Global Industry Surveys

Media: Europe
Alexander Wisch, Media Equity AnalystEurope
JANUARY 2014

Current Environment ............................................................................................ 1

Industry Profile ...................................................................................................... 7
Industry Trends ................................................................................................... 13
How the Industry Operates ............................................................................... 22
Key Industry Ratios and Statistics ................................................................... 41
How to Analyze a Media Company .................................................................. 43
Glossary ................................................................................................................ 52
Industry References ........................................................................................... 58

CONTACTS:

Comparative Company Analysis ...................................................................... 61

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This issue updates the one dated June 2013.

The next update of this Survey is scheduled for July 2014.

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Please see General Disclaimers on the last page of this report.

Topics Covered by Industry Surveys

Aerospace & Defense
Airlines

Financial Services: Diversified

Movies & Entertainment

Foods & Nonalcoholic Beverages

Natural Gas Distribution

Alcoholic Beverages & Tobacco

Healthcare: Facilities

Oil & Gas: Equipment & Services

Apparel & Footwear:

Retailers & Brands

Healthcare: Life Sciences

Tools & Services

Oil & Gas: Production & Marketing

Paper & Forest Products

Autos & Auto Parts

Healthcare: Managed Care

Publishing & Advertising

Banking
Biotechnology

Healthcare: Pharmaceuticals

Real Estate Investment Trusts

Restaurants

Broadcasting, Cable & Satellite

Chemicals

Heavy Equipment & Trucks

Homebuilding

Retailing: General
Retailing: Specialty

Communications Equipment

Household Durables

Semiconductor Equipment

Computers: Commercial Services

Computers: Consumer Services &
the Internet

Household Nondurables
Industrial Machinery

Semiconductors
Supermarkets & Drugstores

Insurance: Life & Health

Computers: Hardware

Telecommunications: Wireless

Computers: Software

Insurance: Property-Casualty
Investment Services

Electric Utilities
Environmental & Waste Management

Telecommunications: Wireline
Thrifts & Mortgage Finance

Lodging & Gaming

Metals: Industrial

Transportation: Commercial

Foods & Beverages: Europe

Healthcare: Products & Supplies

Global Industry Surveys

Airlines: Asia
Autos & Auto Parts: Europe

Media: Europe

Pharmaceuticals: Europe
Telecommunications: Asia

Banking: Europe

Oil & Gas: Europe

Telecommunications: Europe

Food Retail: Europe

S&P Capital IQ Industry Surveys

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CURRENT ENVIRONMENT
Advertising: Big events drive adspend
We are positive on global advertising growth in 2014, a year that we think holds great promise for
advertising because of big global events like the Winter Olympics, the World Cup, and the US mid-term
elections. We believe such events will gain increasing visibility over the next few months, despite short-term
cyclical challenges, in particular the uneven nature of the global economic performance that continues to
impact consumer sentiment and, in turn, advertising expenditure.
We expect emerging markets and North America to continue to provide a significant upswing in growth in
global advertising expenditure, supported by improving trends in Europe. We believe this will help advertisers
with a global footprint that are also exposed to special 2014 events and a strengthening US dollar.
We are also positive on groups that derive their revenues from local advertising (broadcasting, print media),
despite some lingering concerns we have about the health of the economic recovery in Southern Europe. The
latest industry forecasts expect a progressive recovery in global advertising over the next year, with Western
Europe finally on a positive growth pattern. We are particularly positive on core Europe, including Germany
and the UK, with Southern Europe offering a good upswing after years of negative ad expenditure growth.
Estimates on the rise again
For the better part of two years and through early 2013, global advertising revenue forecasts were too
optimistic and tended to disappoint on the downside. However, in the third quarter of 2013, key forecasters
like Magna Global, GroupM, and
ZenithOptimedia (ZO) maintained their
EVOLUTION OF GLOBAL ADSPEND FORECASTS
global forecasts for 2013 and projected
(Year-to-year percent change)
stronger growth in 2014 and 2015. In
6.5
contrast, they had revised their forecasts
downward in the second quarter of 2013.
6.0
Chart C04:
The primary reason for this improving
EVOLUTION OF
5.5
outlook is the nascent recovery in Europe,
GLOBAL ADSPEND
as the Eurozone came out of an 18-month
5.0
FORECASTS
recession in the second quarter of 2013. ZO
4.5
expects the Eurozones adspend to decline
4.3% in 2013, versus a 5.2% decline in
4.0
2012. However, it projects the adspend in
3.5
the Eurozone to grow by 0.7% in 2014 and
1.9% in 2015.
3.0
Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

We believe forecasters and the advertising

agencies were caught off guard by how long
companies maintained their own austerity
Source: ZenithOptimedia forecasts dated March 2012 to December 2013.
programs in regard to advertising. In fact, in
the rest of the world, the pace of the
advertising spend recovery began to level off much sooner than in prior recoveries. In 2012, total ad dollars
in the US were 8% below their 2007 peak. Compared with prior cycles, companies have focused more
diligently on bottom-line results and emphasized promotions more heavily in lieu of advertising. They have
placed a greater emphasis on return on investment (ROI) of advertising spend, shifted their budget spending
to more effective digital campaigns, and attempted to stretch their ad dollars further. The ad agencies have
had to adjust to this new situation.
2012-2013

INDUSTRY SURVEYS

2013-2014

2014-2015

MEDIA: EUROPE / JANUARY 2014

INFLECTION POINT REACHED

We believe we may have reached an inflection point in the global forecasts. In our opinion, both the
agencies and forecasters earlier had factored in a more conservative outlook for 2013 and 2014 that has
allowed them to maintain their outlook, for a change. Moreover, for the first time in the last year, the
agencies collectively have put forth a much more confident tone, not only because of continued growth in
higher-growth markets and North America, but also due to signs of improving trends in Europe. Europe is
likely to be the main swing factor in 2014, given that the region came out of an 18-month recession in the
second quarter of 2013. We are positive on the European Media sector, expecting it to deliver a strong
performance in 2014, as already evidenced in a strong recovery in some advertising-dependant companies like
the UK advertiser ITV PLC.
Meanwhile, the figures for North America remain resilient after a few quarters of solid expansion. North
America, the largest global advertising market, is likely to maintain its strength due to a healthy and
sustained economic recovery. Consumer sentiment remains strong amidst a very accommodative fiscal
policy by the US Federal Reserve Board (the Fed). We are also experiencing a period in the economic
recovery where companies emphasis is on revenue growth rather than the excessive focus on margin
expansion seen during the recession. This shift lends itself to opening advertising budgets as companies
accelerate new product introductions and are more aggressive in wooing customers. In addition, the
structural changes taking place in the advertising industry, in which a larger share of ad dollars is being
spent on digital channels, favour North America, where this practice is more established.

EUROPE ON POSITIVE GROUND AGAIN

According to an October 2013 forecast from ZenithOptimedia (ZO), world adspend is estimated to rise by
3.5% in 2013 and 5.1% in 2014, with Northern and Central Europe down 0.8% in 2013, but projected to
grow 2.0% in 2014. The Eurozone periphery (Greece, Ireland, Italy, Portugal, and Spain) is expected to
decline by 11.6% in 2013 and by a mere 1.2% in 2014. The expected growth in global adspend in 2014 is
driven by the improvement expected in Europe. North America is seen up 3.4% in 2013 and 4.0%5.0% in
2014. Fast-track Asia (which includes China, India, Indonesia, Malaysia, Pakistan, the Philippines, Taiwan,
Thailand, and Vietnam) is expected to grow 10.8% in 2013, and 11%12% in 2014.
A similar report from GroupM, published in August 2013, puts world adspend growth at 3.4% for 2013.
This lower estimate is due in part to the drop in ad investment in the Eurozone periphery, where, according
to GroupM, adspend would fall 11% in 2013. As we mentioned above, we believe the cycle of forecast
reductions has ended, following a series of cuts in estimates over the past two years.
Growing exposure to emerging markets
Despite strength in North America and a recovery underway in Europe, advertising agencies continue to
expand in emerging markets, as has been the case over the past several years. ZO in October 2013 forecast
that between 2012 and 2015, 64% of the worlds growth in advertising expenditure will come from
developing markets (of which 35% will come from Russia, Indonesia, Argentina, and China). According to
ZO and GroupM, China has already overtaken Germany to become the worlds third-largest ad market,
trailing only the US and Japan. This has prompted European advertisers to accelerate their move East, a trend
that we expect to continue over the next three years. The UKs WPP Group PLC, for example, continues to
expand aggressively in China. French advertising agency Publicis Groupe SA. generated 55% of 2012s total
revenue in emerging markets and digital, up from 42% (23% in emerging markets and 19% digital) at the end
of 2008. The company is aiming to generate 75% of its total revenue from emerging markets and digital.
Online migration and disintermediation
Because most of the growth is coming from emerging markets and digital, in our view, some agency
doomsayers are warning that the agency model could be under threat as marketers directly target more costeffective search engines for advertising campaigns. However, our conversations with search engine managers
and ad agency CEOs indicate most players advocate the complementary function of agencies and search
engines. Google, for example, has an alliance with Publicis, which highlights to us that Google has much to
2

MEDIA: EUROPE / JANUARY 2014

INDUSTRY SURVEYS

learn in dealing with complex client demands, while Publicis has much to learn in creating effective
campaigns that make better use of algorithmic search solutions.
The sheer complexity of rapidly changing consumer behaviour makes it unlikely that agencies will be
eliminated from the picture, in our view. Even the most successful search advertising campaign will likely
require some cross-media reference. For example, if a potential car buyer wanted to search for the latest
Ford sports sedan model, she needs to be aware that such a model exists; for that to happen, a mass-marketing
television campaign remains highly effective. The level of TV advertisingincluding medium, timing, and
creative inputand the type of search advertising that could be linked to it remains a very complex
equation. In this context, we believe it is likely that advertising agencies will continue to see growing
demand for their advice for years to come, in particular for digital advertising solutions.

BROADCASTING REMAINS THE MOST POWERFUL MASS MEDIA VEHICLE

Despite the growing importance of the Internet as a medium for the delivery of advertising messages
(Search, Classifieds, and Display), TV remains by far the largest single recipient of advertising dollars
globally. TV receives 40% of the global advertising expenditure, a number that has stayed relatively
constant over the past five years, according to forecasters like ZenithOptimedia. We believe this trend is
unlikely to change in the near future.
Despite the proliferation of Internet-based entertainment, both on personal computers (PCs) and mobile
devices such as iPads, linear TV viewership remains robust. According to the Broadcasters Audience
Research Board (BARB), an industry organization that compiles audience measurement and television
ratings in the UK, the average number of hours of TV watched by individuals in the UK has risen over the
past eight years to 4.0 hours per day in 2012, versus 3.7 hours a day in 2004. In 2012, the global average
stood at around 214 minutes per person per day, according to the Office of Communications (Ofcom), the
UK regulatory agency, with most large European countries showing figures above that.
On balance, TV advertising is forecast to maintain its share of global adspend at about 40%, on average,
for the next three years, according to ZO. This is consistent with our view and data from Warc, a global
market research firm, presented by Ofcom in its December 2012 review of the European TV industry.
However, there are important differences across European countries. While TV advertising in the UK and
France was about 27% and 34% of total advertising expenditure in 2012, respectively, the figure can be as
high as 53% in Italy and as low as 22% in Germany. For comparative purposes, the US figure is 39%,
which is very close to the global average of 40%, according to ZO.
This analysis, however, masks another structural challenge that broadcasters face: the proliferation of multichannel TV and multiple technological platforms that allow viewers to time-shift their content consumption
with ease.
Free-to-air TV: when more means less
There has never been more media available in as many formats as today. If we consider TV alone, out of
150 million TV households in Western Europe, 68% have some form of pay-TV subscriptioncable,
satellite (known as DTH, or direct to home), or Internet Protocol television (IPTV)up from 40% at the
beginning of the last decade, according to figures from market forecaster Informa Telecoms & Media. Of
the remaining 33%, most have access to some form of free multi-channel TV. At the same time, younger
people are increasingly relying on the Internet for video content. In the UK, for example, programs like
Britains Got Talent and The X Factor have generated tens of millions of hits on YouTube, while the
online streaming platform BBC iPlayer gets more than 120 million play requests every month. During the
London Olympics in August 2012, the platform saw 196 million requests.
The explosion in media channels has caused an unprecedented fragmentation of audiences, making it
increasingly difficult for broadcasters to offer advertisers massive viewership on a regular basis, as was the
case through most of the 1980s and into much of the 1990s. In a nutshell: more channels and more content
means fewer viewers per program and less advertising revenues per channel. In most countries, it is usually
the largest incumbent channels that are hurt the most by declines in viewership.
INDUSTRY SURVEYS

MEDIA: EUROPE / JANUARY 2014

In the UK, the largest incumbent free-to-air channels, commercial and non-commercial alike, have seen a
decline in viewership, but the decline has been particularly sharp for the main incumbents, BBC1 and ITV1.
These two channels have seen their combined share of viewership decline from more than 75% in the early
1990s to 37% at present (November 2013), according to the BARB. Meanwhile, a large and growing
number of small channels have increased their share from less than 5% to 44.5% at present. Mid-size
channels make up the remaining 18.5%.
In response to this shift, most broadcasters have created families of channels that target niche demographic
segments. Their relative success depends on their ability to position a particular channel as desirable for a
particular audience, be it young professional women, mature men, or the young and cool. Although this
has helped to maintain sales, in our view, it also squeezes margins: feeding content to several channels
rather than one sometimes requires doubling the expenditure on original programming.
An emerging trend in Europe is for broadcasters to become platform-agnostic. A good example is
Scandinavian broadcaster MTG, which delivers its content via its own satellite platform, but also has
agreements with cable and telecom companies to deliver its content via cable and IPTV. This way, the
viewership of its content remains constantor even increasesdespite the proliferation of channels and
platforms with multiple solutions for retail clients.
Pay TV: Chasing premium ARPU
Pay TV is less cyclical than free-to-air because it relies on a flow of revenues from subscriptions, with
contracts usually tied up for more than 12 months. This makes the cash flows generated by pay TV more
stable and predictable than those generated by advertising. However, this reduced level of cyclicality also
means that pay TV will be less exposed to the upswings in global advertising expected towards 2014, in our
view. That said, the pay-TV sector also offers growth, benefiting from such powerful catalysts as the mass
adoption of high-definition TV (HDTV), 3D TV, pay-per-view, personal video recorders (PVRs), and video
on demand (VOD). According to Ofcom, as many as 41% of UK TV households own HD sets. In terms of
PVRs, as many as 39% of UK TV households own such a device, versus about 18%21% in France,
Germany, and Italy. Meanwhile, today, 68% of European TV households pay for their TV contentalmost
double the percentage doing so 10 years ago, according to market forecaster Informa.
Although the incentive to take up multi-channel offerings has increased with digitalization, so has
competition, especially with the growth of newer technologies like digital terrestrial television (DTT) and
Internet Protocol television (IPTV), adding to already established technologies like satellite and cable. In this
environment, value-added servicessuch as PVRs, HDTV, and video on demand (VOD)have become a
key differentiator for established players seeking higher average revenue per user (ARPU). As digitalization
reaches the whole of Europe, value-added services will be the only revenue growth drivers for pay TV. In our
view, the most innovative operators that are able to offer premium content anytime, anywhere, and in any
platform are likely to fare better than the ones pushing exclusive fixed bundles.
The telco threat
Telecom operators are also a potent threat in the pay-TV market across Europe as they use it as a customerretention tool, using triple-play or even quad-play bundles to help reduce churn and increase ARPU. The
platform of choice for many telecom operators is IPTV, as TV services are usually sold in bundles with
broadband access and telephony. In the UK, for example, British Telecoms pay-TV service is BT Vision.
Launched in 2006, it had secured half a million connected households by 2010, which was significantly
short of its original target of three million households by the end of that year. This was even after BT Vision
made an aggressive commercial move to offer Sky Sports channels at a lower price level than on the Sky
platform. This move, although loss-making for BT, was aimed at eating into Skys market dominance and
allowing BT Vision to move towards its ambitious target. At the end of September 2013, BT Vision had
900,000 subscribers, a number that saw a significant boost after it started broadcasting English Premier
League matches in an exclusive deal in the summer of 2013.
France is the European country with the highest penetration of IPTV, with as many as a 28% of TV
households having opted into this technology by 2012, according to data from LAutorit de Rgulation des
Communications lectroniques et des Postes (ARCEP), the French telecom regulator. In Germany and
4

MEDIA: EUROPE / JANUARY 2014

INDUSTRY SURVEYS

Spain, the figures were 4% and 6%, respectively, in 2011, and as high as 11% in Sweden, according to
research from Ofcom. The lower IPTV penetration in some markets is due to the strength from wellestablished competing digital platforms.
Incumbent pay-TV operators are reacting aggressively to this threat by offering telecom, broadband
services, high-definition, and catch-up TV services. Although this is good in terms of ARPU, short-term
margins suffer, in our view, due to the capital expenditure required to achieve aggressive targets. IPTV
remains a powerful pay-TV platform across Europe, competing head-to-head against satellite, cable, and
DTT. In France, IPTV is the most popular pay-TV platform among all types of technology. In 2012, there
were almost 7.7 million IPTV households in Europe. Many European telecom operators are aggressively
investing in content. For example, British Telecom acquired exclusive rights to broadcast English Premier
League matches at the cost of about 246 million per season, thus becoming more of a threat to pay-TV
operator Sky.

PUBLISHING: NEWSPAPERS TEST DIFFERENT BUSINESS MODELS AMID STRUCTURAL THREATS

Throughout Western Europe, print newspapers are struggling to find and keep readers. Regional dailies are
more stable than the big national newspapers, in our view, but are also under pressure. Although the time
Western Europeans spend reading print editions of newspapers and magazines has remained steady, in our
view, this represents a declining share of time devoted to all media. Currently, consumers are spending an
increasing amount of time on digital devices, including mobile devices, but digital revenues have so far failed
to outstrip the decline in print for most traditional media outlets.
Newspapers manage online migration
Newspaper publishers in Western Europe face the considerable challenge of increasing revenues and profits
at a time when paid circulation is falling and advertising business is increasingly moving online and to other
new media. Managing the print-to-digital migration has not been easy, given increased competition amongst
websites and difficulty in generating loyalty via subscription-based sites.
While readers increasingly favour online news over print, newspapers continue to struggle to find a way of
monetising their online readership. Given the wealth of free information available online, very few
publications have managed to secure significant revenue streams from paid access to online content. In
general, the success stories tend to be newspapers that offer specialized content not available elsewhere, like
FT.com from the Financial Times (owned by Pearson Plc).
Meanwhile, generalist newspapers continue to be hurt, as they have so far been unable for the most part to
charge for online access without alienating their readers and choking off the little advertising revenue they
manage to get. In 2009, News Corp., owner of key publications like The Times and The Sun in the UK and
the Wall Street Journal in the US, threatened to remove all the tagging from Google in order to avoid free
usage of its news. The News Corp. has been moderately successful in charging for access to the Wall Street
Journal and has exported this walled garden strategy for titles like The Times and The Sunday Times.
Meanwhile, online access to popular daily The Sun remains free, favouring the advertising revenue model.
Market research studies have shown that online readers are not averse to paying for content, but they would
like to have more choice than just subscription-based payments. So far, we believe micro-payment systems
are too cumbersome to entice occasional visitors to a newspaper site to pay for individual content sets.
Magazine publishers, in spite of similar challenges, are doing better than newspaper companies are, aided by
new title launches, new business ventures, and loyalty to traditional brands. Book publishers are faring well
across Europe, in our view, with much industry hope pinned on e-readers and a new breed of slim ultraportable computers, like tablet PCs, the iPad, and popular e-reader devices like Amazons Kindle, that allow
readers to easily download and carry literature with them. The e-book phenomenon was negligible in terms
of revenues and profits for non-English European publishers in 2011 and 2012, given the late entrance of ereading devices to the market compared with the United States or the United Kingdom, where they have
gained significant popularity, especially amongst younger readers. In January 2013, Amazon announced
that e-books were a multi-billion dollar category and that sales grew by 70% in 2012. On the other hand,
INDUSTRY SURVEYS

MEDIA: EUROPE / JANUARY 2014

paperback sales grew only 5% in the month of December, which was the lowest sales growth for that
month in the last 17 years. In Europe, the UK market is following a pattern similar to that of the US, with
continental European publishing lagging behind in terms of e-book adoption. This is due to the relatively
lower scalability of non-English speaking countries, but also the fragmented nature of the publishing
markets.
For several years, newspaper publishers in the major Western European markets have tried to shore up their
businesses by switching to smaller formats as a way to both attract readers and cut costs. Many have also
launched free dailies to limit declines in readership and circulation, or expanded into more promising
markets in Eastern Europe. (See the Industry Trends section of this Survey for more on these
developments.)
Those tactics remain critical for newspaper companies, we believe, but publishers are now relying more
heavily on other ways to keep their businesses growing. Companies across all segments of publishing are
turning to mergers and acquisitions (M&A), to either grow in size and expand into other geographic
markets, or diversify into broadcasting or other media. Publishers continue to work hard to establish
themselves in the digital media arena.
In this report, we will discuss developments in newspaper and magazine publishing in the largest national
markets, explore the outlook for book publishing in Europe as a whole, and then detail the industrys effort
to respond to the challenges it faces via M&A and moves into digital media.

