicting myself here?
Advertisement
comes from three segments: Display, Classified and Magazine & Others.
As I have
posted in a forum before, if we track the revenue of these segments from
2009 to the most recent quarter (i.e. the most recent trough to recovery), the weak
2008 Q4 to 2009 Q4, Classifieds and Recruits ads suffered the biggest drop as
compared to Display. When the weak recovery started in 2010, total advertisement
revenue was smaller than in 2012 and 2013 YTD, yet Classified's revenue was higher in
2010 than in 2012 and 2013 YTD.
Hence,
declining business was due to the decline of the Classified segment, which
included the Recruits segment. It makes sense too, if you want to buy a house, or
look for a job, you may no longer turn to the newspaper Classified segment
anymore as there are many websites offering such services. However, if you are talking about M1 or other
telcos, or the supermarkets trying to market their promotions, chances are they
will still do it through the Display segment of the newspapers.
The
"Display" sections will probably be around for a long time and might
even grow from strength to strength due to Singapore's growing economic strength with a bigger domestic economy over time.
The
"Classified" section revenue was 28% of 2012 Ad revenue, at 218
million and continues to shrink in 2013.
Now, to look
at it from the perspective of whether SPH's other businesses can offset this shrinkage, a 5% annual
deterioration is only $11 million which is about 1.3% of annual advertisement revenue
and less than 0.5% of total revenue. I seriously do not think it would be a tall
order to offset this.
Another
concern is circulation figures, the circulation of printed papers have been in
constant decline, 2012 figures was pumped up because they included digital
subscriptions, which I feel resulted in double accounting as the print and
digital version would likely overlap (i.e. people who subscribed to print
would automatically be given digital accounts).
So, if circulation keeps falling,
wouldn’t Display advertisement revenue be affected too? My personal opinion
is that as long as there is no drastic fall in circulation, Display segment
revenue will be more affected by economic activity than by circulation, simply
because SPH is a monopoly (and we might want to remember that they have a stake in Today too) and there are no
credible alternatives.
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