The media industry was shaken to its core last year when two of SA's largest publishers, Naspers and Independent News & Media, announced they would be laying off staff.
Naspers may have little reason to worry. The group - ranked the most empowered media firm in the 2009 Top Empowerment Companies survey scoring 68,18% - owns Media24, Africa's largest publisher which owns the Daily Sun, Beeld, City Press and magazines titles such as FinWeek and True Love. Independent News & Media, which is not listed in SA and therefore excluded from the research, is home to titles such as The Star, The Sunday Independent, and regional titles The Mercury and Isolezwe in KwaZulu Natal, and The Cape Times and The Cape Argus in the Western Cape.
Media24 - Rising costs are affecting the print media
The drastic cuts are the first in the media industry in almost a decade. Rising printing costs, declining copy sales and shrinking advertising revenue are to blame.
Internationally, iconic publications such as The Independent in London and The New York Times are also feeling the pinch. Dublin and London-listed Independent News & Media is even considering selling its bleeding UK operations and other non-performing assets in Ireland and Australia.
Black economic empowerment (BEE) in the media sector is bound to suffer under these market conditions. History can attest that BEE and the market bulls are best friends. Companies that failed to take advantage of the previous upswing may have to wait longer to sort out their BEE standings.
The bottom line is consumers are increasingly migrating to the online stage to source news and entertainment services.
Though SA is not yet up there with the rest of the world, it's definitely headed in that direction and experts predict that the slow adoption pace will lead to the demise of many publications.
Arthur Goldstuck, MD of World Wide Worx, a specialist ICT research firm, says SA newsrooms have displayed a very "blinkered attitude" towards online, which has held them back. "But with the global credit crunch, a new realism has taken hold and large organisations can no longer afford to hold onto traditional positions purely because they are traditional," he says. A lot of what is happening in the media right now is not just a consequence of slowing growth globally but also a shift in people's reading habits, he says.
To say the writing has been on the wall for some time would be putting it mildly.
Naspers began predicting the slowdown as far back as 2006 with publishing group Caxton - whose empowerment status was not measured this year - and Avusa, the third most empowered media group with 55,06%, testifying to feeling the pinch last year. The market is still waiting for Avusa, which owns 50% of BDFM, the publishers of the FM and Business Day, to conclude a black economic empowerment deal. Though its largest shareholder is black-owned Mvelaphanda, which owns 25% of Avusa, the media group was expected to complete a BEE deal that would have given Avusa's management and employees ownership of 10% of the company. However, the deal was shelved because Avusa CEO Prakash Desai felt it would not receive the required 75% shareholder backing it needed to go ahead. Whether such a deal is possible now is anyone's guess. The credit crunch and falling asset prices have made it almost impossible to fund BEE deals.
Backing up reports of the pinch is the Audit Bureau of Circulations (ABC). Almost 70% of daily newspapers experienced a decline between July and September, according to the ABC, while digital editions, though small, grew by 25%.
In the past, media companies have used SA's low Internet penetration levels to explain their lack of interest in the medium. Goldstuck says the excuse is a cop-out, given that most mainstream titles are aimed at an audience that mostly has access to the Internet. "The best online media will be those that are able to leverage print media, and the most viable print media will be those that are able to leverage online," he says.
Using 2008's biggest breaking stories as examples - the resignation of 11 cabinet ministers following that of former President Thabo Mbeki and the collapse of the JSE - Goldstuck says mainstream media failed to use their online presence to scoop each other, choosing instead to reserve their coverage of the events for print. The result: all mainstream titles ran the same breaking news at the same time.
He says big organisations can no longer afford to have a business-as-usual approach, sticking to doing things the way they've always done them.
Rhodes Journalism School head professor Guy Berger says the economic downturn will soon give newsrooms no choice but to use cheaper and alternative platforms to get the news out there. These include online and mobile platforms.
He predicts that in future the media, both old and new, especially the advertising-reliant platforms, will be severely hit - some even fatally. The signs are already there.