MEDIA: EUROPE / JANUARY 2014

INDUSTRY SURVEYS

INDUSTRY PROFILE
Media: Advertising and beyond
Advertising is by far the largest single driver of revenues and profits for most European media companies,
be it in publishing or broadcasting, but it is by no means the only driver. In newspaper and Internet-based
publishing, subscription-based services and individual-item sales are an important part of the equation.
Subscriptions also play an important role in broadcasting. According to the Office of Communications
(Ofcom), the UK regulatory agency, over the five years through 2012, income from pay-TV subscriptions in
Europes major TV markets (Germany, the UK, and France) was the fastest-growing source of revenue, and
represented the largest source of TV income in those countries. Global TV industry revenues were split
almost evenly between advertising and subscription revenues, with some marginal input from state funding.
In the same period, however, growth in subscription revenues outpaced advertising. According to the
December 2013 review from Ofcom, global TV revenues amounted to 252 billion ($410 billion) in 2012,
of which subscription revenues were 50% of the total at 127 billion ($207 billion), and advertising
revenues were 40% of the total at 102 billion ($166 billion). In this section, we will analyse the three
major components of the media industryAdvertising, Publishing, and Broadcasting.

ADVERTISING: GROWTH IN EMERGING MARKETS AND DIGITAL OPERATIONS

Global spending on major media is projected to reach $503 billion by the end of 2013, a 3.5% gain yearon-year, according to ZenithOptimedia (ZO), a media services firm owned by the ad holding company
Publicis Groupe SA. Global advertising has come a long way from the recession year of 2009, when
spending slumped 9.6%, according to ZO. In 2012, Western Europe held an estimated 21.5% share of the
global market, with spending of $106.8 billion, which put it in third place in total adspend, following North
America and Asia Pacific.
GLOBAL MAJOR MEDIA ADVERTISING SPENDING, BY REGION

- - - - - - - - AD SPENDING (BIL. $) - - - - - - - 2011

2012
2013
2014
2015

REGION

North America
165.1 172.6
Western Europe
109.4 106.5
Asia Pacific
132.2
140.7
Table T02: GLOBAL
Central & Eastern
Europe
25.8
MAJOR MEDIA 26.7
Latin America ADVERTISING
34.1
36.6
Africa/M. East/ROW
9.7
9.7
SPENDING, BY
World total
476.2 492.9

REGION

178.5
106.0
148.7
28.1
40.7
10.0
511.9

186.2
108.0
156.8
30.3
44.8
10.9
537.1

195.1
110.2
167.4
33.0
49.2
12.2
567.0

- - - - - - - - - PERCENT OF TOTAL - - - - - - - REGION

2011

2012

2013

2014

Germany is Europes largest advertising

market, registering about $25.6 billion in
measured media ad spending in 2012,
followed by the United Kingdom ($19.5
billion), and France ($13.5 billion), according
to ZO. These three countries were the only
European ad markets placing in the top-10 ad
markets globally. The top three markets (in
order) were the United States, Japan, and
China.

2015

The fact that only three European ad markets

placed in the top-10 global markets has not
prevented European advertising agencies from
taking advantage of global trends in higher
growth or bigger advertising markets, as
European agencies are also global in nature. In
fact, globalization has helped European
agencies, which, in response to sluggish
economic growth in their home markets, have
turned to overseas opportunities. Of the top-10 global advertising agencies by sales, three are European;
two of theseWPP Group PLC and Publicisare in the top four.
North America
Western Europe
Asia Pacific
Central & Eastern Europe
Latin America
Africa/M. East/ROW
World total
Source: ZenithOptimedia.

34.7
34.7
27.8
5.4
7.2
0.0
100.0

35.0
21.6
28.6
5.4
7.4
2.0
100.0

34.9
20.7
29.0
5.5
7.9
2.0
100.0

34.7
20.1
29.2
5.6
8.3
2.0
100.0

34.4
19.4
29.5
5.8
8.7
2.2
100.0

The largest agency networks generate most of their growth from expansion into emerging markets and
digital operations in their home markets. To do so, agencies buy out local players in different countries or
local agencies that have an important digital presence, whether it is online marketing, viral marketing, search,
INDUSTRY SURVEYS

MEDIA: EUROPE / JANUARY 2014

or a mixture. Local advertising, which primarily meets the needs of local businesses and governments,
remains important in Europe. With 27 countries and 23 official languages, the European Union is more
culturally diverse than the larger US advertising market. As a result, smaller agencies are often better able to
meet the needs of local campaigns.
The major players
A handful of international holding companies dominate the global advertising industry. According to the
trade publication Advertising Age, four agency networks controlled some 64% of the worlds ad agency
revenues (top 50) in 2012: US-based Omnicom Group Inc. and Interpublic Group of Companies Inc.;
London-based WPP Group PLC; and France-based Publicis. The worlds fifth-largest marketing organization
is the Japanese firm Dentsu, which also includes UKs Aegis as of Q1 2013. Dentsu, before the incorporation
of Aegis, was operating as an agency brand, not a holding company. (For more on agency brands, see the
How the Industry Operates section of this Survey.) Including Dentsu/Aegis, the worlds top five marketing
organizations accounted for 73% of the worlds ad agency revenues (top 50) in 2012. With three of the 10
biggest marketing organizations, Europe is a major player in the global advertising industry.
European agencies also have a long-established reputation for creativity, in our view, which they continue to
defend enthusiastically. London and Paris are Europes creative centres, home to numerous agencies that
regularly win international advertising awards. Brief descriptions of the top-three European agencies follow.
TOP 10 GLOBAL MEDIA AGENCIES
COMPANY

HEADQUARTERS

WORLDWIDE REVENUES
2011
2012 % CHG.

1. WPP Group
London
16,053 16,459
2. Omnicom Group
New York
13,873
14,219
Table: TOP
10
3. Publicis Groupe
Paris
8,086
GLOBAL 8,494
MEDIA
4. Interpublic Group New York
7,015
6,956
AGENCIES
5. Dentsu*
Tokyo
4,067
6,390
6. Havas
Suresnes, France
2,291
2,287
7. Hakuhodo DY*
Tokyo
1,934
2,184
8. Epsilon
Plano, TX
847
1,223
9. MDC Partners
Toronto/New York
943
1,071
10. Experian Marketing New York
791
947
*Figures are estimated. NA-Not available.
Sources: Ad Age; company reports.

2.5
2.5
5.0
(0.8)
7.4
(0.2)
12.9
6.7
13.9
19.7

- - - - US REVENUES - - - 2011
2012 % CHG.

5,046
7,049
3,783
3,888
316
724
0
782
758
367

5,252
7,364
4,043
3,804
735
741
0
1,159
868
395

OUTSIDE US REVENUES
2011
2012 % CHG.

4.1 11,007
4.5
6,824
6.9
4,303
(2.2) 3,127
16.9
3,751
3.9
1,567
NA
1,934
7.3
65
15.0
185
7.6
424

11,207
6,855
4,451
3,152
5,655
1,546
2,184
64
203
552

1.8
0.5
3.4
0.8
50.8
(1.3)
12.9
(1.5)
9.7
30.2

WPP Group PLC. With more than $16.5 billion in revenues in 2012, London-based WPP Group has
used acquisitions to grow rapidly. It is a diversified marketing company, garnering more than half of its
revenues from non-advertising activities. WPP rose from third- to second-largest advertising and marketing
holding company in 2003, when it completed the acquisition of US-based Cordiant Communications, then
the worlds eighth-largest advertising group. Its position was solidified with the 2005 acquisition of Grey
Global Communications, for $1.52 billion, including the assumption of debt. WPP overtook Omnicom as
the worlds largest advertising agency in 2008, following the acquisition of market research firm TNS.
WPP has been a leader in expanding its market research capabilities. The company is focusing on this
segment, as well as on web-based marketing, with the goal of making market research one of its primary
revenue generators.
Publicis Groupe SA. The French holding company, whose portfolio includes Saatchi & Saatchi and Leo
Burnett Worldwide, derived roughly half of its $8.5 billion in annual revenues in 2012 from advertising. In
July 2013, Publicis entered into a definitive agreement with US-based Omnicom Group Inc. for a merger of
equals that would create the largest advertising agency in the world. The new company would operate
under the name Publicis Omnicom Group. The merger is expected to close in the first half of 2014.
Over the past decade, managements strategic emphasis has been on expansion in digital services. Over the
past several years, Publicis has acquired a number of digital agencies, including LBi International N.V.,
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Rokkan, Rosetta, Digitas, and Razorfish. These acquisitions helped the group to comfortably achieve its
goal of 50% of total revenue in emerging markets and digital. Further, in April 2013, the company announced
plans to spend $4 billion on acquisitions in the next five years, and announced it aims to deliver 75% of
earnings from a combination of digital advertising and emerging markets. Publicis digital activities share one
roof, called VivaKi, that is a strategic initiative designed in 2008 to improve the performance of advertisers
marketing investments as well as boost the groups growth in digital markets. Publicis is one of the three
largest advertising companies in China and is strong in other Asian markets as well. It ranked first in media
buying in both the US and China.
Havas SA. With $2.3 billion in annual revenues in 2012, France-based Havas ranks as the third-largest
European advertising group, and No. 6 in the world. Its primary business segments consist of the global
advertising agency Euro RSCG Worldwide, the US agency Arnold Worldwide Partners, and the mediabuying business Media Planning Group.

PUBLISHING: EUROPES LARGEST MARKETS DOMINATE

The publishing industry is composed of three segments: newspapers, magazines, and books. The segments
function differently and are influenced by different types of events, so we treat them separately in this Survey.
Newspapers
The European newspaper market is the second largest in the world, based on advertising revenues.
According to ZO, global newspaper ad revenues totalled about $93 billion in 2012, with Asia Pacific
responsible for a third of that figure, ahead of North America and Western Europe.
Germany and the United Kingdom dominate newspaper ad revenues in Europe. Germany accounted for
29% of the regions advertising revenues in 2012, and the UK brought in 14%. No other country came
closethe next highest rankings were 6% for Switzerland, 5% for France, and 4% each for Italy and Spain.
Large publishers dominate the UK and German newspaper markets, which account for a combined 44%
share of newspaper ad spending in Europe. The other, smaller markets have lower readership, so they
attract less advertising revenues.
Regional newspapers dominate German market. Germany is unlike many of its European neighbours in
that no one city serves as a media hub. Munich, Frankfurt, Hamburg, and Berlin are all important media
centres. With the exception of Bild, most of the highest-circulation newspapers in Germany are regional
titles. There are around 10 national daily newspapers in the country, and roughly 335 regional papers.

Axel Springer Verlag AG is one of Europes largest publishers, and the biggest newspaper publisher in
Germany. The company owns more than 230 newspapers and magazines in 36 countries, including the
tabloid Bild, Germanys No. 1 newspaper, with daily circulation of almost four million. Axel Springer is
also among Germanys leading book publishers and owns about a dozen commercial printing plants
(for company and contract work) and other media interests.

Verlagsgruppe Westdeutsche Allegemeine Zeitung (WAZ), based in Essen, publishes nine newspapers in
Germany, including a regional newspaper named WAZ. The group also publishes magazines and has
television interests, as well as publishing assets in other markets.

Verlagsgruppe Georg von Holtzbrinck GmbH, a major book publisher based in Stuttgart, also publishes
several major German newspapers, including Die Zeit, and Der Tagesspiegel.

Number of newspaper owners in UK market declines. A rash of takeovers in recent years has greatly
concentrated newspaper ownership in the UK: 20 publishers now account for 87% of all UK regional press
titles as of January 2013. Three major publishers dominate the sector:

News International, the UK newspaper arm of the global media conglomerate News Corp., is among
the largest of these. It publishes three national newspapers (The Sun, The Times, and The Sunday
Times), as well as a portfolio of regional papers.

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MEDIA: EUROPE / JANUARY 2014

The Financial Times Group, a unit of Pearson, publishes the Financial Times in the UK and more than
20 cities worldwide.

Daily Mail & General Trust PLC (DMGT) publishes several national papers (including the Daily Mail,
with circulation of more than 1.8 million, and the Mail on Sunday) and about 100 regional papers
across the UK.

Smaller newspaper markets in France and Spain. France is not a big newspaper nation. Only 16% of the
population regularly reads daily newspapers, the lowest proportion in Western Europe. The countrys
largest newspaper, Ouest-France, is a regional paper with a daily circulation of roughly 800,000. The
largest publisher is Socpresse, publisher of about 80 papers including Le Figaro, LExpress, Valeurs
Actuelles, and LExpansion. Spain has fewer than 50 newspapers with daily circulation of more than 5,000.
The countrys largest newspaper is El Pas (Madrid), followed by El Mundo (Madrid), and Diario ABC.
Magazines
The European magazine market also ranks second worldwide based on advertising revenues. According to
ZenithOptimedia, in 2012, global magazine ad revenues totalled some $43 billion, with Europe justifying a
third of that figure, behind North America, but ahead of Asia Pacific.
There are more than 15,000 magazine publishers in Europe, according to the European Magazine Media
Association (EMMA), a trade group, the vast majority of which are small and medium-sized enterprises. On
average, 87% of European adults buy at least one of the more than 50,000 magazine titles published in the
region per month. More than 300 million Europeans read magazines on a regular basis, resulting in annual
sales that surpass 20 billion copies, according to EMMA.
Germany has the largest magazine advertising market in Western Europe, according to ZenithOptimedia,
with a 37% share of the regions total advertising expenditure in magazines in 2012, followed by France
and the UK, with shares of 16% and 10%, respectively. The Swiss market is next with 9% share, followed
by Italy (6%) and the Netherlands (5%). The remaining national markets contribute less than 5% each.
Germany, Europes largest magazine market. Germany has the biggest magazine market in Europe,
though newspapers are the countrys most important advertising medium. Gruner & Jahr AG & Co., a
subsidiary of media giant Bertelsmann, is Germanys largest publisher, and Europes largest publisher of
magazines. Hubert Burda Media Holding GmbH & Co., based in Munich, is also a major magazine
publisher, with annual revenues of 2.5 billion ($3.2 billion) in 2012. It has 240 publications in 17
countries, including 87 magazines in Germany, as of year-end 2012. It also has significant interests in
printing, new media, radio, television production, and direct marketing. [Note: All currency conversions in
this Survey are at yearly average exchange rates, except where noted.]
The UK. IPC Media Ltd., a unit of Time Warner Inc., is the largest magazine publisher in the UK. Emap
PLC, which publishes more than 150 magazines worldwide, is the No. 2 publisher of magazines in the UK
and the No. 3 magazine publisher in France, based on sales. It is also the countrys largest provider of
business-to-business conferences and exhibitions.
French readers prefer magazines. France is unusual in that magazines outweigh newspapers in advertising
clout. Magazines accounted for 15% of advertising spending in France in 2012, compared with 48% for
television and 10% for newspapers, according to ZenithOptimedia. Hachette Filipacchi Mdias (HFM), a
subsidiary of France-based Lagardre SCA, is the largest-selling magazine publisher in France. It publishes
around 250 magazines and newspapers. Socpresse, the No. 2 magazine publisher in France, publishes more
than 40 consumer and business titles, in addition to national and regional newspapers in France and Belgium.
Book publishing
The European book market, with revenues of 23 billion ($31 billion) in 2012, according to the Federation
of European Publishers (FEP), a trade association, easily exceeded net sales in the United States, which
totalled $26 billion. Germany has the largest percentage of sales (25% of Europes total) and the UK is
second (20%).
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The industry is very fragmented. There are many thousands of book publishers across Europe, including
roughly 60,000 in the UK and Ireland alone. The average publisher is small, however, and publishes
between 20 and 40 titles per year. Large publishers are increasingly buying up their mid-sized rivals, leaving
a few major players and a large number of very small companies.
The book industry comprises a number of sectors: consumer or trade publishing, educational or school
publishing, academic publishing, and business and professional publishing. These are broad categories:
definitions vary across Europe. Larger publishing companies often operate in all four sectors.
Among the major book publishers in Europe are Pearson, a large educational and consumer book publisher;
Bertelsmann, owner of Random House; Editas, Hachette Filipacchi Mdias, a unit of Lagardre, which
publishes consumer and educational books; Wolters Kluwer NV; and George von Holtzbrinck GmbH.
Large North American publishers are also key players in the European market, particularly in education.
Companies in Germany, the UK, and France have large overseas sales. Bertelsmanns Random House and
Pearsons Penguin-Putnam consistently dominate the bestseller book lists in the US. A subsidiary of
Hachette Livre (part of France-based Lagardre) is the publisher behind the successful global series of books
from Stephenie Meyer (Twilight). Britains Pearson PLC is the largest publisher of primary and secondary
school texts in the US, and a major US publisher of other consumer, academic, and business books.
Germanys Bertelsmann AG is also one of the largest consumer and academic book publishers in the US.
Reed Elsevier Group PLC, jointly owned by the UK-based Reed Elsevier PLC and the Netherlands Reed
Elsevier NV, is also a major US book publisher.
E-books currently play a relatively marginal role in Europe, given the relatively late launch of widely
available e-readers and digital content for them. For example, Amazons Kindle only became available in
France towards the end of 2011. The UK is the European market with the earliest adoption of e-readers
thanks to Amazons Kindle being on the market since 2010, but sales of e-books there are still at 12% of
the book market in 2012, according to The Publishers Association, a UK trade group.

BROADCASTING: FREE TV VS. PAY TV AMID STRUCTURAL CHALLENGES

With over $31 billion in advertising revenues in 2012, the European television industry ranks third behind
North America and the Asia-Pacific region, according to the media research company ZenithOptimedia Inc.
However, because many government-owned European broadcasters are funded through television licensing
fees, rather than advertising, ad revenue figures exclude a major slice of the industry.
Radio advertising revenue totalled $5.9 billion in Western Europe. This was far behind the $18.0 billion in
North American radio ad sales, but more than in the Asia-Pacific region, with $5.6 billion.
Take-up of pay-TV services varies from country to country, but it remains lower than in North America. In
the UK, 55% of TV households have some form of pay-TV services, be it cable, satellite, or IPTV, according
to a December 2012 study by Ofcom, incorporating IDATE (a media market research firm) and industry
data. In France, the ratio is 62% and, in Germany, it is 64%. Southern Europe has a lower take-up, with
Italian pay TV consumers making up only 35% of the total household population. In the US, in contrast,
89% of TV households pay for TV.
Private capital has a stronger position in the cable and satellite broadcasting industry, the fastest-growing
sector in European television thanks to digitalisation of the airwaves and new technologies like PVRs and
HDTV sets (as highlighted in the Current Environment section of this Survey). According to estimates
from research firm Informa, nearly half of Europes 314 million TV homes will have digital terrestrial
television (DTT) at the end of 2014, up from less than a third at the end of 2009.
Government plays a major role in broadcasting
All of the major Western European countries have large, well-developed broadcast markets. In common
with most of the world, broadcasters rely on a mixture of advertising, subscriptions, and public funds for
their revenues. Globally, according to a study from Ofcom, 41% of global TV revenues came from
INDUSTRY SURVEYS

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11

advertising, 50% from subscriptions, and 9% from public funds in 2012. That said, there are variations in
different countries.
Germany and Spain are the European countries with the highest share of public funding in the total mix,
with the state providing 36% and 38% of total broadcasting revenue, respectively, according to Ofcom. In
Germany, the remaining funding is split between subscriptions (34%) and advertising (30%), while in
Spain, subscriptions play a relatively smaller role (27%). In the UK, public funding is 24% of the total TV
revenue mix, with subscriptions at 44%, amongst the highest in Europe, alongside France (49%).
Publicly funded broadcasters face programming restrictions, including cases where they are banned from
broadcasting advertising. Hence, for audience metric purposes, many advertisers exclude audience figures
from publicly funded channels; instead, they use a measure that only includes commercial channels, known
as the Share of Commercial Impacts, or SOCI.
Germany: Europes biggest TV market. With more than 38.1 million TV households, Germany is the
largest TV market in Europe in terms of population, according to the Astra TV Monitor Report. It had 18.1
million satellite subscribers and 16.7 million cable subscribers in 2012, making it the biggest market for
those services as well. Roughly 47% of TV homes subscribed to satellite services, the highest penetration
rate in Europe after the UK.
Two media groups dominate commercial broadcasting in Germany. ProSiebenSat.1 Media AG owns five
TV stations in Germany, which together account for roughly 44.3% of total TV advertising in the country,
and also owns Seven Pictures, a theatrical film production house. Bertelsmann AG owns the second
company, RTL Group SA, Europes largest over-the-air broadcaster. It owns or has ownership interests in
54 TV stations and 28 radio stations in 10 countries. RTL operates six TV channels in Germany, owns Five
TV in the UK, and the M6 and RTL9 TV stations in France. RTL also has TV operations in Belgium, the
Netherlands, Spain, Hungary, and Croatia. Munich-based Hubert Burda Media Holding GmbH & Co. is
best known as a magazine publisher, but it also has significant interests in radio, television production,
printing, new media, and direct marketing.
UK: BBC dominates terrestrial broadcasting. The UK is home to hundreds of privately owned television
and radio stations, but the government-owned British Broadcasting Corp. (BBC) is the industrys largest
player by far. The BBC operates the UKs national public service stations, digital television and radio
stations, as well as a number of local and regional radio broadcasters. License fees account for more than
72% of the BBCs revenues, according to 2012/2013 data. Other government-owned television operations
include two terrestrial (analogue) TV stations in Wales: Channel 4 and the Welsh-language S4C.
ITV PLC, formed through the merger of Carlton Communications PLC and Granada PLC in February
2004, is the largest commercial terrestrial-TV network in the UK. It owns all of the private-sector regional
licenses in England and Wales, which together account for more than 90% of analogue advertising revenues.
ITV also owns three leading free-to-air digital channels: ITV2, ITV3, and ITV4. The company reported total
revenues of $3.5 billion in 2012. ITVs main non-government rival in terrestrial television broadcasting is
Five TV; it is owned by media investor Richard Desmont, who acquired it from RTL Group in July 2010.
In terms of revenues, the UK is the third-largest pay-TV market globally, after the US and Japan. More than
66% of households in the UK (17 million homes) subscribe to cable or satellite services. British Sky
Broadcasting Group PLC (BSkyB) is by far the largest UK provider of satellite television. It also operates the
UKs largest digital pay-TV platform, Sky Digital, as well as 28 channels, including Sky One, Sky News, Sky
Travel, the Sky Sports channels, and the Sky Movies channels. BSkyB had roughly 10.5 million satellite
subscribers in September 2013.
The other major UK cable-TV provider is Virgin Media, a product of the merger of NTL and Telewest in
2006. That year, the joint group became the first UK company to offer a media quadruple play: one-stop
shopping for cable television, fixed-line phone service, mobile phone service, and Internet access. In
September 2013, the company had 4.9 million cable customers and as many as 3.8 million TV customers.

