As indicated by the typical company data, the demand for print magazine and print advertising has been declining significantly in the past several years. The reduced demand has shifted partially to the corresponding digital platforms of those companies and, to larger extent, to other type of Medias.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

• The continuously shifting of readers from traditional print magazine to other digital forms of sources seems to be accelerating in the past several years as indicated by the continuing decline in print magazine circulation.

• The demand for print advertising has been significantly decreasing in the past several years as indicated by decrease in both pages and price.

• The demand for digital advertising has gone up but more slowly than the decline in that for print advertising.

• Facing tough industry climate, companies have reacted by consolidating and shifting business focus to digital content to adapt this trend and by saving costs to keep margins.

Causes behind the trend

• Increasing availabilities and lower/free costs of accessing online media and changes in preference of reader should be the reasons behind readers’ shifting away from traditional media.

• Competition is obviously more intensive in digital content providers than traditional print newspaper industry. Therefore, the reduced readers’ time on print magazine are again largely diluted by more competitors/websites/other entertainments.

• Because the shifted readership did not all go to the corresponding digital platforms of those traditional media companies and because advertisers have more options/platforms in reaching consumers, the lost advertising in print magazine of those companies is not completely offset by the increase in their digital platforms.

Industry Future

• There are going to be increasing difficulties for current magazine companies to adapt changes in in this industry.

General Financial Performance of Companies In the Sector

It seems that the demand for print advertising of companies in this sector has been significantly decreasing in the past several years as indicated by the averaged decrease in organic print advertising revenue (average 10-15% annually in 2016-2018) due to decrease in both pages and price. While digital advertising revenue has increased, the average 3-4% growth in digital advertising revenue of companies in this sector has been far from enough to offset the declining revenue in their print advertising. We also see the decline in their subscription/newsstand revenue (2% annually) during the same period of time.

Declining revenue from its core revenue source has put huge pressure on companies’ gross margins (58% currently). However, benefiting from costs cutting, companies seem to be managing to keep operating margin at between 8-15% in 2018 with an average SG&A of about 44%.

The typical enterprise price/EBI ration is 14-15.

Looking for  multiples to help you make decisions in pricing of PE, M&A, or distressed debt transactions?

Please click the button below.