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The company provides a separate total that counts each product a customer takes. By that measure, the
group registered as many as 12.2 million cable products in its customer base.
France: Funding from government and pay TV. Public funding and subscription revenues contribute as
much as 70% of French TV revenues. France has more than 130 TV channels, including six that broadcast
nationwide. Three of the national stations are owned by the state and are financed by a combination of
license fees (75% of revenue) and advertising (25%). The state also controls dozens of radio stations. The
French are avid radio listeners and television viewers. Satellite services dominate the French cable and
satellite market. As many as 70% of the total number of TV households have access to some pay TV,
satellite, cable, IPTV, or pay digital terrestrial television service. Three companiesCanal Plus Groupe,
Groupe Lagardre, and Groupe Bouyguestake in the bulk of revenue in commercial broadcasting.

Canal Plus, majority-owned by Vivendi SA, owns 13 TV stations and is a major producer and
distributor of feature films and television programming. It also provides digital pay-TV satellite services
in France, Italy, and the Netherlands.

Lagardre Active, a wholly owned subsidiary of Groupe Lagardre, owns three radio stations in France
and 20 stations outside France. Its TV division operates 16 production companies and 11 specialinterest television channels, among them MCM, Europe 2 TV, and Canal J, the childrens channel. The
Lagardre group is also a minority shareholder (20%) in Canal Plus.

Groupe Bouygues owns TF1, Frances leading general-interest TV channel. In 2008, the French
watched three hours and 24 minutes of TV a day on average, according to the company. Nearly onethird of that time (one hour and six minutes) was spent watching TF1. The company also operates 10
special-interest television channels.

Italy: A virtual duopoly. Radio Audizioni Italiane (RAI), a broadcaster owned by the government, and
Mediaset SpA, a unit of Finivest Group, a publicly traded company dominated by the family of former
Prime Minister Silvio Berlusconi, control virtually all television and radio broadcasting in Italy.
RAI controls the three public television stations that offer nationwide service, while Mediaset operates three
of Italys eight commercial television networks. Mediaset also operates terrestrial-TV channels in Spain, four
digital satellite channels in Italy, and offers pay TV channels via set-top boxes (DTT). Other Italian
broadcast outlets include nearly 800 independent local TV stations, and close to 2,500 commercial radio
stations. Sky Italia (owned by News Corp.) is the major digital satellite provider in Italy.
Spain: Public broadcaster dominates. Radio Television Espaola, Spains public broadcaster, operates
two national TV networks and nearly 460 national and 500 local radio stations. The country has three
commercial TV operators, two commercial radio operators, and two digital satellite companies. Grupo
Telecinco, 50.1% owned by Mediaset, the Italian broadcaster, is Spains leading commercial TV company.
Antena 3 Televisin SA, established in 1990, was the first private TV station in Spain.

INDUSTRY TRENDS
ADVERTISING INDUSTRY TRENDS
European advertising expenditure has seen an uneven recovery over the past four years, after a significant
decline in 2009, which marked the worst advertising decline since the Great Depression. According to
ZenithOptimedia, the peripheral Eurozone (Portugal, Ireland, Italy, Greece, and Spain) ad expenditure
declined 16.1% in 2012, and was estimated to have declined another 11.6% in 2013, as companies cut
back on advertising expenditure in this region. Spending in Northern and Central Europe, which declined
0.5% in 2012, was expected to decline another 0.8% in 2013. On the other hand, Eastern Europe saw a
quick recovery after 2009, and was forecast to grow 10%11% in 2013.

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13

With a European economic recovery in full swing, we expect to see a flat to higher percentage increase in
advertising expenditure in 2013 and a further recovery in 2014. In 2014, global advertising markets should
benefit from special events like the Winter Olympics, the FIFA World Cup, and the US mid-term elections.
Over the mid-term, and looking particularly into the next five years, the bulk of global advertising growth is
likely to come from emerging markets, particularly China, Brazil, and India. Asian advertising expenditure
overtook European expenditure in 2010, according to ZenithOptimedia. We believe growth in Western
European advertising expenditure should remain behind the rest of the world in the mid-term. This is due in
part to sluggish economies in some key European countries, but also to the regions large public sector,
which tends to spend less on advertising than private companies do. In North America, advertising
expenditure as percentage of GDP is traditionally higher than 1%, but in Europe, it is slightly lower than 1%.
Not only must European advertising companies compete in this slow-growing environment, but they must
also adapt to changing markets, as advertising spending shifts to the Internet and other new media, which
tend to yield less revenue than advertising via traditional media. Although some industry experts believe
that the rise of search advertising may lead to disintermediation (advertisers sidestepping agencies), we
think there is little evidence so far that this
is
actually happening. For example, Google
GLOBAL vs. WESTERN EUROPE GDP
has formed an alliance with Publicis in
AND AD SPENDING GROWTH
(Year to year percent change)
order to better serve clients.
Chart C03: GLOBAL
vs. WESTERN
EUROPE GDP AND
AD SPENDING
GROWTH

10
8
6
4
2
0
(2)
(4)
(6)
(8)
(10)
(12)
2009

2010

2011

2012

2013

2014

2015

Nevertheless, many clients are

consolidating and changing their portfolio
strategies. In response, European
advertising agencies and their holding
companies are developing non-traditional
advertising businesses, such as market
research and interactive advertising, which
they believe have higher growth and profit
potential, and offer insight into clients
needs. European advertising firms are likely
to continue to pursue growth in both the
non-advertising and creative (advertising)
businesses, both organically and via
acquisitions.

This push into new areas of business has

accelerated the consolidation of the
advertising industry, as companies seek to
Western Europe GDP growth
acquire new business lines, rather than
Western Europe Adspend growth
starting such operations from scratch.
Source: Global Insight, ZenithOptimedia.
Europes agencies also continue to expand
into new global markets through
acquisitions, alliances, and organic growth. In 2008, WPP took the bold step of acquiring Taylor Nelson
Sofres (TNS), one of the global leaders in market research, in a fierce bidding process against German rival
GfK. Publicis acquired the digital agency Razorfish from Microsoft in 2009. Further, Publicis went on to
acquire Rosetta, Rokkan, LBi International N.V., Interactive Solutions, Zenith Romania, and Poke. In July
2013, Publicis entered into a definitive agreement with US-based Omnicom Group Inc. for a merger of
equals that would create the largest advertising agency in the world. The new company would operate
under the name Publicis Omnicom Group. The merger is expected to close in the first half of 2014.
World GDP growth

World Adspend growth

Meanwhile, European agencies continue to expand into emerging markets via acquisitions, but also organic
growth. WPP generates 30% of revenues from what it calls faster growing markets, including Central and
Eastern Europe, and aims to reach 34% in the mid-term, with the other two-thirds of revenues split between
North America and Western Europe. According to WPP, this strategy delivered a $2 billion advantage over
its nearest peer over the 200108 period. In the first half of 2013, Publicis generated 37% of revenues from
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INDUSTRY SURVEYS

digital, and 24% from emerging markets. In 2012, Publicis acquired 11 companies in emerging markets,
thereby strengthening its foothold there. Going forward in 2013, Publicis acquired Beehive, Convonix,
Neev, Net@lk, and Espalhe in the emerging markets. Such strategies are allowing both WPP and Publicis,
Europes largest agency networks, to generate revenue growth above that of the moderate growth in
European advertising.
Whether these strategies have made agencies more profitable is less clear to us, with data comparisons
distorted by the margin compression suffered as an effect of the 2009 global economic recession and margin
expansion seen in 201013 as a natural consequence of top-line recovery. In our view, no trend is
discernible in net income and profitability measures for European agencies. With so much going on
concurrently (acquisitions, divestitures, the launch of new services, changes to agencies client bases,
downsizings, the imposition of new fee structures, and more), it is difficult for us to determine whether the
expansion and diversification push has made the industry more profitable as a whole.
Ad mediums undergoing rapid change
Change has always been the order of business for agencies, advertising media, and advertisers themselves. In
the history of advertising, however, rarely, if ever, has change occurred so fast for so long, and raised such
significant challenges for so many segments of the media. Newspapers, magazines, television, radio, cinema,
and outdoorvirtually all advertising mediahave been affected in important ways.
Target markets are shifting as consumers media preferences and their demand for goods and services
change. Advances in digital technology are creating new advertising media at a rapid pace. Take, for example,
these new ways of delivering ads: cell phones; iPods, iPads, and other hand-held devices; direct-to-consumer
and consumer-generated online media channels, such as YouTube and Facebook; and other media such as
video games, and screens visible in airport security lines and on street furniture.
Both Internet usage and Internet advertising, which account for the largest share of new-media ad spending,
have increased significantly. According to ZenithOptimedia, global spending on Internet advertising rose an
estimated 16.4% in 2012, growing more than four times as fast as the market, to $85.4 billion. Internet
advertising is forecast to rise by 16% annually over the 201315 period. The share of adspend enjoyed by
the Internet overtook radio in 2006, surpassed magazines in 2009, and it did overtake TV in some countries
like the UK during some periods, like 2009. Globally, Internet advertising expenditure is unlikely to
overtake TV expenditure because of the significant growth of TV in emerging markets and the inability of
Internet media to generate instant mass reach, which TV can offer with big events like sports, live reality
shows, and entertainment.
Internet advertising can be divided into three sub-sectors: Display, Classified, and Paid Search. Paid Search
accounted for 47.7% of total Internet advertising revenues as of year-end 2012, according to October 2013
data from ZenithOptimedia. The main global player in this segment is Google, both globally and in Europe.
Display advertising is next, accounting for about 39.5%, and Classifieds are last, contributing about 12.9%.
Meanwhile, new media continue to emerge. US spend on mobile marketing grew to $6.7 billion in 2012,
from $4.0 billion in 2011, according to the Mobile Marketing Association, with growth expected to
continue through 2015.
With the pace of change so brisk, we believe ad agencies have their work cut out for them. Companies in all
areas of the industry must keep abreast of, or even anticipate, the changes that are taking place to preserve
their role as middlemen in getting the advertising message from the sellers to the targeted audiences. It is
now more common than ever for advertising campaigns to cover different media outlets, with TV and radio
spots leading to Internet campaigns, for example.
Agencies strain to meet needs of buyers and sellers
Conflicts of interest add to the difficulty of prospering in the new environment. Agencies first responsibility
is to the advertisers who pay them to create and execute marketing programs, but they also have an interest
in the health and welfare of the media outlets from whom their customers buy advertising space. The case of
the European newspaper industry illustrates the problem.
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Newspapers in Europe, and particularly the UK, are losing ad market share to broadcast media as well as to
Internet and new media outlets. Channelling ads to these media may benefit marketers, but doing so poses
conflicts for agencies. Not only do agencies often act as consultants to newspaper publishers that are
seeking to market their medium to advertisers, but agencies are also hurt directly when newspapers lose
advertising to newer media. That is because newspaper advertising is typically more expensive than newer
media on a cost-per-thousand basis. If an agency is paid on a fixed-rate commission basis (that is, the
agency receives a set percentage of all monies spent), then an agency could generate more income for itself
by placing a newspaper ad for the client than by using a web ad to reach the same number of consumers.
Agencies try to keep pace with technology
An additional challenge is maintaining the technological expertise needed to serve marketers who are
increasingly eager to take advantage of new media. Digital specialists are in particular demand among
traditional agencies, with many of the small digital agencies (and some not so small) being acquired by large
advertising conglomerates.
That demand is not newduring the dot.com years of the late 1990s, for example, there was great demand
for people able to create websitesbut the growth of Internet search as an advertising medium has led to
more complex advertising needs, like algorithmic optimization and viral marketing. Agencies must now have
creative and strategic specialists in the newest digital media. Clients are demanding technical prowess from
their marketers, and the agencies are struggling to catch up, or maintain whatever advantages they have.
Not only are agencies training and hiring with these needs in mind, they are also establishing and acquiring
specialty media and digital shops at a rapid pace. Agencies are making every effort to improve and expand
their media-buying operations, through both internal growth and acquisitions, in order to keep pace with
the proliferation of media outlets.
Clients focus on fewer products
Cost-cutting measures in several client industries, implemented to improve bottom-line profits, have added
to the difficulties facing advertising agencies. Many companies have shed nonperforming businesses in
recent years, resulting in major transformations of product portfolios.
In the consumer goods sector, for example, companies such as Unilever PLC/NV and Diageo PLC have
dramatically reduced their number of brands and products. By focusing on their most successful lines, the
companies hope to boost the performance of their leading products and, consequently, the overall profitability
of the companies. According to the Financial Times, Unilever now devotes the largest share of its marketing
efforts to just two dozen global names. The company has about 400 brands, down from some 1,400 a
decade ago. Diageo, in turn, allocates about 75% of its ad spending to eight priority brands, having reduced
its brand portfolio from more than 300 in recent years. In our view, the concentration of ad spending on
fewer brands raises the stakes for the advertising agencies, heightens agency competition, and raises
advertisers expectations.
Consolidation and restructuring among ad agency clients
Not only are advertising clients focusing on fewer brands and products, many of these companies are also
merging, bringing changes that may or may not benefit advertising companies. Advertising agency holding
companies themselves are also merging, in addition to buying up competing and complementary businesses.
Mergers and acquisitions in the retail sector, which is among the largest sources of ad revenue, exemplify
the trend toward consolidation among clients. Although local businesses still meet many retail needs, the
industry is becoming increasingly concentrated. A few leadersWal-Mart Stores Inc., Carrefour SA, Royal
Ahold NV, Metro AG, and Home Depot Inc., for examplecontrol the largest share of global revenues.
In many cases, large global retailers are manufacturers biggest clients. For instance, Wal-Mart (excluding its
Sams Clubs division) accounted for roughly 14% of Procter & Gambles total sales in 2012, according to
company documents. Such concentration has a significant impact on both retail and manufacturing
marketing strategies, often shifting the emphasis to brand building.
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In the UK, consolidation in the grocery industry has hurt advertising agencies. Food retailers have become
more cost-conscious, as heightened competition has forced them into price wars to attract consumers.
Industry observers report that food retailers are now less concerned with image buildinga lucrative
business for agenciesand are more focused on in-store price promotions launched in collaboration with
manufacturers. In an effort to bypass external agencies and to cut costs even further, the UK food retailer
Tesco PLC founded its own in-house media-buying unit.
Agencies look to emerging markets, digital for growth
Efforts to expand into emerging markets and increase digital revenue sources are other responses by
advertising companies to address the challenges outlined above. The geographic expansion trend has been
going on for several decades, but the pace and magnitude have grown in recent years. Not only are advertising
companies eager to take advantage of the rapid growth of emerging markets, but their clients are expanding
abroad as well, forcing the agencies to move overseas or risk losing business to their rivals. Companies like
WPP have expanded aggressively in China, at first assisting Western companies address the Chinese market,
but, increasingly, also helping Chinese companies expand with sophisticated marketing strategies.
Traditional Western markets remain an important source of income and growththe United States in
particular, because of its sheer size. Meanwhile, the Asia-Pacific region is growing in importance, given the
recent healthy state of the economies in such key countries as India and China. As we noted earlier, Publicis
now generates 24% of total revenues in emerging markets and 37% from digital. Acquisitions of US
agencies are also attractive, in our view, because these multinational businesses usually have extensive Asian
alliances and portfolios of business already in place. WPP is another example of an advertising company
looking abroad for business: it acquired market research firm TNS in 2008 and US-based Grey Global
Group in 2005, and secured a number of smaller deals in the 200913 period.
Acquiring digital agencies is an important way to increase digital revenue sources. French group Publicis
purchased digital agency Digitas in 2007, allowing it to have a more competitive edge in the higher-growth
digital markets. Then, Publicis added Microsofts digital agency Razorfish in 2009, Rosetta in 2011,
Rokkan in 2012, and Interactive Solutions in 2013, to its fold, further boosting its share of digital revenues.

PUBLISHING INDUSTRY TRENDS

Shrinking customer bases are forcing print publishers across the developed world to seek new revenue
streams to compensate for losses in paid circulation and advertising. Two factors are affecting readership
and circulation.
First, a proliferation of new media and ever-more-advanced electronic gadgetry are competing for
consumers time and money. There are still only 24 hours in a day, but demands on that time, and options
for how to spend it, are on the rise. Newspapers, magazines, books, radio, and broadcast television now
compete with cell phones, smartphones, e-readers, the Internet, email, broadband television, and game
consoles. Second, younger people, having grown up in the electronic age, are less likely than their parents
and grandparents to turn to print for their news and entertainment. Advertisers have followed these
potential customers to newer media outlets.
Because they are geared toward a mass market, national newspapers have suffered most in circulation,
readership, and advertising. Local and regional newspapers and specialty magazines have benefited as
marketers have increasingly gone after targeted audiences. In some European countries, where there is a
strong culture of regular newspaper subscriptions, circulation has been relatively more stable. This is the
case in Scandinavia, for example. That said, circulation of single-copy issues continues to fall year after
year, as this is the sector most affected by the substitution coming from online sources.
To their credit, newspaper, magazine, and book publishers continue to pursue ways of attracting readers,
both by launching new products and by moving into new geographic markets, such as Eastern Europe.
Readership of glossy magazines continues to rise in countries like Russia, but has reached a plateau (or even
started to decline) in Western Europe. We believe that traditional print media will continue to lose audience
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share, but at a fairly slow rate. We think it is highly unlikely that consumers will give them up altogether, as
some doomsayers have argued.
Newspapers that are most at risk, in our view, are the ones that rely on single-copy sales and on classified
advertising, which is the kind of advertising that has most aggressively migrated online due to the
functionality of search. We think newspapers that rely on subscription revenues, rather than advertising, are
more likely to survive in the longer term. Meanwhile, many newspaper groups have built significant online
operations, generating online advertising revenues, but also classifieds. Norwegian newspaper publishing
group Schibsted, for example, generates more than half its operating profit from online operations,
including both classifieds and online newspapers.
E-books
Book publishing is perhaps the hardiest segment in the industry, but it too faces challenges. Although it is a
mature industry, it is not in decline, by our analysis. (The German market, which has shown weakness in
recent years, is perhaps an exception.) Book sales per capita are stable across Europe, but distribution
methods are likely to change dramatically. The advent of digitization has made it possible to download
books from the Internet, forcing publishers into new battles to defend their intellectual property.
E-books have had a slow start in Europe, so far, with two platforms (Amazons Kindle and Sonys eReader)
still aiming to secure both demand from consumers and buy-in from a significant number of publishers to
guarantee a decent selection of content. The iPads launch in Europe in mid-2010 increased consumer
interest in e-books. Publishers, like Frances Lagardre, have welcomed more competition in the e-readers
market, as it shifts the balance of power back to the publisher from the platform-owner. As evidence of this,
we note that as soon as the iPad was announced, Amazon allowed publishers more flexibility in pricing
their content, rather than it deciding what price it would set for each publication.
We estimate there are likely to be more than 30 million e-readers globally by 2014. In 2010, Amazon
announced that Kindle e-book download sales in the US had already outstripped paperback sales. We
expect European consumers to catch up on this trend through 2014, as e-readers are embraced from Madrid
to Berlin. In the UK, where Amazons Kindle has been on sale for three years, we expect e-books to account
for as much as 20% of total book revenues. Globally, e-books made up 20% of all trade book sales in
2012, up from 15% in 2011, according to a 2013 annual report from the Association of American
Publishers and Book Industry Study Group. In particular, digital is now the most popular format for adult
fiction, with e-book sales in the segment increasing 42% in 2012 to reach $1.8 billion.
Educational publishing remains a very resilient sector in book publishing, especially as companies have
incorporated digital offerings as product extensions to their traditional printed books. In fact, many publishers
have actually benefited from the digitalization drive in education. In 2009, the governor of California, Arnold
Schwarzenegger, said he would aim to eliminate printed books from the state curriculum as a way to save
costs. This did not come to fruition. Nevertheless, the threat to print remains strong, though the threat to
publishers themselves is less evident. Educational publishers like Pearson also benefit from the sale of digital
solutions, which, in turn, reduce warehousing and distribution costs. On balance, the ultimate effect of
further digitalization in educational publishing may not be a bad thing, in our opinion.
Publishing losing advertising share in Europe
Print publishing accounts for a progressively smaller part of the advertising pie in Europe. The trend extends
as far back as the 1980s, as a result of the growth of broadcast and satellite-delivered television. The growth
of the Internet has accentuated the trend since 2000. Some of the smaller media categories, such as radio,
cinema, and outdoor advertising, have also gained share.
As recently as 1993, newspapers enjoyed 40% of European advertising revenue, versus 27% for television,
and 21% for magazines. By 2000, newspapers had seen their share shrink to 35%, while magazines share
had fallen to 20%. Television surpassed newspapers as the largest advertising medium in Europe in 2003,
taking 33% of the pie, while newspapers were down to 32%. Magazines had only about 20% of the
market. The Internet, which only came into widespread use in the mid-1990s, grabbed nearly 14% of the
European advertising market by 2010.
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GLOBAL ADVERTISING BY MEDIA TYPE

(In percent)
2013

Radio
6.9%
Magazines
7.9%

Outdoor
6.9%

Cinema
0.5%

Chart C05: GLOBAL

ADVERTISING SHARE, BYTelevision
MEDIA TYPE
40.2%

Newspapers
17.0%

By the end of 2012, television accounted for

about 40% of total European advertising
spending, according to the forecaster, while
newspapers represented only around 20%.
Magazines accounted for less than 9%, and
the Internet gained ground to 18%.

Desktop
internet
17.9%

Mobile
internet
2.7%

2016

Radio
6.9%

Outdoor
6.3%

Cinema
0.6%

Television
39.3%

Magazines
6.3%
Newspapers
14.0%

Mobile
internet
7.7%

Desktop
internet
18.9%

This is not to say that newspaper advertising

hasnt grown; it just hasnt grown as fast as
some other types of media, a trend found in
most developed countries. The
accompanying table shows the share of total
global advertising by different media type,
including forecasts, as calculated by
ZenithOptimedia. By the end of 2012,
newspaper advertising was 20.4% of total
ad spending in Europe, down from 39.1%
in 1995. Magazine advertisings slide was
similar. By 2012, magazines share of
advertising had fallen to about 11.1%,
compared with 20% in 1995.

Newspapers look to tabloids, free papers to

cure ills
To stem the loss of circulation while
addressing changing lifestyles and
preferences, publishers in both Europe and
elsewhere have been introducing free
newspapers and compact newspapers. The
phenomenon spread throughout Europe on
a large scale during the last 10 years. In the
UK, for example, the tabloid is rapidly
becoming the predominant newspaper
format.

Publishers stand to gain in several ways

from the switch to a small format, in our
view. Consumers seem to prefer the smaller
papers, and while the changeover to tabloids has not reversed the circulation decline on an industry-wide
basis, it has probably slowed the trend. Indeed, Experience has shown that circulations rise, at least initially,
when papers adopt the tabloid format. We assume that some of the new readership derives from defections
from other newspapers. Publishers of smaller format papers can also benefit from reduced paper and ink
costs, assuming that they cut back on content as well as size.
Source: ZenithOptimedia.

Launching free daily papers is a second tactic newspaper publishers have used to stem declines in
circulation. The free dailies allow publishers to attract younger readers, particularly those who would not
pay for and read a newspaper, while at the same time making money on targeted, niche advertising.
Free morning papers proliferated from 2000 to 2005, but have struggled to survive since then in a very
competitive advertising environment. Examples include Metro, produced by Associated Newspapers Ltd. (a
subsidiary of Daily Mail & General Trust PLC), in London, Birmingham, and Leeds; a sister paper called
News in Manchester; Manchesters own Metro News; and similar titles in Tyneside, Edinburgh, and Glasgow.
In Spain and France, 20 Minutes are the largest free sheets, owned by Norwegian newspaper group Schibsted.
Metro International, based in Luxembourg, is a global newspaper group that has free newspaper operations
in several European countries and the US, and as far away as Hong Kong and Chile.
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While we applaud these efforts to slow or reverse the newspaper circulation slide, the free daily newspaper
segment remains relatively small as far as readership and advertising money are concerned. We believe that
although these papers provide publishers with advertising revenues, they are significantly less profitable
than paid-circulation papers and very vulnerable to advertising markets. The entry of free newspapers into
the market, however, did force some formerly paid-for publications to become free, as in the case of the
Evening Standard in London. Advertisers do benefit from this trend, as circulation is determined by the
supplier and focuses generally on young urban professionals, a very valuable, yet hard-to-reach, segment.
Increasing loyalty
In addition to reducing the size of their publications and distributing free newspapers, publishers are
experimenting with dozens of ways to boost readership and loyalty. Across Europe, newspapers are
encouraging their journalists to supplement their regular work with online diaries, or web logs (blogs), to
establish a dialogue with readers.
Some European newspapers also provide blogs to the subscribers themselves, in the hope that the offer will
transform them into active participants in the news process and thus increase reader loyalty in a new
phenomenon called citizen journalism. An example of this broader interactive community in the US is the
Huffington Post (acquired by web services company AOL Inc. in February 2011). That said, all newspapers
in Europe have incorporated some degree of digital interaction with their readers.
Newspapers are also adding content that they believe will attract target audiences, including younger
readers. Publishers know that their most reliable readers are women, so they have instituted features and
sections designed to appeal to them as well.
Publishers expand scope
Although publishers have seen their total advertising revenues increase over the long term, other advertising
media, such as satellite television and Internet sites, have grown faster. Publishers are striving to capture a
bigger share of ad spending by improving their sales efforts, customer service, and market research. Free
newspapers emphasize their ability to target young, urban audiences. All newspapers, free and subscriptionbased alike, continue to expand their online offerings, with paid and free offerings for different client
segments.
Publishers are also adding to their mix of revenues by leveraging their brand names through other
businesses. Magazine and newspaper publishers are increasingly using trade shows and other events as part
of their growth strategies, as the UKs Daily Mail & General Trust (DMGT), for example, has done. Most
have established websites with the goal of selling archived news articles, advertising, and other services, and
eventually launching offline magazine or media properties.
Aware that advertisers prefer to create multimedia campaigns, many publishers have become active across a
wide range of media. Many publishers also have entered the product-licensing business. While this is
certainly not a new trend, it has become more important to companies business planning and strategies in
recent years. Hachette Filipacchi Mdias (HFM), for example, licenses the logo from its flagship magazine,
Elle, to manufacturers of dozens of consumer items, such as sunglasses, shoes, handbags, and jewellery. The
annual wholesale value of Elle merchandising exceeds $500 million worldwide. HFM has also branched out
by creating magazine offshoots of Elle. Its other Elle titles now include ELLEgirl, Elle Dcor, Elle
Decoration, and Elle Table.
Daily Mail & General Trust also has expanded beyond its publishing base, leveraging its Euromoney and
Institutional Investor magazines into a large number of businesses and offshoots. These include Institutional
Investor conferences, MIS training, Euromoney books, Euromoney business meetings, Euromoney lease
training, Euromoney conferences, Latin Finance, and Institutional Investor Research Products Group.
DMGT has interests in television, radio, books, magazines, exhibitions, and information services.

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BROADCASTING INDUSTRY TRENDS

Technological innovations are expanding the number of pipelines through which consumers can receive
news and entertainment. In particular, the digitalization of free-to-air signals under way across most of the
continent is leading to a majority of households having access to multi-channel television. This means that
audiences are more fragmented than they were five years ago, let alone in the 1980s and 1990s when a
handful of TV channels concentrated most of the national viewership. As if multi-channel television were
not enough worry for traditional broadcasters, new technologies like video on demand (VOD) and personal
video recorders (PVRs) allow viewers to skip advertisements and, in so doing, undermine the main source of
revenues of traditional broadcasters.
In this context, most broadcasters have opted to offer content across different channels, aiming to target
distinct audiences. That is at the expense of margins, as feeding three additional channels with good content
is significantly more expensive than feeding one, at a time when the four channels combined likely can only
generate the same viewership as one channel did in the past. Meanwhile, a few broadcasters are experimenting
with online delivery of content, especially to counteract the effect that YouTube and other digital video
platforms is having on younger audiences. Different business models are being tested (including roll-on
adverts before programs, for example), though these ventures are not profitable so far.
Meanwhile, cable and satellite TV operators face new competition from telecom providers as the border
between telecoms and pay-TV operators becomes blurred. While cable operators like Virgin Media in the
UK offer quadruple solutions (mobile, fixed line, broadband, and TV), so do most European telecom
operators, with IPTV delivery of content being one of the fastest-growing areas in the sector. Meanwhile,
new technologies like high-definition TV (HDTV) are also playing an important part in altering the
competitive landscape of the sector.
In the following sections, we discuss efforts by Europes old-line broadcasters to enter the new businesses
themselves, as well as their attempts to take advantage of new outlets and markets for their content. We
also explore the use of mergers and acquisitions (M&A) and international expansion in maximizing the
potential of broadcast businesses. Finally, we examine regulators efforts to revise existing laws to address
the new media landscape.
Technology and deregulation open the door to competition
Thanks to deregulation and the implementation of new broadband technologies, cable operators,
broadcasters, telephone companies, and satellite providers are becoming able to offer a similar range of
services. While cable operators throughout Europe see offering telephone service to consumers as a new
business opportunity, traditional telephone companies realize that they can offer cable-style TV service to
their telephone customers. In addition, fixed-line phone companies and satellite providers are trying to grab
a share of a key cable market: providing broadband Internet connections to households.
In the UK in 2010, the battle between pay TV operators and telecom service providers intensified, with a
regulatory ruling demanding the dominant pay TV platform, Sky, re-sell its key (and valuable) sports
content to third-party distributors at a regulated wholesale price. After the announcement, arch-rival British
Telecom started marketing Sky sports channels at discounted prices, even if it meant a loss per subscriber.
British Telecoms rationale for this tactic is to secure customer growth and thus achieve its target of three
million UK pay-TV subscribers, from its current base of just 750,000.
Meanwhile, the rise of mobile phones, handheld game machines, and other wireless gadgets has further
complicated the picture. While each of these devices initially served only a few functions, more of them now
offer a broad range of options, such as email, web browsing, text messaging, and the ability to download
music, games, movies, television shows, and photos.
The proliferation of functions creates a variety of business opportunities. Companies can get one-time
revenue from selling a device in the first place, and lock in continuing sales if they offer services that are
appealing enough to encourage people to subscribe, or download software or other products. Advertising
via these new media offers a third opportunity. As noted earlier, however, an expanding group of companies
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are able to take advantage of these opportunities. Thus, while the size of the overall media and advertising
pie is growing, many more diners are at the table.
Because so much is happening at once, and because the changes are so rapid, it is difficult to predict how
much of the pie each player will have in five or 10 years. It seems obvious to us, though, that broadcast
media will gain over print, and that the Internet and other new media will benefit at the expense of
traditional media.
New chances to sell programming
Even as they try to move into new media businesses, broadcasters across Europe are realizing that the
growing audience segmentation, combined with competition for audiences brought about by the
proliferation of new media outlets, create a new market for their proprietary content. News, sports,
entertainment, and other programming are being packaged and sold in video, audio, and text formats. In
addition to augmenting their fee income, offering programming to the new media outlets is often a way for
broadcasters to maintain ties or establish closer links with viewers and listeners.
The key to UK broadcaster ITVs strategy over the next five years is to grow revenues by selling content to
other broadcasters and, increasingly, in international markets from its ITV Studios production arm. The
venture has been successful in selling short series in the US, German, and French markets over the 201012
period. ITV aims to generate revenues beyond the cyclical advertising markets.
Plurimedia SA, a unit of the French publisher and broadcaster Lagardre, was among the first media firms
in Europe to specialize in producing content for distribution via mobile phones in France. In Germany,
Lagardres Legion GmbH is a leading supplier of content for mobile phone services. In the US, Lagardre
owns Bling Tones and Barrio Mobile, which also provide content for mobile phone services.
Broadcasters expand abroad
Moving into new geographic markets offers another strategic alternative for Europes broadcasters as
growth from Eastern Europe and emerging markets far outpaces relatively sluggish TV advertising markets
in Western Europe. Many Western European broadcasters have expanded in Eastern Europe over recent
years, in particular RTL from Luxemburg/Germany and MTG from Sweden.
Modern Times Group, a Sweden-based pan-Nordic free-to-air and pay-TV operator, controls 40% of
Russian broadcaster CTC Media and generates as much as 40% of operating profits from Central &
Eastern Europe in a normalized year. Its key operations beyond Scandinavia are in the Czech Republic, the
Baltics, and Bulgaria.
Frances Lagardre notes on its website that its 21 international radio stations supply the bulk of growth in
both revenues and profits at its radio business. The company has properties in Eastern Europe, Germany,
South Africa, and elsewhere.

HOW THE INDUSTRY OPERATES

Advertising
A handful of multinational conglomerates, or agency groups, dominate the European advertising industry.
These large holding companies, such as WPP, Publicis, Havas, and Aegis, are composed of networks of
hundreds of individual agencies. These agencies often specialize in particular services, such as media
advertising, public relations, or market research.
A holding company may have multiple agencies within the same country or city, and some of these may
offer similar services. This apparent overlap can be explained by the value each agency brings to the holding
company. Value in this case lies not in an agencys geographic coverage area or specialization, but in its
relationships with clients.
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There is a strong US presence in European advertising because subsidiaries, branches, and affiliates of US
companies have acquired many local agencies in recent years. US advertising conglomerates Omnicom
Group and Interpublic Group, for example, conduct approximately 30% and 25%, respectively, of their
annual business in the region.
European agencies, in turn, look to the United States and emerging markets for growth. WPP and Publicis
derive around 34%48% of their revenues from North America (2012 data). In other cases, European
agencies have avoided being folded into international conglomerates by forming partnerships with US or
other foreign advertising firms.

TYPES OF AGENCIES
The emergence of multinational conglomerates as the dominant force in European advertising has radically
changed the business landscape over the last decade. As in the rest of the world, the globalization of
European advertising and the integration of multiple services have afforded agencies new opportunities to
expand their businesses. They are now better positioned to compete for such prestigious and lucrative
international accounts such as those of Coca-Cola, Procter & Gamble, or Sony Corp., to name just a few of
the worlds largest purchasers of advertising.
Globalization presents challenges from a management standpoint, however. The conglomerate or super
agency structure shifted leadership from the local level to regional and international directors who may
oversee dozens or even hundreds of individual agencies. While this is generally effective for developing
marketing strategies for global products such as fast food, soft drinks, and computer hardware or software,
such homogenization can leave agencies out of touch with local consumers.
As a result, we believe local advertising agencies still have an advantage over international conglomerates
when it comes to knowing the preferences of consumers in a particular country or region. For this reason,
European advertising is likely to remain polarized between super agencies and local advertising firms.
Some agencies operate within a network, or agency, brand. The brand may belong to a larger conglomerate
or may be entirely independent. For example, Publicis Worldwide, a subsidiary of Publicis Groupe, is
Europes largest agency brand and No. 6 in the world, according to Advertising Age. Publicis Worldwide
itself is comprised of the agency brands Saatchi & Saatchi, Leo Burnett, Fallon Worldwide, Bartle Bogle
Hegarty Ltd., Beacon Communications KK, and The Kaplan Thaler Group. Most of the agency brands that
today belong to international conglomerates originally operated independently.

SERVICES OFFERED
European advertising agencies offer a wide array of services. The tendency today is to incorporate an
increasing number of services in-house, marking a return to the 1960s-style full-service agency that once
dominated advertising in London and Paris.
Media
Media buying involves the negotiation of television, outdoor, and other mass media purchases, including
Internet. Agencies typically bundle media with other marketing services, including public relations and
specialty communications. Bundling multiple services enables agencies to generate benefits from economies
of scale, thus improving their competitive position.
From the client perspective, using a media buyer allows them to obtain better pricing and enhance the
effectiveness of an advertising campaign by tapping the experience of an agency in reaching a targeted
audience. For example, an agency can make recommendations as to whether it is better to advertise on
national media, or regional media to achieve a certain campaign goal, or which medium guarantees a better
reach. This is a very complex task on the face of significant changes in consumer behaviour and the change
in relative advertising expenditure in different media. (For details, see the table Global advertising share,
by media type in the Industry Trends section of this Survey.)

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The rise of Internet search advertising, with Google as the most important global player, has prompted talk
of disintermediationcorporations going straight to the Internet search company and bypassing advertising
agencies as middlemen. So far, however, evidence of disintermediation is weak, in our view. In fact, Google
and Publicis have a joint venture to better serve clients at both ends. Indeed, the number and complexity of
the media channels available today mean that expertise in reaching particular audiences to achieve campaign
targets is more relevant than ever, allowing advertising agencies to continue to play a key role in media
purchasing decisions.
Among European holding companies, the bundling of communications goods and services has prompted
widespread discounted cross-selling in recent years. In this context, we believe large holding companies are
in a better position to negotiate contracts in this environment than small independent agencies.
Market research
Market researchthe systematic and objective identification, collection, analysis, and dissemination of
information aimed at improving decision making related to marketing effectivenessis becoming an
increasingly important business in advertising companies portfolios. It plays a vital role in helping
marketers make the best use of their advertising dollars.
Agency groups have taken advantage of the business opportunity this represents by strengthening their
market research businesses. In addition, many firms in the ad industry consider having first-hand access to
primary market research as a trump card in their business. Having a recognized market research name in an
agency groups portfolio lends credibility when approaching new customers, and provides incremental
revenues that complement the advertising business.
There are two types of market research, ad hoc (customized) and syndicated. Historically, growth in ad hoc
research has outpaced that of syndicated research and now accounts for about 60% of revenues in this
category. Syndicated research is generally more profitable because the cost of collecting data can be spread
over multiple customers.

CLIENTS, COMPENSATION, AND CONTENT

Winning clients remains an essential goal of ad agencies worldwide. Nevertheless, compensation structures
differ, as do norms of acceptedor expectedcontent.
Client relationships
Client relationships are the cornerstone of advertising in all markets. Agencies win accounts by making a
pitch to prospective clients. Winning a deep-pocketed client does not guarantee an endless relationship,
however. For example, in 2008, WPPs MediaCom won a $250 million Time Warner deal, but lost an equal
size deal from Eli Lilly. Agencies will often offer a combination of services to secure a long-term
commitment from the client.
Compensation structure
The commission or fee structure is always stated in the contract between the agency and the client. It is
important to understand the terms of all specialized billing arrangements to determine proper recognition of
revenues and expenses.
Cost-plus fee. This kind of contract is negotiated for an overall flat fee based on the annual cost of
servicing the clients account, plus a profit markup on costs of materials, labour, and overhead. Out-ofpocket production expenses are billed to the client at cost, plus an agreed-upon percentage.
Sliding scale fee. Contracts negotiated for a sliding scale fee are basically cost-plus contracts, but the fee
is based on the volume of services provided to the client. Sliding scale arrangements generally include an
initial fee (or markup), with decreasing rates for services as predetermined thresholds are met. For example,
a contract might stipulate that the agencys markup is 9% on the first $50 million of total spending (costs),
but slides to 6% of all spending over $50 million on that account.

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 Fixed-rate commission. In a fixed-rate arrangement, the agency receives a set percentage of all monies
spent. Compensation for media buying has traditionally been about 15% of the gross billings for media
time, and the standard markup on production billings has been 17.65%. For example, if an agency buys $5
million of combined advertising space in newspapers and ad time on television for a client, its commission
would be 15% of that $5 million, or $750,000.
Fixed-rate commission provides the agency with more operational leverage than a fee-based arrangement,
because if the agency brings down its own costs to make each media transaction, then its profit margins
automatically increase. The agencys take is 15% of spending no matter what its own costs are.
While US agencies compensation structure has largely shifted from a commission-based system to a feebased one, some European agencies still benefit from commission-related remuneration. Given the growth in
competition for business, there are indications that this is changing. European media buyers report that
clients are increasingly requesting that compensation be fee-based. This is undermining profits in the
industry, in our view.
Content
Sex sells, but it can also offend the public. As a result, advertisers constantly find themselves trying to strike
a delicate balance between titillation and offensiveness.
The publics sensitivity to sexual content varies dramatically from one region to another. This becomes
particularly apparent when advertisers plan to send their campaigns overseas: in many cases, campaigns
must be modified to suit local tastes. Social mores allow for a more relaxed view of sex and nudity in some
countries than in others, which affects the kinds of ads that can be shown in various markets. For example,
the condom manufacturer Durex became the first to advertise sex toys for men on British television in 2006.
While the ads were also shown in Italy and France, they would not be aired on US television or in many
Asian markets.
Another element that distinguishes European advertising from that in the rest of the world is its use of
humour. British advertising is well known for its use of humour, driven largely by the British public itself.
British consumers generally expect advertising to be funny, while Americans tend to expect advertising to be
essentially informative. In a similar vein, the French give priority to creativity. These differences explain why
certain ads may be more effective in some markets than in others.

REGULATORY ISSUES
Advertisers, agencies, and ad media in Europe operate within both statutory constraints and codes imposed
by self-regulatory bodies. Issues such as truth in advertising; content and decency (e.g., taste, violence,
sexual matters, and strong language); advertising to youth; and alcohol, drug, and tobacco advertising are
among the areas covered by national and EU regulations.
Despite efforts to unify Europe in economic terms, advertising regulations still vary considerably among
European countries, notably with regard to television advertising. The French, UK, and German advertising
markets are the most regulated in Europe. In some areas, European countries share similar policies, but
those often contrast with policies in the rest of the world.
In France, for example, the Loi Sapin (Sapin Law) of 1993 redefined the role of agencies in the advertising
industry. The law prohibits agencies from buying media space and reselling that space to advertisers at
higher rates, thus eliminating the potential for agencies to generate commissions on media spending. The
media are required to bill advertisers directly. Agencies cannot receive any commissions or discounts from
media providers that are not passed on to their customers.
This is in stark contrast to historical practice in US advertising, where agencies have been able to generate
significant profits through media markups. As noted earlier in this report, however, US marketers are
increasingly moving toward fee-based compensation.

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The regulation of advertising and the enforcement of those rules also differ substantially within Europe. For
example, in the UK, television advertising must not exceed an average of 12 minutes per hour of broadcasting,
with the exception of teleshopping broadcasts. Regulators monitor compliance. Spain has the same time
limit, but channels in that country often go past it, without regulatory intervention. Italy is also less
stringent in enforcing its advertising limits.
Because advertising campaigns increasingly cross national boundaries, the European Advertising Standards
Alliance (EASA) was formed in 1992 to bring together all the national self-regulatory advertising
organizations in Europe under one umbrella organization in order to deal with cross-border issues.
Comparative advertising
Advertisers vary in their willingness to use comparative advertising, the practice of highlighting ones
strengths while drawing attention to a competitors weaknesses. In Europe, the public generally considers
comparative advertising distasteful, so it has been used less than in the US, but this is changing.
Prior to 2000, advertisers who wished to carry out Europe-wide marketing campaigns had to modify their
advertising to conform to the comparative advertising regulations of each country. This had a significant
impact on marketing spending and on the movement of goods and services between European countries.
Today, EU regulation basically allows comparative advertising, though enforcement of the rules seems to
vary among countries. Lawsuits and complaints involving comparative advertising and the unauthorized use
of a competitors trademark surfaced in the European airline industry, with the growth of no-frills airlines
RyanAir and EasyJet since the beginning of the decade.
Budget airline EasyJet was censured by the UK advertising watchdog in 2008 for exaggerating the low-cost
of its fares compared with British Airways. Small cases like this surface on a regular basis. The most
significant, however, was a case in 2001 in which a UK High Court judge threw out British Airways lawsuit
against RyanAir over its so-called Expensive Ba****rds campaign on the grounds that, although vulgar,
the no-frills airlines claim was true.
Tobacco
One of the European advertising industrys greatest fears came to pass in late 2003, when the EU banned
tobacco advertising. Following the example of the US law, the EU legislation prevents cigarette advertising
in a wide range of media. The ban, which took effect on July 31, 2005, outlaws cigarette advertising in
newspapers, magazines, on the radio, and on the Internet.
Internet and spam
In early 2004, the EU adopted legislation regarding spam, or unsolicited email. The ban on spam law
requires advertisers to receive consent from consumers prior to dispatching marketing via email. This is an
opt-in approach, making it more stringent than the US approach, which allows advertisers to send unsolicited
email unless a consumer tells them not to. Key points in the European legislation, known as the Directive on
Privacy and Electronic Communications, include the following:
Prior consent for B2C. Advertisers must have consent prior to sending email to individual consumers
(B2C marketing). The one exception to this is when the recipients information was received in the context
of a sale and the advertiser wishes to send information on similar products or services.
National rules for B2B. EU member states can create their own legislation with regard to requiring prior
consent for sending ads to corporate email accounts (B2B marketing).
Clear identification. Advertisers must identify themselves clearly in all communications and provide valid
contact information so that consumers may easily opt out of receiving further solicitations.

Broadcasting
Radio broadcasters, television broadcasters, and cable television system operators all seek to attract
audiences by providing subscribers, viewers, or listeners with desirable programming. They differ, however,
in how they deliver programming and how they generate revenues. Broadcasters and cable system operators
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are usually not just deliverers of content, or pipelines, but also creators, distributors, and packagers of
programming.
National broadcast markets differ as well. Although European Union (EU) members must follow regulatory
guidelines outlined by the European Commission, each country is unique in its culture, and in the makeup
of its broadcast market. Below, we discuss how broadcasting works, in general terms, for television, radio,
and cable and satellite operators, before exploring the peculiarities of broadcasting in Europe.

TWO BUSINESS MODELS

Terrestrial-TV and radio broadcasters generate nearly all of their revenues from advertising, while satellite TV
providers rely on subscriptions. The cable industry also relies primarily on subscription revenues, although
local advertising sales also play an important role. The top cable networks rely on a dual revenue stream of
advertising and carriage (or affiliate) fees paid by cable and content providers (channels).
Advertising rates on both broadcast and cable networks depend on audience size and demographics, so
objective audience measurements are essential. AGB Nielsen Media Research and TNS (Taylor Nelson
Sofres) are the major television (broadcast and cable) audience measurement firms operating in Europe.
TNS, using technology developed by Arbitron Inc. (an international media and market research firm), also
measures radio audiences in many European countries.
The primary TV measurement units used are rating points and share points. One rating point equals 1%
of the total television households in a stations designated market area (DMA), while one share point equals
1% of the TV households in a given DMA that are using a television at the time. Ratings are tabulated for
all DMAs to arrive at figures for local, regional, and national markets.
For radio measurements, rating points represent the percentage of listeners measured against the entire
population of a DMA. Share points represent the percentage of those listening to radio in a particular DMA
who are tuned to a specific radio station.

TV BROADCASTING
Television signals are electromagnetic waves in the radio frequency that are radiated into space from station
transmitters to receiving antennas. Like FM radio broadcasts, TV signals occupy considerably higher
frequency bands than do AM radio signals.
TV stations
TV stations revenues come primarily from three sources: local advertising, national advertising, and network
compensation payments. A stations competitive position depends on network affiliation, programming
quality, management ability, and technical factors. An individual TV stations ratings derive from the
publics response to its programming relative to competing programming or entertainment outlets.
Television stations that serve a given DMA compete for ad sales with other local broadcast outlets,
newspapers, radio, and, increasingly, local cable operators. Within each DMA, ad rates depend on the
stations program ratings, the time of day, and the programs viewer demographics (categorized mainly by
age and gender).
Advertisers usually buy airtime through advertising agencies. National advertising time is sold through
national sales representatives, who receive a commission based on ad cost. Local advertising is typically sold
by each stations sales force.
Network television
Broadcast networks remain the largest force in television programming in most European markets, just as
they are in the US. For national advertisers, these networks continue to provide household penetration and
viewership levels not available elsewhere. In the long term, we expect that their market share will continue
to decline as viewers shift to new media.
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The broadcast networks remain the largest buyers of high-profile first-run shows. Varying quantities of
programming are imported from the US and elsewhere. Cable company investment in original programming
is on the rise, yet shows that originally appeared on a major network continue to fill the airtime on cable
outlets and independent broadcast stations.
Upfront advertising buying
Each year, around spring, broadcast and cable networks commit the bulk of their prime-time advertising
inventory for the upcoming season (which starts in the fall) to media buyers during an annual bazaar.
During this period, the networks present their upcoming program schedules to buyers, who are then offered
the opportunity to lock in negotiated prices for specific shows and times.
Buyers also get certain cancellation options, and sellers may be required to offer make-good inventory if
specific shows fall short of their guaranteed ratings. Networks usually withhold some inventory to sell ad
spots in what is called the scatter market, after the television season begins.
Syndication
Regardless of network affiliation, all broadcast stations obtain some programs from independent sources.
Syndicated programs fall into two major categories: off-network series (which have already aired on a major
network) and first-run shows (specifically made for the syndication market). These programs are typically
owned by the major TV studios or by independent producers.
Television stations must make substantial financial commitments for future access to syndicated programs.
More often than not, these contracts require stations to purchase an entire program series, even before the
number of episodes to be produced has been determined. Although network audiences are analysed to
estimate the future value and potential profitability of such programming, there is no guarantee that a
successful network program will continue to be profitable once syndicated.
License terms for particular programs or films generally run from one to five years. Long-term contracts for
syndicated TV series provide for an initial telecast and subsequent reruns for a period of years, with full
payment to be made by the station before the end of the reruns.

RADIO BROADCASTING
The term radio broadcasting refers to the terrestrial transmission of sound waves, which are sent from
amplitude-modulated (AM), frequency-modulated (FM) or digital audio broadcasting (DAB) stations. AM
radio, sometimes called standard broadcasting, operates on relatively low frequencies and was the earliest
broadcast service, with the first radio station licensed in 1921 in the US. FM radio, which occupies
considerably higher frequency bands, was patented in 1933 but was slow to catch on because the industry
had already invested heavily in AM equipment. DAB allows more stations in the same broadcast spectrum,
allowing for a larger number of broadcasters having launched services in recent years.
The UK was one of the first European countries to adopt DAB, and commercial receivers began to be sold
in 1999. In Europe, DAB is more popular than digital audio radio service (DARS), otherwise known as
satellite radio, whose signals are transmitted to FM-modulated receivers within the S-band range of
frequencies. The reason for DABs popularity over DARS in Europe is the high population density, which
makes it easier and less expensive for DAB to reach the bulk of the population.
Despite an increase in the number of cable channels and continued inroads from emerging digital media, the
old-fashioned radio is a familiar fixture not only in homes but also in workplaces and cars, and on the
streets, beaches, and elsewhere. Unlike most other major media, a radio can go just about anywhere a
person can. Moreover, unlike television, books, magazines, video games, or the Internet, radio does not
demand the listeners undivided attention.
Although the competition for radio listeners has grown more intense in recent years, broadcasters have
created a broad range of specialized stations, making radio more attractive by letting advertisers focus on
niche markets. In addition, radio is generally perceived as a cost-effective medium relative to TV.
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Radio ad rates are based primarily on a stations ability to attract clearly segmented audiences. Other
factors affecting ad rates are the number of stations competing for the same demographic group and the
availability of advertising time slots on any given program.
A radio stations revenues are derived mainly from local advertising, although regional and national ad sales
contribute as well. Local sales are typically made at the station level by a dedicated sales force, while
national accounts are handled by a national advertising representative. These firms are typically
compensated on a commission-only basis. Most radio advertising contracts are short term, generally
running for only a few weeks.

CABLE AND SATELLITE BROADCASTING

Cable and satellite system operators can receive signals from their program providers by several means: special
antennas, microwave relay systems, Earth stations, and fibre-optic cables. These systems amplify the signals,
combine them with local programs and ancillary services, and distribute them to subscribers.
Cable companies generally offer their video subscribers a number of service and/or programming options,
including basic (analogue), enhanced basic or digital tiers, plus large amounts of premium programming. In
addition to digital video and cable modem, or high-speed data services, most cable operators have recently
started to deploy and market digital phone services and broadband connectivity.
Basic programming packages include all local broadcast signals, non-satellite distant broadcast signals that
the system wants to carry, and all public, educational, and government-access channels. Enhanced tiers of
programming include the basic package, plus an assortment of additional program choices that feature
channels dedicated to movies, sports events, concerts, childrens shows, and other entertainment programs,
as well as pay-per-view programming.
Cable and satellite providers also offer channels that are not dedicated to traditional programming,
including information services like news, weather, and stock market reports; public, government, and
educational access channels; audio programming; and electronic retailing.
Revenues are primarily derived from fixed monthly subscription fees paid by customers. In some rare
instances, cable and satellite operators may offer programming on a per-channel charge, or packaged at a
discount from the la carte rate.

OPERATING IN EUROPE
Perhaps the most important difference between the US and European broadcasting industries is the degree
to which European governments dominate the sector. The role of the EU in regulating the industry
constitutes a second major difference, while laws covering freedom of speech, privacy, copyrights, and
media ownership vary as well.
Governments dominate broadcasting industry
European government involvement in the industry dates back to 1922, when the British Broadcasting
Company (BBC), the UKs national public broadcaster to this day, began radio broadcasts. Commercial
radio service did not become available until the 1970s.
The BBC began broadcast television service in 1936, and monopolized the industry for the next 19 years.
Not until 1955, a year after the passage of the Television Act in 1954, did Britains first commercial
television broadcasters begin service.
In Germany, public broadcasting controlled the television airwaves for much longer. Commercial television
entered the country only in the early 1980s, and government-owned and commercial broadcasters continue
to divide the market more or less evenly. Each of the 16 states that form the German Federal Republic
operates its own public radio and television stations.

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Frances first commercial television broadcast came in 1987, after a state-run TV station was privatized.
Italy has three national, terrestrial, public-TV stations, all controlled by Radio Audizioni Italiane (RAI), the
government-controlled broadcaster. Radio Televisin Espaola, Spains public broadcaster, operates two
national TV networks and hundreds of national and local radio stations.
The situation is similar across most of Europe, although state-owned broadcasters are less dominant than
they were as recently as the early 1990s, especially with the rollout of digital broadcasting started in 2006.
In Sweden, for example, four public broadcasters now vie for market share with four public stations, plus a
dozen additional digital channels. The field is split fairly evenly between private and public broadcasters in
Hungary, Norway, and the Netherlands as well. Belgium has no public broadcasting, and is an exception.
TV license fees. In order to fund their large public-sector broadcasting systems, most of Europes largest
countries require owners of televisions to pay for a television license. Many countries initially had a radio
license fee, but in a majority of instances, the separate radio fees have been discontinued. Thus, public
broadcasters must fund their radio operations from the money generated via TV licenses.
European countries requiring license fees include the UK, Switzerland, Sweden, Norway, Italy, Ireland,
Germany, France, Finland, Denmark, and Austria, among others. The annual fees payable in 2009 for
households that own a colour television ranged from a low of roughly $70 in Poland to a high of about
$410 in Denmark, or $416 in Switzerland, including radio.
Must-carry rules. Also as a result of governments dominance of broadcasting, many European countries
require that cable operators carry certain broadcast channels as a condition of keeping their operating
licenses. Because most channels were public broadcasts when the current generation of cable television came
to Europe in the late 1980s, requiring cable operators to give subscribers access to that content served the
public interest.
Cable trade groups now argue that these rules are unfair and unnecessary because commercial broadcasting
has spread throughout Europe, bringing with it many more channels and much more programming. The
cable operators also reason that with the proliferation of media pipelines, broadcasters should have no
difficulty distributing their content, making the rules unnecessary. Cable groups favour limiting must-carry
regulations to channels that meet explicit general-interest objectives. Little headway has been made in
changing the requirements, but regulators are reviewing the issue.
A critical role for EU law
Each European country operates under its own sovereignty, setting its own telecommunications rules, but
the EU has regulatory power as well. EU institutionsthe European Parliament and the European
Councilhave the power to approve legislation formulated by the European Commission. Once a law is
approved, generally in the form of a directive, national governments are required to pass domestic
legislation adjusting their regulatory regimes to match.
The 1989 Television Without Frontiers (TWF) directive established rules intended to allow broadcasters in
each EU nation to serve the entire market. Major elements of the TWF directive are as follows:
Each EU member should require, where practical, that at least half of programming be produced in
Europe;
Members must allow free access for broadcasts throughout the one European market;
Each member should respect the European Commissions guidelines on the maximum time devoted to
advertising during specified programs or given periods of time; and
All members should take steps to protect minors from violent or pornographic programming through
scheduling or limited access.
The TWF regime has been revised several times since 1989. On December 13, 2006, the European
Commission voted to approve a number of proposals introduced in December 2005. The new rules allow
for more split-screen, virtual, and interactive advertising. The commission also relaxed rules governing
product placements in programming, but required broadcasters to flag them before a show begins.

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The commission also increased the frequency of advertising breaks for television dramas to every 30 minutes,
instead of every 45 minutes under the existing rules. Rules for advertising frequency during other types of
programming were not changed. Most importantly, the commission has extended all TWF rules to apply to
online and mobile audio-visual transmissions, levelling the playing field between new and old media.
Foreign ownership rules
As is the case in other regions, European governments impose restrictions on media ownership, either to
prevent foreigners from controlling the flow of information within a country, or to keep any one owner
from accumulating too much control of the media. Most European countries, with the exception of France,
Italy, and Portugal, restrict foreign ownership of broadcast and print media.
Cross-ownership regulations
Nearly half of Europe, including all of the major Western European nations, allows varying degrees of
cross-media ownership. Italy relaxed its standards in April 2004 with the Gasparri Law, which lifted a ban
on any one entity owning interests in more than one news medium. The new law also allowed television
station owners to own newspapers, but those owning more than one station were not allowed to own a
newspaper until January 1, 2011.
Ownership rules in Italy are more lax than in most other European countries. The majority of the countrys
broadcast and print media are owned or controlled by well-known families that came to television, radio,
newspapers, and magazines after establishing their fortunes in other industries. In addition to financial gain,
these powerful groups seek to mould public opinion and exert political influence. Mediaset, which operates
terrestrial- and satellite-television businesses, is owned by Finivest Group, a publicly traded firm controlled
by the family of Silvio Berlusconi, Italys prime minister. Paolo Berlusconi, the prime ministers brother,
owns Il Giornale, a major newspaper.
The law also established antitrust ceilings for media revenue. No one entity can account for more than 20%
of the media industrys revenue, based on a set basket of revenue items stemming from a number of sources,
including national and local advertising; teleshopping; pay-TV subscriptions; sales of books, newspapers,
and magazines; electronic publishing; and revenue from filmed entertainment, among other things.
In Spain, although there are no restrictions on the ownership of newspapers and magazines, there are
ownership limits on radio and terrestrial television. There are no limits on the ownership of digital
television.

Publishing
Even within a given country, publishers may differ substantially in their strategies and sources of revenue,
but the basic business model is the same. In this section, we discuss how the sector works in general terms,
before going on to discuss the ins and outs of newspaper, magazine, and book publishing in Europe. Finally,
we explore the European regulatory landscape for publishing.

PUBLISHING BASICS: COMMON FEATURES

Publishing entails the commercial production and distribution of literature and information, as well as
reproductions of musical scores, visual art, and audio recordings. Newspapers, magazines, and books are
the industrys three main products (delivered in printed form or electronically).
Newspapers and magazines generate income from a mixture of advertising and circulation revenue (from
subscriptions and single-copy sales). Book publishing revenue is derived primarily from sales to readers.
Circulation figures, distribution channels, paper costs, and other expenses vary from sector to sector. While
newspapers, magazines, and books are distinctly different media, they share some fundamental operating
characteristics.

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Labour intensity
All three segments of the publishing business are labour-intensive. Newspaper and magazine publishers
employ reporters, editors, researchers, copy editors, copyreaders, proofreaders, art directors, photographers,
graphic artists, copywriters, and illustrators on a full-time, part-time, or freelance basis.
Nationally and regionally distributed newspapers, and news and business magazines typically maintain
offices and staff in key cities and markets outside their headquarters offices. Book publishers employ some
of these same categories of workers, particularly editors, copy editors, graphic artists, proofreaders,
illustrators, and researchers. Most book authors are under a publishers contract, not part of its salaried staff.
Magazine and book publishers usually outsource their printing and distribution functions. Newspaper
publishers usually print in-house. Magazine and newspaper publishers also maintain advertising sales staffs,
circulation sales staffs, production personnel, and subscriber services personnel.
Although union pressure and worker-friendly legislation keep labour costs high in Europe, the increasing
mobility of the labour force has provided EU employers with some relief. A sluggish economy and high rates
of unemployment in some European countries also help to keep a lid on labour costs. Unemployment rates
in southern European countries remain at their highest levels in five years, while the rates in even stronger
economies like Germany, France, and the UK remain relatively higher compared with historical levels.
While these trends are not good for the indigenous workers in high-wage countries, they could benefit
employers seeking to fill non-union jobs at lower cost.
Paper: publishers raw material
Paperthe main raw material for printed publicationsis second only to labour among costs for a typical
publisher. Newspapers use newsprint; magazines use coated and uncoated publication paper (body paper);
and books use various book-grade papers.
Paper is a cyclical commodity, so prices can change rapidly. Much of the impact of rising or falling paper
prices is borne by the publisher, although the printer can also make money (or lose it) by buying ahead and
maintaining inventories of paper.
While publishers may keep only one or two months paper inventory on hand, many negotiate longer-term
contractsoften multiyear agreements with major paper manufacturersat set prices, shielding themselves
from the impact of short-term changes in paper prices. Many paper users are able to negotiate discounts on
quoted list prices from manufacturers, a practice that is particularly common during downturns in the paper
cycle. More often than not, the size of these discounts is significant. To obtain advantageous terms from
newsprint vendors, newspaper publishers often centralize the purchase of newsprint for all of their properties.
It is not uncommon for newspaper holding companies to have equity interests in newsprint suppliers.
Production
Most newspaper production is performed on company-owned presses, whereas most magazine publishers
printing is done by unrelated third parties under long-term contracts. Some magazine publishers also
perform print services for third parties.
Published books are also typically manufactured by outside printers, but often on paper the publisher
supplies. Book manufacturing contracts are generally signed on a title-by-title basis. In cases where the
publisher does not supply paper to the printer, the printer buys in bulk from paper producers. In addition to
manufacturing books and magazines, third-party printers often provide distribution services, arranging for
mailing and delivery.
Distribution: getting the product out
National and regional newspaper distribution is most often contracted out to third parties. Local newspaper
distribution, whether through home delivery or to newsstands, is increasingly contracted out to third
parties, although many newspapers still maintain their own fleet of trucks. Magazine publishers usually sign
multiyear contracts with unrelated third parties for cross-border, national, regional, or market-by-market

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newsstand distribution services. Subscription copies generally are mailed through the postal system. Book
distribution uses all classes of mail or bulk shipments by freight carriers.
Online publications
Most of Europes newspapers and magazines operate websites, or online solutions. Trade associations and
sites ABYZ News Links Inc. provide links to most of those operated by newspapers. In addition, major wire
services, government news services, television and radio broadcasters, and non-traditional publishers
operate thousands of web-based news sites.
We are not aware of any industry-wide or countrywide statistics on newspapers e-publishing profits, but
we believe the trend is positive. Through paid subscriptions, listing fees, advertising, or all three, e-publishing
is growing and profitable for many companies. Professional and educational publishers are also embracing
the power of the web to offer product extensions to their print material, or even migrating their clients from
print to online solutions, thus cutting the need for printing and distribution, and boosting margins.
Circulation and advertising
Books, magazines, and newspapers compete for readers and buyers based on content, service, and price as
perceived by the individual reader. Newspapers may compete for readership with other metropolitan,
regional, and national newspapers. Magazines compete, in large part, with similarly focused periodicals.
Books compete for readers by subject matter. All three forms of publishing are up against other media for
the consumers time and money.
Newspapers and magazines also compete for advertising. This contest is based on circulation levels,
readership demographics, price (measured in cost per thousand readers, or CPM), geographic coverage, and
effectiveness (gauged by consumer response). They not only compete with each other, but also with other
advertising media, including television, radio, direct mail, outdoor advertising, Internet services, and others.
Revenue mix affects growth
A company in which ad revenue predominates over circulation will benefit from a strong advertising
environment. Conversely, a publisher that depends more on circulation than on ad revenue will be strongly
affected by changes in sales patterns and pricing, for subscriptions as well as for single-copy sales. In a given
economic environment, revenue mix can significantly influence the respective performance of two
companies in the same business.
Typically, newspapers receive around 80% of their revenues from advertising and 20% from circulation.
On average, magazines receive about 60% to 65% of their revenues from circulation, but individual titles
may range widely from that figure.
Among newspaper publishers, the portion of ad revenue contributed by classified, retail, or national
advertising can influence results. In particular, those newspapers that rely significantly on classified advertising
have experienced a serious structural decline because of the audience migrations to the Internet.

DIFFERENCES BY PUBLICATION TYPE

The following section discusses the differences between the various segments of the print media, and how
each operates in Europe.
How newspapers operate
Newspaper revenues come largely from advertising (from both print and online editions) and circulation,
though newspaper publishers also derive revenue from electronic information and publishing, as well as
from selling their news to others.
Newspapers compete for ad dollars with two vibrant segments of print advertising media: shoppers and
direct mail. Shoppers (or penny-savers) are free-distribution newspapers delivered directly to consumers
homes on a weekly, biweekly, or monthly basis. In Europe, Sweden-based newspaper group Metro

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International has perfected this business model launching free-sheets across most of the continent and
outside Europe, too.
Direct-mail products include samples, magazines, catalogues, coupon packs, and circulars. These are
delivered by the postal service or by private carriers. Shoppers and direct mail typically achieve 100%
market penetration without duplication in targeted areas; they also provide guaranteed delivery and
concentration in the area the advertiser wants to reach.
Thousands of shoppers are published in Europe. They have proliferated as advertising rates have risen and
newspaper penetration has fallen over the years. Relatively low production costs, cheap postage rates, and the
availability of demographic information keyed to postal codes, have contributed as well.
The newspaper industry has responded to these challenges by pricing preprints (pre-printed literature
usually advertisingthat is placed inside a newspaper or magazine) on a par with third-class postage,
pushing preprint sales, and increasing the frequency and number of Sunday supplements and special
magazine editions. In addition, many newspapers are publishing their own free-distribution papers; some
have even acquired their own chains of shoppers.
These subsidiary marketing programs are called TMC (for total market coverage) or ADS (for alternate
distribution systems). They are designed to attract advertisers with a guarantee of 100% market coverage
significantly higher than the less than 60% of the market the typical daily newspaper reaches. By adding a
TMC or ADS program, a newspaper publisher can get the advertisers message to people who are not part
of its readership.
Newspapers operate independently, but together
Most daily newspapers operate independently of their parent companies. Editorial policies and business
practices, for example, are established by local management in most cases. In this way, a publisher can meet
the needs of the individual areas served by its newspapers.
For corporate-owned newspapers in physical proximity to one another, however, publishers often combine
certain operations. In an effort to improve efficiency and cut costs, for example, accounting or payroll
functions may be consolidated. Where markets overlap, newsgathering and other activities may also be shared.
Quarterly revenues of the newspaper publishing industry vary in response to seasonal influences. In general,
results in the first and third quarters are significantly lower than those in the second and fourth quarters.
Sales are boosted by heavy holiday advertising around Easter in the second quarter and the year-end
holidays in the fourth quarter.
National newspapers dominate in UK
Because of the UKs small geographical area and good transport infrastructure, there are many national
newspapers, unlike in the US, where most newspapers are printed and published locally. In contrast to
France, the main national papers in the UK are morning newspapers; there are no national evening titles.
UK newspapers have traditionally been grouped into three categoriesmass-market tabloids, or red-tops
(such as The Sun), middle-market tabloids (the Daily Mail), and quality broadsheets (The Daily Telegraph).
Unlike in other European countries, there are no daily all-sport newspapers.
Mass-market tabloids. Just as in other areas of life, sex sells. Thus, this category outsells the quality
broadsheets (and the quality compacts) more than four to one. The mass-market tabloids include The Sun,
The Daily Mirror, and The Daily Star.
Middle-market tabloids. The middle-market tabloids, the Daily Mail and the Daily Express, serve a very
different readership: family women. Weekend supplements ensure that these titles are a popular and cheap
alternative to magazines, while sports supplements aimed at men seek to broaden their readership with that
group. Both tabloids sponsor events to win publicity and give the public a favourable view of them.

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 Broadsheets. This format is disappearing. The Times and The Independent have already switched to
tabloid format, and The Guardian has switched to a hybrid format, called the Berliner. The remaining
broadsheets are The Daily Telegraph and the Financial Times. Although neither publication has moved to a
smaller format, both newspapers have been revamped. The Financial Times, for instance, instituted a
number of changes to the newspaper, including new typefaces and labelling, in 2007.

THE INS AND OUTS OF MAGAZINES

Factors affecting magazine publishers revenues include advertising, circulation, and brand-extension
programs.
Circulation determines ad rates
Magazines usually sell three primary types of advertising: run of press (ROP), mail order, and insert. Most
magazine advertising pages and revenues are derived from ROP ads, which are printed within the magazine.
Advertising rates are based on each magazines average per-issue circulation, usually stated as cost per
thousand readers. These rates must usually be competitive with those of comparable magazines serving the
same target audience. Readers response to advertisers products and services, the effectiveness of the
magazines sales team, and the quality of customer service are factors affecting demand for ad space in a
particular magazine.
Building readership
Circulation revenues are generated in two basic ways: subscriptions and newsstand sales. Magazine
publishers are increasingly using specialized titles and local and regional editions to boost circulation.
Subscriptions. Subscriptions are usually a magazines largest source of circulation revenues. They may be
generated through direct-mail solicitation, agencies, insert cards, and other means. Publishers sometimes
lure subscribers with discounts from the stated cover price or with premiums. While discounts and
giveaways do attract subscribers, they do not necessarily provide readerspeople who read the publication
after buying, borrowing, or obtaining it through other meansand the number of ultimate readers is what
advertisers care about. Editorial content, therefore, is crucial to maintaining a loyal readership. Readers
must perceive the magazine as worth the investment of their time and money.
Newsstand sales. Newsstand sales, including single-copy sales at supermarkets, drugstores, and other
retail outlets, are another important source of circulation revenues for most magazines. These tend to be
lucrative.
Although comprehensive statistics are not available, it is well known that single-copy sales can be more
profitable than subscription sales. That is because subscriptions are usually discounted from list price, and
they entail postage costs. On the other hand, single-copy sales (newsstand sales) are sold at list. But because
retail copies are discounted to the retailer or wholesaler, and because they also incur distribution costs,
profits to the publisher for newsstand sales may not always be higher than for subscription sales,
particularly if the magazine in question is usually not offered at a subscription discount.
The trend toward increasing market segmentation can be seen clearly within magazine publishing, where
specialized titles and local and regional emphases proliferate. Magazines focused on such subjects as
parenting, children, and city and regional life are common, as are titles covering personal finance, travel,
sports, and computingnot to mention fashion, celebrities, culture, and consumer lifestyles. Some
publications target a particular demographic group, such as the mature reader. General interest magazines
can benefit from the segmentation trend by producing special editions and theme sections to promote
readership and advertising.
Other sources of revenues
Magazines have created brand extensionswhereby they produce goods for sale or license their name to
manufacturersfor decades. Today, magazine publishers are expanding such endeavours. We expect that
trend to continue for the foreseeable future.
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Additional revenues are also obtained from other ventures, such as contract (or custom) publishing and
spin-off products. Spin-off products can include special-interest magazines, books, CD-ROMs, online access
to special interest websites, and radio or television shows. Magazines are also lending their names to trade
shows, tours, seminars, and conferences. Custom publishing (or customer titles) comprises a significant
percentage of the total magazine output in several European countries, including the UK, Finland, Estonia,
and Austria.

BOOK PUBLISHING
Book publishing in Europe can be divided into four main categories. General (or consumer) book publishing
includes all kinds of books, whether hardcover or softcover. Included in the consumer book category are
adult and juvenile fiction and nonfiction (or trade books), religious books, and mass-market paperbacks.
The other segments are educational (primary through secondary school); academic (college); and business
and professional.
Fundamental factors in book publishing
In the realm of book publishing, important factors include per-unit costs, author advances and acquiring
rights, return rates, and remainders.
Per-unit costs. Per-unit costs are largely a function of print run size. For example, per-unit costs for massmarket paperback publishers are low compared with most other categories because the number of copies
printed is largeoften more than 500,000 in the first run. In addition, these books are usually made of less
expensive materials than some other types of books, such as art books or textbooks. Paper grades can differ
widely in weight and quality, and therefore price. Mass-market books are also smaller than most other
books, so they use less paper and material.
A specialized professional book printed in a small quantity might incur the same composition and plant
costs as a general interest title expected to sell many copies. For the book with a short run, fixed costs are
spread over a smaller number of books, raising the cost per unit.
Material costs vary with the level of output. In other words, a higher unit production does not lower perunit variable expenses. It may permit a publisher or printer to negotiate a volume discount from suppliers
on certain materials, however, as well as to spread fixed costs across a larger base. Today, non-educational
publishers typically limit the first print run of a hardcover book to 5,000 to 75,000 copies. Circumstances
sometimes warrant a larger run, however. A new book by a best-selling author, or on a popular topic, can
be given a first run of 2 million or more copies.
Bloomsbury Publishing PLC, which has worldwide (excluding the US) publishing rights to J.K. Rowlings
books, reported successive records with the Harry Potter series. The last book in the series, Harry Potter and
the Deathly Hallows, was released globally in 93 countries in 2007 and is, to date, the fastest-selling book
ever. It sold 15 million copies in the first 24 hours following its release, including more than 11 million in the
US and the UK.
Author advances and acquiring rights. Costs to cover author advances and to acquire rights affect a
publishers profitability. Buying the rights to an unreleased book by a popular author, or the paperback
rights to a successful hardcover title, can cost well into the millions of euros. These expenses are often
higher for publishers of adult trade and mass-market paperbacks than for other publishers, such as those of
professional or educational books. Such contracts can be viewed as fixed costs to be spread over highvolume output.
Return rates. Trade and paperback publishers generally print far more copies than they expect to sell to
the book-buying public, and permit retailers to return unsold books for a full refund. Returns, which entail
handling, freight, processing, and disposal, are costly. Both publishers and retailers spend millions of Euros
to ship unsold books back and forth.

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On average, retailers in Europe return roughly one-fifth of all publishers book shipments in any given year,
although the actual percentage varies widely by category and by country. (The US return rate approaches
one-third.) Returns from retailers throughout the consumer sector continue to be a problem for publishers.
Generally, mass-market book returns and adult hardcover returns are more than 30% of total sales. All
other book returns average between roughly 15% and 25% of sales, with technical, scientific, business,
medical, and other professional books at the low end of the scale. On the other hand, electronic books are
never returned. The return rate is also affected by the size of a publishers backlist and frontlist (defined
below). A publisher with many backlist nonfiction titles usually has much lower returns than does a publisher
that emphasizes new fiction. Why? Because a frontlist title is by definition new to the market and the
demand for it has not been tested. Meanwhile, publishers have a prior selling historya yardstickwith
books on the backlist, so backlist titles like Jane Eyre see fewer returns than new titles.
Remainders. Publishers tend to reduce the price of hardcover books drastically after a certain period, in a
process known as remaindering. Remaindered books are offered for sale to discount bookstores, jobbers,
and other vendors. Paperbacks are often shredded and recycled.
Publishing catalogues
A book publishers catalogue falls into two major categories: the frontlist and the backlist.
The frontlist. This is a publishing companys catalogue of new books. In trade publishing, it is estimated
that only one out of every five new books succeeds. Therefore, a small number of bestsellers typically subsidize
a large number of less profitable titles. In addition, subsidiary rights from the frontlist (such as royalties from
paperback reprints) can make a significant contribution to a publishers profits.
The backlist. The backlist comprises a publishing companys catalogue of books that have already
appeared in a first edition and that have been or will be issued in subsequent editions. It is the industrys
bread and butter in that its unit sales and revenues are usually predictable. No matter what frontlist sales
are like, the backlist gives publishers a measure of economic security.
Backlist books are lucrative partly because print runs are planned in advance, so there are fewer costly returns.
Such works require no additional editing and very little promotion. The main expenses are manufacturing and,
occasionally, a new jacket design. Ever-rising cover prices also help profits.
Profit margins
In book publishing, profit margins vary by market segment. The ratio of operating income to net sales (sales
minus returns) is usually higher for school and college texts (roughly 13%16%) because demand can be
more accurately estimated, reducing the amount of unsold stock. Margins are relatively low for other
segments, such as adult softcovers (1%4%), where demand is more uncertain. There are no hard-and-fast
rules, however. Profit performance can vary widely from book to book, even within a single category.
To decide print runs and sale prices, publishers calculate the various costs of their products. They typically
offer wholesalers and bookstores a discount of roughly 40%60% from the suggested retail price of a book.
Distribution channels
Retailers and other distributors buy books directly from publishers or from book wholesalers. Most books
in Europe are sold through retail channels, including the Internet. In most EU countries, more than 60% of
books are sold in this way, versus only 35% in the US. Mail order and book clubs, college bookstores,
schools, and libraries account for much larger shares of publishers sales in the US than in Europe.
France: 70% of sales (by value) are made through retailers; 21% through book clubs; and 9% through
other channels. The principal retail outlets are bookshops (18% of the total), hypermarkets (18%), and
multimedia superstores (20%).
Germany: 63% of sales are made through all retail channels; 28% through book clubs, direct sales, and
mail order; and 9% through other channels.

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The UK (data is available only for the consumer sector): 65% of sales are through retail outlets, 15%
through book clubs or mail order, and 20% through the Internet. Large chains are the most significant
force in the UK, with 45% of the market; supermarkets account for 5%.

In some countries, such as France and Italy, a single retail chain is either very strong or dominant; in others,
such as Germany, the retail channels are more fragmented. However, books are increasingly sold in outlets
other than traditional bookshops. This trend is even more pronounced in countries that do not have fixed
pricing for books (discussed below) because big-box discounters and others are free to compete on price.
Educational publishing
Textbooks are written and marketed primarily for use in formal educational settings. They contain such
features as chapter summaries and test questions. Unlike trade and professional books, they normally are
not marketed to the general consumer, but sold directly to school systems.
Educational publishing comprises primary through secondary texts. It generally excludes academic (college)
texts. It also does not include medical, nursing, and other health sciences textbooks published by medical
publishers, which are generally considered professional books.
High capital stakes are barriers to entry. The process of developing instructional materials for primary
and secondary schools is complex, time consuming, and expensive. A full-scale instructional program in any
given subject area, like history or mathematics, usually consists of a series of textbooks and ancillary
materials in various formats, such as workbooks and study aids.
The cost of putting together a new program in a given subject area can easily exceed 40 million and take
five years or more to complete. Marketing costs are another major expense, generally representing 25% of a
grade school publishers revenue.
Heavy capital demands and erratic income flow in this line of business have tended to keep it concentrated
among the larger, better-financed publishers. A publisher whose books do not make the grade among
textbook buyers can lose many millions of Euros in upfront spending. Only the largest firms can afford both
the upfront costs and the periodic big losses.
Substantial spending requirements and the difficulty of winning acceptance by educators present a significant
barrier to new entrants in the industrys educational segment. Publishers entering the education market
today generally do so by acquiring established publishers or imprints. When orders do come, however, the
quantities are large. Moreover, once a school text is purchased, it may not be replaced for several years.
These market characteristics, along with established publishers strong reputations and the high barriers to
entry, provide the industry with some degree of long-term stability.
Educational sales run in cycles. The educational publishing sector exhibits a greater degree of cyclicality
than do most others. As described below, this feature partly reflects the normal pattern of orders. In
addition, because funds for the purchase of education texts come largely from governments or school
districts, local or regional economic conditions have an important influence on purchasing decisions. Of
course, enrolment trends also drive demand.
US textbook cycles affect Europes educational publishers. Because many of the major European
publishers have significant operations in the US, issues that are peculiar to the US market affect company
performance. Pearson is the largest publisher of grade school textbooks and materials in the US, so its sales
and profits are particularly affected by US purchasing cycles.
Academic publishing has high profit margins. Academic (college) texts are the most profitable line in the
book publishing industry. Production costs are comparatively low, and cover prices are relatively high.
Educational programs, which are usually organized in series and sold to a number of countries, must meet
specific pedagogical and government guidelines requiring numerous reviews and revisions. Academic
textbooks are not subject to such scrutiny.

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Academic textbooks are sold directly to students, primarily through college or private bookstores. In recent
years, however, the proliferation of Internet sites catering to this market has cut significantly into bookstores
share of sales. Unit sales are far smaller than in the elementary or secondary school textbook market (or
most other markets, for that matter). For this reason, academic texts typically carry higher price tags than
do consumer-oriented books.
These high prices have fostered a strong market for used textbooks. The widespread use of the Internet for
book retailing has also made it easier to buy used texts. It is very common for Internet sites that sell new books
to also list used ones. Used texts account for anywhere from 20% to 40% of total college textbook sales.
The availability of used books can reduce the demand for a new title within two or three years of its initial
publication. In efforts to counter this, textbook publishers typically issue new editions every few years; they
also try to direct potential users to their own sites, to buy new books directly from the publisher. Although
reliable statistics are not available, direct sales do not account for a significant portion of publishers revenues.
Fixed pricing versus free markets
In some EU countries, book prices are fixed by law. That is, publishers list prices are the prices paid by
consumers. Fixed-price countries include Austria, Denmark, France, Germany, Greece, Italy, the Netherlands,
Portugal, Spain, and Hungary. This differs from the practice in other EU markets, the US, and Australia,
where list prices generally mean suggested price only. The book-buying public has come to expect
discounts off the list price in these markets.
One could argue that fixed pricing aids publishers by eliminating pressure on them to reduce the prices they
charge retailers or wholesalers. Floating pricing, or discounting, on the other hand, may boost book unit
sales to such an extent that the lower proceeds per copy are offset by higher volume. We have not been able
to find evidence that would prove either point.
Book market difficult to measure accurately
Book sales statistics are generally available from EU member states, but even in the major EU markets, there
are gaps in the data. For some countries, data exists only since 2002; in others, governments regard book
sales statistics as confidential.
Even where data is available, national book publishing associations collect information only from their
member companies. However, if member companies do not account for all domestic sales, the associations
may underestimate the size of their national markets. Information that is more reliable may be gleaned from
the national associations of booksellers, but only a few report such statistics. The lack of consistent and
comparable data makes it hard to draw firm conclusions.

EUROPEAN MEDIA REGULATION

As is the case elsewhere, European media regulation covers issues such as copyright protection, foreign
ownership restrictions, cross-media ownership controls, and concentration of media ownership. Although
Europe is economically unified to a degree, media laws still vary by country, as well as in comparison with
other areas of the world.
Copyrights and moral rights
European copyright laws generally accord authors and other creative types a high level of intellectual
property rights (IPR) protection. Such rights, and the enforcement mechanisms in place, are essentially on a
par with those in other developed countries. The French and Spanish governments go further: both recognize
authors moral rights over their work, in addition to the property rights protected by traditional copyrights.
French law on moral rights stipulates that authors have the right to respond to critics in the same venue where
the criticism appeared. Authors have the power to decide when, where, and how their works will become
available to the public. In addition, although authors can remain anonymous or use a pseudonym, they can
also require that authorship be noted on any form of publication of their work.

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If an author believes that any modification of his work will dishonour him or otherwise harm his reputation,
he can oppose those changes. He can withdraw rights or back out of contracts under the above conditions,
but he must compensate the other party for any monetary losses or damages.
These moral rights stay with the author or heirs forever. Copyrights expire 70 years after the death of the
author, roughly in line with practices in most of the rest of Europe and the US. In Spain, both types of rights
expire 70 years following the authors death.
Privacy laws
The French, English, and Germans take a stricter stance than most of the rest of Europe in protecting
citizens privacy in the media, particularly when it comes to publishing a persons image, a photo of a
persons works, or a photo of a persons property.
The UK Press Complaints Commission (PCC) ruled in December 2005 that the Daily Mirror had breached
PCC privacy rules when it published a photo of the home of J. K. Rowling, author of the Harry Potter
series, and printed enough information that the exact location of the property could be determined. The
author claimed that the newspapers action caused a security breach.
In October 2005, a German court awarded a man monetary damages after a Munich newspaper published a
photograph of him at a gay parade. The mans family and acquaintances had no idea before the photo
appeared that he was gay. Although he was in a public place, the court noted in its ruling that the man was
not a public figure, that the photo was two years old and taken out of context, and that the photo was
taken and published without the mans consent. Trade interests in Germany and France are lobbying to
change the laws, arguing that they severely limit freedom of speech.

OWNERSHIP RESTRICTIONS
As is the case in other regions, European governments impose restrictions on media ownership, either to
prevent foreigners from controlling the flow of information within a country, or to keep any one owner
from accumulating too much control of the media. Most European countries, with the exception of France,
Italy, and Portugal, restrict foreign ownership of print media. The UK, Germany, Spain, and Ireland, all
have ownership restrictions.
Nearly half of Europe, including all of the major Western European nations, allows varying degrees of
cross-media ownership. Italy moved to relax its standards in April 2004, with the Gasparri law, which lifted
a ban on any one entity owning interests in more than one news medium. The new law allows newspaper
publishers to also own television stations, but those owning more than one station were not allowed to own
a newspaper until January 1, 2011.
The law also established antitrust ceilings for media revenue. No one entity can account for more than 20% of
the media industrys revenue, based on a set basket of revenue items stemming from a broad range of sources.
These include national and local advertising; teleshopping; pay-TV subscriptions; sales of books, newspapers,
and magazines; electronic publishing; and revenue from filmed entertainment, among other things.
Ownership rules in Italy have always been more lax than in most other European countries. The majority of
the countrys 177 daily newspapers are owned or controlled by well-known families that came to
newspapers after establishing their fortunes in other areas. In addition to financial gain, these powerful
groups seek to mould public opinion and exert political influence. The Fiat Group, for example, owns La
Stampa, and Paolo Berlusconi, whose brother is Italian Prime Minister Silvio Berlusconi, owns Il Giornale.

FAVOURABLE TAX TREATMENT

Many EU member states provide some form of support to their newspaper, magazine, and book industries
through preferential value added tax (VAT) rates on end-user sales. Some member states do not charge VAT
at all for books (Ireland and the UK), magazines (UK), or newspapers (Belgium, Denmark, and the UK). In
the majority, the VAT rate charged on print publications is significantly lower than the standard national
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rate. The preferential rates are usually intended to support cultural and political diversity by keeping prices
low for buyers, ensuring healthy demand for print media. VAT rates, or changes in the rates, can have a
significant impact on publishers sales.
In 2002, Sweden reduced the VAT rate on books to 6% from 25%, allowing retail prices to fall substantially.
Book sales increased by 20% in the following 18 months, according to the Swedish Publishers Association
(SPA). Although growth has now levelled off, sales remain significantly higher than they were before the
VAT reduction.

KEY INDUSTRY RATIOS AND STATISTICS

Both general economic data and industry-specific statistics can provide useful indicators of the outlook for
the media industry, including broadcasting, pay TV, advertising, and publishing.
Population, income, and demographics. Population statistics, along with figures on income and
demographics, play central roles in all media advertising, particularly when a market is highly segmented. In
addition to absolute size, the growth rate and size of key age groups and other categories (such as married
couples, grandparents, or working mothers) can determine how much advertising money a segment will
attract and which broadcast medium is best suited to reach that segment. These statistics can be obtained
from government websites for each country.
Program audience measurement. The size of a programs television or radio audience helps determine how
much advertising revenue the show will produce. The number of rating points given a program shows what
percentage of that particular markets television households watches it, or what percentage of the population
listens to it. One national rating point is equal to 1% of all the television homes.
Data also are collected on the percentage of people watching television at a given time who are tuned in to a
particular show. This number, which excludes potential viewers who are not watching television, is known
as share. This definition also applies to radio share.
AGB Nielsen Media Research and TNS (Taylor Nelson Sofres) are the major television (broadcast and
cable) audience measurement firms operating in Europe. TNS, using technology developed by Arbitron Inc.,
an international media and market research firm, also measures radio audiences in many European countries.
(See the How the Industry Operates section of this Survey for more information on audience measurement.)
Real growth in gross domestic product (GDP). Real GDP growth measures the change in a nations
output of goods and services, adjusted for inflation. When real GDP is growing, consumer and business
sentiment tends to be positive, making consumers and businesses more likely to buy. Advertisers, newspaper
and magazine publishers, and broadcasters benefit because marketers are more likely to advertise when they
think consumers are in the mood to spend.
Companies spending on advertising generally tends to exaggerate economic cycles. When economic growth
slows, advertising spending usually slows even further. Inversely, when GDP growth recovers, ad spending
has a tendency to rebound even faster, often exceeding GDP expansion for three to four years.
Economic data and measures of business sentiment can be obtained from various sources in Europe, including
government websites for individual countries. The Conference Board, an international non-profit business
research group, provides consumer (and business) sentiment indices through local chapters in countries
throughout the world. Eurostat, the statistical office of the European Union, offers a broad range of data.
Media spending. Media spending is the largest component of marketing expenditures. Statistics for
advertising in such media as broadcast and cable TV, radio, newspapers, magazines, and online are key
measures in this area. Media spending, and thus agency revenues, are usually highest in the second and
fourth quarters of the year.

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European media spending is tracked by private research firms and by trade organizations. Some of the most
widely used data comes from research firm ZenithOptimedia and the trade organizations Interactive
Advertising Bureau, based in the United States; Zentralverband der deutschen Werbewirtschaft e.V., in
Germany; and Association des Agences Conseils en Communication, in France.
Stock market performance. In general, a strong stock market tends to boost consumer and business
sentiment, in addition to increasing the wealth of both groups. As in the United States and other developed
countries, spending and investment in Europe increases when consumer and business sentiment is positive,
and real wealth is rising. This has a positive impact on the advertising industry because its revenues are
directly linked to discretionary spending.
In addition, the largest of the companies in this sector are publicly traded, so a strong stock market makes it
easier for companies such as WPP and Publicis (whose shares trade in the US as American Depositary
Receipts, or ADRs) to raise capital for further investments. Stock market performance can be tracked in
financial publications such as the Financial Times and The Wall Street Journal, and via online services such
as Yahoo!.
Advertising strength and relative advertising growth factors. Total projected spending on ads in all media
and projected spending for advertising various categories of goods and services provide clues about demand
for ad space in certain media, as well as the general health of all media. Changes in spending on entertainment
and movie advertising, for example, will have an important effect on ad sales in radio, TV, and newspapers,
but little effect on magazines. Automobile, hotel, and airline advertising is purchased from all ad mediums,
while fast food is pitched mainly on TV and radio.
Net new business. Net new business represents the estimated annual advertising budgets (or revenue
depending on the circumstances) for new business wins (which includes new clients, clients retained after a
competitive review, and new product or brand expansions for existing clients) less the estimated annual
advertising budgets (or revenue) for lost accounts.
Net new business is used to measure the effectiveness of client development and retention efforts. It is not an
accurate predictor of revenues because what constitutes new business or lost business is subject to differing
judgments, and may vary from one company to the next. In addition, the amounts associated with individual
business wins and losses depend on estimated client budgets. Clients may not spend as much as they budgeted,
and the timing of budgeted expenditures is changeable. In addition, the amount of budgeted expenditures that
translate into revenue depends on the nature of the expenditures and the applicable fee structures.
Currency exchange rates. Advertising is a global business, so changes in exchange rates have a significant
impact on ad agencies. This is a particularly thorny problem for the major groups, which commonly have
agency operations in more than 100 countries and bill clients in many different currencies. There are also
economic risks associated with intra-company cash movement; that is, when agency groups under the same
corporate parent move money across different currency markets. Some of the largest advertising
conglomerates conduct 40% or more of their business in the US, making the dollar particularly important.
Upfront television ad sales. This term refers to the sale of advertising time before the start of the TV
season (mid-September through mid-May). Broadcast networks generally sell most of their available time
slots in advance. The rest is sold in the scatter market, after the television season begins in early fall.
Upfront market prices can provide a guide to what prices will be in the scatter market.
Cost per thousand (CPM). This refers to the price of reaching 1,000 households or viewers with an
advertisement. It is computed by dividing the cost of the airtime by the estimated number of households or
viewers. As a measure of cost efficiency, CPM is used to compare programs whose audience appeal differs.
This measure can also be used to gauge pricing pressure and whether a particular program or medium can
sustain its pricing power.
Cable and satellite
Some indicators are specific to the cable and satellite industry:
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 Churn. This measure of monthly customer turnover is calculated as the number of cable or satellite
subscribers who terminate service during the month, divided by the average number of subscribers for that
month. Subscribers may leave an operator voluntarily (for example, due to service dissatisfaction or
relocation) or involuntarily (for example, due to failing to pay their bills). Comparing the churn rates of one
operator with anothers, and with the industrys overall rate, can help to gauge customer satisfaction and
the potential for defections to competing providers. The various sources of churn are also informative.
Homes passed and penetration. Homes passed (also referred to as the footprint) is an estimate of the
number of living units that a cable distribution network can reach. Penetration refers to the percentage of
households passed that subscribe to a service.
To stay competitive, many operators are expanding their footprints for advanced services, while aiming for
greater penetration in areas where such services are already available. Declining penetration can indicate
higher competitive threats or market saturation, while low penetration can indicate growth potential,
particularly for newer services such as digital cable, high-speed Internet services, and Internet telephony.
Publishing
Some indicators are specific to the publishing industry:
School/college enrolment trends. Information on trends in primary school (elementary), secondary school
(high school), and college enrolment is essential for projecting textbook sales. Enrolment levels influence
demand for textbooks in general, but they are particularly critical in the market for college textbooks.
Enrolments are closely linked to demographic trends.
Paper inventories. The amount of paper inventoried by publishers is an important consideration in
analysing the profit outlook for a publisher or the industry at large. Higher paper prices can mean rising
inventories in the short term. When prices begin to rise, publishers start hoarding paper to avoid paying more
in the future. Raising inventory levels to hedge against higher anticipated paper prices means spending cash
that could otherwise be invested or used to pay down debt, however. When reviewing paper inventory levels,
the analyst should measure the opportunity cost versus the savings anticipated from stockpiling paper.
Paper supplies. There are more than 100 paper, newsprint, tissue, paperboard, and/or board manufacturers
in Europe. There are many hundreds more paper suppliers throughout the world. Thus, under normal
circumstances, European publishers should have access to ample supplies of this commodity.
Nevertheless, it is important to be aware of potential disruptions or changes in the supply/demand balance,
not just in Europe, but globally. A labour strike in Canada, for example, might lead American publishers to
bid up prices and siphon supplies away from European producers.
The rapidly growing Chinese economy is an additional consideration. Because the countrys population is so
huge, even moderate sustained growth in demand for commodities such as newsprint, coated paper, or book
stock could cause disruptions in world supplies and prices.
Statistics and other information on the markets for newsprint, coated paper, and uncoated paper, including
data on pricing, manufacturing capacity, raw materials, production, consumption, and exports and imports,
are provided by the Confederation of Paper Industries.

HOW TO ANALYZE A MEDIA COMPANY

While each industry has unique aspects to analyse, there are also a number of significant common factors
among publishers, ad agencies, broadcasting, pay TV, and holding companies in the media sector.

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THE ECONOMY INFLUENCES ADVERTISING DEMAND

Newspapers, magazines, broadcasters, and ad agencies are significantly affected by the demand for
advertising, which in turn is influenced by the overall level of activity in an economy. During periods of
prolonged economic decline, corporate revenues fall and companies look to reduce costs in order to
maintain profits. Since cutting fixed costs or personnel can be difficult, ad budgets often are one of the first
expenses to be axed. Of course, this hurts both advertising agencies that create and buy ads on behalf of
their clients, as well as the media outlets that sell their advertising inventory. Conversely, during periods of
economic prosperity, the overall level of advertising usually rises.
Economic conditions at the local or regional level generally exert a greater force on advertising health than
do those of the nation at large. A sluggish economy in a town, city, or region has a much more direct impact
on consumer spending, and therefore on the health of local businesses and their level of advertising spending.
In the current environment, for example, European publishers and broadcasters with a substantial presence
in regions hardest hit by the recent recession were the hardest hit in 2009, in particular those operating in
Spain, the UK, Italy, and Scandinavia.
In certain instances, advertising sales do not follow the economyfor instance, in the entertainment
industry. Therefore, depending on the clients products and the ad campaigns, ad agencies still can have
significant growth in an economic downturn. However, the larger the agency and the more diversified its
client base, the more likely it is that that agencys fortunes will mirror the health of the general economy. It
is normally the smaller agency, the one with a few large clients, or the highly specialized agency, with
business growth that can be countercyclical to the general economy. We also note that the worlds largest
agencies derive a substantial portion of revenues from many regions outside their home country. Thus, the
effect of a weak European economy may be offset by strength in overseas economies.

BROADCASTING
Television and radio broadcasters generally compete for advertising dollars with a host of other in-home
and out-of-home mass media outlets, including cable, newspapers, billboards, and the Internet. These
broadcasters are exposed to different levels of competition for national, local, and regional advertising. The
fortunes of any given broadcaster depend partly on its ratings and partly on competition from alternative
media outlets.
Over the next few years, we believe it is important to estimate the extent to which terrestrial television and
radio broadcasters may be vulnerable to audience erosionor open to new growth opportunitieswith
advancements in newer digital outlets, such as webcasting (YouTube) and the spread of multi-channel
television in Europe.
Because broadcasters typically generate most of their recurring revenues from a few major advertising
categories (typically automotive, restaurants, retail, pharmaceuticals, packaged goods, financial services,
hotels, real estate, and entertainment), an assessment of trends in these categories is usually instructive. Such
assessment should focus on trends across those sectors to which a given company may be exposed. Is the mix
of advertisers diversified or heavily concentrated? How might a company be exposed to the consolidation of
department stores or wireless carriers? Are new car dealers following their customers to the suburbs?

PAY TV
A thorough qualitative analysis of a cable or satellite company differs from that of a broadcaster because
these sectors are both structurally and competitively distinct from the advertising-driven and heavily
regulated broadcast industry. Cable and satellite companies compete for subscribers largely against each
other and against other providers of communications and entertainment services to consumers and
businesses. These companies rely only marginally on advertising revenues, as most of their income is
generated by monthly household subscriptions to different packages on offer.

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Pay-TV operators benefit from network effects, as the one that has a larger customer base is able to buy
more attractive content. In Europe, sports rights are the main cost for many of the pay-TV operators, but
also the main driver in subscriber growth. In the UK, for example, British Sky Broadcasting Plc has been
able to consistently outbid rivals in bidding for sporting rights, which, in turn, has allowed it to maintain its
market-leading position in the UK in numbers of subscribers. In this context, any analysis of pay-TV
operators should explore whether the markets are served by one or more competitors and what roles the
incumbent cable, satellite or phone companies play. In addition, when there is severe concentration of
content in one provider, the analysis should also consider the possibility of regulatory intervention. In the
UK case, for example, the authorities have been reviewing the possibility of whether to force BSkyB to resell sports content to third-party providers at regulated wholesale prices.
Given these dynamics, the analyst should pose questions aimed at assessing market prospects for a
particular company. Are the companys markets exposed to undue competition? Are the demographic
trends favourable? Are competitors increasingly resorting to aggressive price discounting? How does the
quality of service compare with that of rival providers? Which companies are introducing stickier services,
with differentiating features such as PVRs and HDTV? Is a pay-TV operator highly exposed to recent IPTV
launches? Can digital phone service significantly enhance a cable operators bundling strategy? What is the
potential impact of the bundled offerings? These and other pertinent questions should help the analyst to
evaluate both a companys competitive position and the potential for future gains or losses in market share.

MAGAZINES AND NEWSPAPERS

The major factors affecting the business health of most magazine and newspaper publishers are advertising
and circulation revenues (sales of individual publications via single-copy newsstand sales as well as by
subscription). The analyst must consider the revenue mix of advertising versus circulation, as well as the
composition of each revenue category.
Revenue mix
A company in which ad revenue predominates over circulation will benefit from a strong advertising
environment, but will be very vulnerable in an environment of economic contraction. Conversely, a
publisher that depends more on circulation than on ad revenue will be strongly affected by changes in sales
patterns and pricing, for subscriptions as well as for single-copy sales, while it is likely to be less affected by
changes in the overall economy.
Typically, newspapers receive about 80% of their revenues from advertising and 20% from circulation.
Magazine publishers, however, can exhibit more pronounced differences because there is no norm for the
revenue and circulation breakdown. On average, magazines receive about 60% to 65% of their revenues
from circulation, but individual titles may range widely from that figure. For instance, one magazine may
derive 50% of its revenue from advertising and 50% from circulation, while another may receive 90% or
more of revenue from advertising or circulation alone. Periodicals that are distributed free of charge are
commonly controlled circulation publications, which are highly targeted to a specific audience of reader.
Advertising mix
Among newspaper publishers, the portion of advertising revenue contributed by classified, retail, or national
advertising can influence results. For example, if total newspaper advertising is expected to grow 10% at a
time when classifieds are projected to rise by only 4%, then the publisher heavily weighted with classified
advertising might not be expected to do as well as the industry as a whole.
When looking at an individual newspaper or magazine publishing company, the analyst should determine if
anything in its market or advertiser mix might affect whole categories of advertisers. Who are the companys
major advertisers? Is the mix diversified or weighted heavily toward one product or industry? In general, the
more diverse a publications advertisers, the better it is able to weather the vagaries of the ad market.
If major advertisers include large local department stores or other businesses, are these companies in the
process of consolidating? The amount spent on advertising by a merged business is usually less than the
total spent by the individual firms before the merger.
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Are other advertisers, such as new car dealers, following their customers to the suburbs? If so, is the
publisher also following its advertisers by offering zoned or targeted editions? Consider both the economic
and competitive conditions of local markets, which have an impact on the health of advertising segments
such as used car dealerships or real estate.
Timely information on advertising statistics and trends can be obtained from Advertising Age magazine,
ZenithOptimedias Advertising Expenditure Forecasts, and various trade groups, including the World
Association of Newspapers, and the Association of Magazine Media. (See the Industry References section of
this Survey for a more complete list.)
Circulation mix
When assessing the health or the growth prospects of a magazine or newspaper publisher, it is important to
examine the proportion of newsstand versus subscription sales. Subscription sales provide a fairly secure
circulation rate base, while newsstand (single-copy) sales generate more revenue per copy. It is also important
to note the quality of a newspaper publishers circulation numbers. Does the publisher count a significant
portion of circulation as coming from third parties, such as hotels, or from distribution areas hundreds of
miles outside the major city that the newspaper serves? In recent years, local advertisers have determined
that both third-party circulation and long-distance distribution are less valuable to them than local
subscriptions and newsstand sales. Sales trends in the two latter categories affect a companys revenues.
At present, newsstand sales of magazines and newspapers are experiencing a long-term decline. Subscription
sales are also slowly declining, despite higher prices charged by publishers.
Knowing a publications audience demographics helps the analyst understand trends in the publishers
financial results. One might ask, for instance, whether subscribers to a magazine are trickling away because
its readership is aging or perhaps migrating to the Internet. What is management doing to replace those
readers? What are the characteristics of the new demographic target, and how fast will the new audience of
readers grow? What editorial or platform changes are necessary to attract the new demographic?

BOOK PUBLISHING
For book publishers, revenue from unit sales is the main source of income. Beyond that, it is important to
analyse a companys sales mix.
Unit sales. Book publishers depend on unit sales rather than advertising, so the kinds of markets targeted
by the company must be considered. Does the firm sell to businesses and professionals, children, trade
groups, or other markets? Are its products printed books, software programs, or both?
Each market segment has its own dynamics. In any given year, sales for various types of books can vary
widely. For example, adult trade hardcover sales might be soft one year, but juvenile trade might be strongly
boosted by, for example, a new instalment in a best-selling series, such as the recently concluded Harry
Potter series. Other segments tend to ebb and flow in multiyear cycles, such as grade-school publishing.
Product mix. It is essential to distinguish between types of publications when looking at a book publisher.
An educational publishers sales do not correlate with those of trade or general publishing. Even within the
educational publishing field, college sales may flounder, while elementary sales skyrocket, or vice versa.
Demographic trends and economic cycles can affect trade, general, professional, and other non-educational
book segments in various ways. For example, demographic trends in Europe (aging population) now favour
rising book readership in general, but an economic slowdown can affect gift giving (and thus juvenile trade
books) and discretionary purchases (adult fiction), to some extent.
On the expense side
With respect to expenses, publishers have some costs in common. Book, magazine, and newspaper
publishers alike bear costs for labour, paper, production, and distribution.

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Personnel expense is the largest cost item for publishers. Some of the questions that should be asked are: Is
the company downsizing or expanding? What will average wage hikes be? What proportion of the work
force is unionized? Are contracts up for renewal? How fast are benefit costs rising? It is important to
determine the ratio of personnel costs to revenue (or to total costs) and to compare these ratios with those
of peer companies. Analysts should look at the direction of cost ratio trends, both for individual publishers
and for the industry as a whole.

AD AGENCIES AND HOLDING COMPANIES

For an ad agency, creativity is the key to winning and maintaining clients. After all, no matter how well an ad
or marketing program is put together, if it does not move consumers to act, it has failed. In turn, the key to
continually developing innovative ad campaigns is having employees capable of doing just that.
At the heart of the agency: employee issues
Given the importance of personnel in service related businesses, it should come as no surprise that an ad
agencies largest cost is their personnel. Typically, wages and salaries account for 55% to 60% of expenses,
and range from 50% to about 70%, depending on the agency. Thus, hiring and maintaining the best
managers, creative talent, planners, and other staff is an expensive and competitive proposition, and
agencies vie fiercely for the best and most talented employees.
Because of the central role of human resources in this industry, agencies must focus on both recruitment and
retention to be successful. A strong relationship often forms between a client and an account executive that
has remained on the account for several years, and it is not uncommon for an account to follow an executive
who has been lured away by a competing agency or who has decided to start his or her own agency.
A measure of creative success that helps determine the effectiveness of a companys hiring practices can be
gleaned from how many industry awards a company wins versus its peers. Industry awards include the Gold
Lion, Palme dOr, and Grand Prix (Cannes Lions International Advertising Festival); the ECHO (Direct
Marketing Association, for direct marketing); the OToole (American Association of Advertising Agencies); the
ADDY (American Advertising Federation, for excellence in advertising); the Effies (New York American
Marketing Association, for ad effectiveness); and the Clio (The Nielsen Co., for excellence in advertising).
Occupancy costs
After direct employee costs, occupancy (office space) is the second highest expenditure for the typical ad
agency. Quite simply, ad agencies need office space to conduct their business. Occupancy costs per
employee, square footage per employee, and comparisons with historical occupancy and square footage are
key measures when comparing an agencys operating efficiencies with those of its peers. Some agencies have
moved to a virtual office concept, where employees share workspaces and are equipped with cell phones to
conduct business at home, in the office, on the road, or out of town.
Revenue composition
An agencys client list is an important indicator of how it can expect to fare. For example, while an
economic slump would hurt most advertising segments, the direct-to-consumer drug and remedy segment
might experience relatively strong spending, partly because of new drugs and new therapy campaigns, but
also because of the generally recession-proof nature of consumer spending on drugs. Therefore, an agency
or group with several clients in these areas would probably do better than its peers, in our view.
Another important consideration is product diversity. Many of the largest agencies today generate
significant portions of revenue from non-traditional sources, such as special events promotion and public
relations management. Revenues from these sources may be less cyclical than those generated from creating
advertising and buying ad space. It is also important to understand the digital capabilities of an advertising
agency, since that is a strongly growing advertising segment.
Compensation structures vary
When analysing revenues, it is important to determine what percentage of a companys business is based on
billings, as opposed to other fee arrangements. Under the billings-based arrangement, an agencys
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compensation is calculated as a fixed percentage of the clients total spending (or total billings for media
placements and the like). Thus, agencies benefit from rising media prices and from growing media budgets.
Conversely, significant cutbacks in client spending can greatly reduce agency income.
Key performance measures
When evaluating an ad agency, comparative analysis is important. Agencies can be benchmarked against other
agencies based on annual reports and other company documents or material published by trade organizations
such as the American Association of Advertising Agencies. In addition, creativity awards, such as a Clio or
prizes at Cannes, are highly visible and may be used as benchmarks. Clients will often prefer an awardwinning agency to a non-awardwinning agency, meaning that this is a useful benchmark for customers.
In addition to the performance indicators mentioned in the Key Industry Ratios and Statistics section,
analysts may also consider the following: occupancy trends, comparisons of square footage to headcount,
payroll as a percentage of revenue, liquidity/cash management, pre-tax income growth, and effective tax
rates. Other areas that may be monitored are work force utilization (chargeable ratios measure how much
billable time people spend on a marketing or advertising program), employee turnover, professional fees
paid to consultants, average days billings in accounts receivable, and age of receivables. With this information,
the analyst can determine the health of the agency business and run comparative analyses with results of its
competitors.

FINANCIAL REVIEW
Rigorous financial statement analysis should be part of an effective review of any publicly traded company.
Financial statement analysis offers important insights into a companys current position and future growth
prospects. The following discussion highlights some of the key considerations for the financial review of
broadcasting, cable, and satellite companies.
Income statement analysis
The income statement portrays the operating results of a company over a stated period. Trends in growth
ratesand any aberrations from the normshould be assessed. In particular, analysts look at revenues and
operating costs, which factor into operating cash flow.
Revenue comparisons. Quarterly results should be compared with the year-ago quarter and on a sequential
basis (i.e., with the preceding quarter). Year-to-year changes reveal longer-term trends, while sequential
fluctuations provide clues about sales momentum, seasonality, short-term events, and emerging trends.
In the case of broadcasters and newspaper and magazine publishers, a big emphasis should be placed on
advertising revenues, which are typically cyclical. They should be considered against the backdrop of the
overall economic picture, noting that factors such as the Olympic Games and political spending can
significantly affect overall ad spending. A broadcasters revenues may depend on factors such as ratings,
exclusive network programming (such as the Olympics), and audience demographics.
Conversely, the revenues for a cable or satellite company are more a function of its subscriber base. A useful
measure for analysing and comparing cable operators is revenue-generating units (RGUs), which include
video, data, and voice services offered to a particular home. It is helpful to analyse other key indicators used
by cable and satellite operators that factor into the level of reported revenues, including measures of average
pricing (average revenue per user, or ARPU) and customer disconnects (known as churn). These parameters
should factor into a separate analysis for each type of service. A higher ARPU should increase revenues, but
it may indicate that the company is approaching the limit of its pricing power. ARPU may be hurt by bundle
promotions (for cable), as well as family plan and multiyear subscriptions (for satellite radio).
Key operating expenses. Among the major expense items for broadcasting, cable, and satellite companies
are those related to programming, sales, and marketing. The analyst should compare these as a percentage of
revenues, or on a per-subscriber basis, noting any factors that might cause variations within a peer group.

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Programming expenses include costs related to content produced in-house (such as reality shows and local
news), as well as costs related to programming from external parties (such as sports licensing fees, on-air
talent, and syndication). Cable and satellite companies typically must acquire most of their programming
from unaffiliated providers. The analyst should note that a distributors scale could affect its programming
costs. While broadcasters also incur sizable programming costs, they produce a fair amount of their own
programming. The programming costs of a local station partly depend on its affiliation, which affects the
number of hours of network programming that it can air each week. In addition, newer sectors, such as
satellite radio, must spend heavily to ramp up programming during the early growth phases.
Sales and marketing expenses include costs related to ad sales commissions, advertising and promotions,
subscriber acquisition costs (SAC), and retention and upgrade costs. Again, companies (even within the same
sub-industry) may be subject to different levels of spending. For broadcasters, sales commissions, which are
paid to a local sales force or a national representation firm, are typically a fixed percentage of the total ad
salesperhaps with some incentive component as well. On the other hand, satellite providers typically need to
incur heavy SAC spending during the early years, or to roll out newer offerings or upgrades, such as portable
media applications and advanced digital boxes. SAC should then gradually abate over time, as consumer
awareness grows and the subscriber base approaches critical mass.
For cable operators, marketing costs would include spending related to bundling promotions and to the
launch of newer offerings in digital video and phone (such as Voice over Internet Protocol, or VoIP). The
amount of such spending for a company would depend partly on the competition from rival providers
across its various markets. However, the analyst should note that cable companies generally capitalize the
cost of consumer premise equipment (such as digital boxes), which DBS providers typically expense on their
income statement as part of SAC.
For newspaper and magazine publishers the main expenses are raw materials (paper), distribution, and staff
(newsroom). While staff costs tend to rise with inflation, distribution and raw materials are linked to the oil
price (fuel), and other commodity pricing.
Finally, for advertising agencies, the main cost is labour, particularly agents with key client relationships.
Over the past few years, agencies have also relied on consultants for part of their work, which allows them
to better control staff costs throughout the business cycle without having to overpay for personnel during
the peak years and outlay significant redundancy payments in leaner years.
Operating cash flow. Despite differences among broadcasting, pay-TV, and advertising companies, a
common measure of financial health typically used by capital-intensive businesses is growth in operating
cash flow, or earnings before interest, taxes, depreciation, and amortization (EBITDA). As a proxy for
operating cash flow, EBITDA may be computed by adding back depreciation and amortization charges to
reported operating income. The growth trend in EBITDA may indicate where a company stands in its
business plan or its ability to fund future expansion. The analyst also may compare a companys EBITDA
margins with those of its peers.
In recent years, EBITDA has gained wider acceptance as a financial measure, and it may be particularly
useful for many companies that still have operating losses and negative free cash flow. Still, the analyst
should note its potential drawbacks: it ignores the hefty interest payments and capital outlays that are
necessary to support growth initiatives (such as digital upgrades or satellite expansion); furthermore, as a
non-GAAP measure, it may be subject to manipulation.
Earnings quality. Although all publicly traded European companies are required to report their results
using International Financial Reporting Standards (IFRS), several media groups also disclose pro forma
numbers, which exclude some items that, in their view, do not reflect their underlying operational health.
Such items could include the sale of a building or other assets, write-downs for the loss in value of formerly
acquired brands or publications, to name a couple. However, when these extraordinary gains or charges
become too frequent or permanent, there could be some real concerns about the long-term performance of
the business. Meanwhile, a relatively low earnings quality may be indicative of poor corporate governance.
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Balance sheet and capital structure

A balance sheet is a snapshot of a companys assets, liabilities, and net worth as of a particular date. Many
companies in the media sector have been able to secure significant levels of debt and equity funding, following
telecom and broadcasting deregulation, but also due to their strong cash-flow generating capacity, which
investors and corporate lenders alike appreciate. In this context, we believe a review of the balance sheet has
become more important when evaluating a companys capital structure and its impact on valuation.
In conducting this review, the analyst should assess a companys underlying financial health, its financial
flexibility, and its ability to continue as a going concern. An analysis of the leverage ratiosof the type
typically conducted by credit rating agencies to determine creditworthinessis usually instructive. A
companys creditworthiness may be important in evaluating potential stock price appreciation. Not only
could subpar leverage ratios jeopardize a companys ability to meet its recurring interest payments, but they
also could limit the companys ability to make opportunistic acquisitionsand, potentially, return capital to
shareholders through share repurchases and/or dividends.
The most widely used leverage measure is net debt (long- and short-term debt, minus cash) divided by
EBITDA. Several companies in this Survey currently fall somewhere between 3.5X and 4.5X; a ratio above
5.0X could pose major balance sheet constraints, by our analysis. Another measure is the EBITDA/interest
ratio, which shows the interest coverage cushion in operating cash flow. Several of these companies fall
between 3.5X and 5.5X; in our view, a ratio below 3.0X could significantly limit a companys financial
flexibility.

EQUITY VALUATIONS
Several valuation techniques, such as discounted cash flow (DCF) analysis, may be commonly applied to
media companies. However, choosing among other conventional valuation methodologiessuch as those
based on earnings and subscriber projectionsmay depend on a particular companys business model or its
stage of development.
For example, a start-up company may be valued for its licenses based on future market potential, as
compared with established companies with a similar business model. Over a period of years, as a new
company moves from sustained losses and negative cash flow to increased earnings and positive cash flow,
the number of valuation methods also should increase.
Relative value
The price/earnings (P/E) ratio is one of the popular valuation measures typically used for broadcasters, most of
which have an earnings track record. A companys P/E ratio may be compared with the S&P Broadcasting
sub-industry index or a broader market index such as the S&P Europe 350 index. The analyst also may
assign a benchmark P/E multiple to forecast future earnings to arrive at a future price, which is discounted
back to the present and compared with the stock price, to determine whether a stock is overvalued or
undervalued. Well-positioned companies with high earnings quality generally should generally trade at a
premium to the benchmarks.
The P/E ratio can be compared with the estimated long-term earnings growth rate for an individual
company, to arrive at the PEG ratio. To forecast growth rates, many analysts begin with the potential rate
at which a certain markets revenues can increase. For companies that may be more than a year away from
profitability, growth rates can be measured in terms of revenues or subscribers, noting that these rates may
be highly divergent. Then, considerations are made regarding potential market share gains or losses. A
companys shares may be undervalued if the PEG ratio is significantly less than 1.0, and if, after careful
analysis, the analyst concludes that the fundamentals are healthy.
A similar analysis, also typically used for more established companies, is based on the price/free cash flow
(P/FCF) multiple. Free cash flow (for equity holders) is calculated as operating cash flow (net income plus
depreciation and amortization, plus or minus the decrease or increase in working capital), minus capital
expenditures. Again, the P/FCF multiple can be benchmarked to historical, sub-industry, or broader market
multiples to derive a target price, which is then compared with the current stock price.
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Another common relative valuation ratio is the enterprise value (market capitalization plus net debt) divided
by EBITDA. While this measure can be applied to established companies, it also is typically used for those
that still have operating losses and negative free cash flow. For companies with significant cross-platform
businesses, it may be necessary to use different multiples for the individual constituent parts. For cable and
DBS companies, another commonly used variant is the enterprise value per subscriber multiple. Again, it
may be necessary to make some adjustments to ensure an apples-to-apples comparison. For example, certain
cable companies also have significant content assets, which the analyst should value separately and isolate
before any peer comparisons can be made.
Discounted cash flows
While the relative valuation methodologies discussed previously are quite common, in the end, the valuation
of media companies is similar to any other business: it is an exercise in forecasting and discounting cash
flows. The analysts objective is to obtain a free cash flow estimate for the total enterprise, which is the free
cash flow to the equity holders plus the interest payments to debt holders.
S&P Capital IQ frequently uses discounted cash flows to derive the intrinsic values of companies in this
universe. In general, the intrinsic value of a companys common stock equals the present value of its free
cash flow to the equity holders. The first step in any DCF valuation is to forecast cash flows over the near
future, which, in turn, is based on an analysis of expected earnings performance and the use of these earnings
to maintain or grow the business (capital expenditure). After a certain year, a terminal growth rate is
applied, a number that reflects a steady state of growth for the group in an environment of stable economic
performance in the future.
All cash flows, short-term, mid-term, and terminal cash flows are discounted at a rate called the Weighted
Average Cost of Capital, or WACC. This rate is determined by the underlying interest-rates in the economy or
economies in which the company operates, by the companys cost of equity, but also by the companys capital
structurehow much debt and how much equity it holds. As the cost of debt is lower than the cost of equity,
groups with a higher level of debt tend to have a lower WACC than groups that rely exclusively on equity.
However, too much debt can also become risky, which is a factor that should also be considered.
Using DCF methodologies also helps the analyst to avoid the potential pitfalls associated with relative
valuation: for example, an overvalued stock could appear attractive because it is being compared with
another stock that is even more overvalued.

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GLOSSARY
Above-the-line advertisingThis term has historically referred to advertising using the five major media (newspapers,
magazines, television, radio, and outdoor). In recent years, the term has come to include Internet advertising, though sometimes
Internet is still classified as below-the-line. (See Below-the-line advertising.)
Advertising mediumA vehicle for conveying an advertising message, such as the Internet, television, radio, cinema, or
newspapers.
AdvertorialA print or web advertisement designed to look like a news story. The TV or radio equivalent is an infomercial.
AnalogueGeneral term for radio frequency wave signals in the form of continuously varying quantities. Analogue signal
information is superimposed on a modulated carrier wave. AM (amplitude modulation) and FM (frequency modulation) are the two
most common analogue carrier waves. Analogue TV channels have two carrier waves: one for audio (FM) and one for video (AM).
Analogue is being replaced by digital technologies, which are more efficient and secure, and provide better sound and video quality.
AudienceAll people, households, or organizations that may read, view, or hear an advertisement or other marketing
communication.
Audience duplicationThe overlap of people, households, or organizations that might read, view, or hear an advertisement or
other marketing communication more than once if it is carried by a combination of media vehicles.
AuditObjective confirmation by independent organizations of circulation figures, website impressions, and other records,
which publications use to promote their business.
Audit reportThe official findings of an audit bureau as a result of its examination of a magazines records for a particular year
or other period.
Average net paid circulationA term often used by audit bureaus to indicate the average number of copies of a publication sold
per issue. It equals the total circulation of all issues during the audit period divided by the number of issues in the audit period.
BacklistA publishers catalogue of books in print: books that have appeared in a first edition and have been, or will be, issued
in subsequent editions.
BandwidthThe capacity of a medium (such as copper or fibre-optic cable) to transmit a certain amount of data in a fixed
period of time. For digital devices, bandwidth is usually expressed in bits per second (bps) or bytes per second. For analogue
devices, it is expressed in cycles per second, or hertz (Hz). The bandwidth needed to send a signal depends on the amount of
information the signal contains. An FM radio station takes 10 times as much bandwidth as an AM station; a TV channel requires
33 times the bandwidth of an FM station.
Banner adOn the web, a standard advertisement (either static or animated) that normally, though not necessarily, appears
near the top of a web page. The term generally indicates an ad of a particular size (the industry standard is 468 x 60 pixels).
Below-the-line advertisingRefers to advertising by means other than the major media (newspapers, television, radio,
magazines, outdoor, and increasingly Internet). Examples include direct mail, sponsorship, merchandising, trade shows,
exhibitions, sale literature, and catalogues. (See Above-the-line advertising.)
Boutique agencyAn ad agency that focuses on just one or a few services. It might, for example, just produce videos.
Brand nameThe proprietary name given to a corporation and/or its products and services. Advertising is used to promote
consumer awareness and loyalty, and to enhance the brands desirability.
BroadbandWired transmission pathway with enough capacity to simultaneously carry multiple voice, data, and video
channels. The term is also widely used to denote cable systems with high bandwidth capacity that are able to relay large
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numbers of TV channels and other electronic services, including Internet access, and provide return pathways that permit
subscribers two-way communications (interactivity).
Broadband satellite service (BSS)A radio communications service that transmits or retransmits broadcast signals via
space stations. Signals may be picked up directly by receivers in individual homes or by community receivers for multiple users at
one location (such as a condominium complex).
Broadband servicesOn-screen interactive services (e.g., email and Internet access) offered by broadband cable systems,
whose high bandwidth capacity gives them the potential advantage of offering faster access and communications than
competing technologies, and services (e.g., video telephony or on-demand video) that require large bandwidth capacity.
Broadsheet newspaperA standard- or large-size newspaper. Measurements vary, but a standard broadsheet newspaper
page is 21.5 inches deep and 13 inches wide, with six columns of ROP display advertising.
Bulk circulation/salesDistribution of multiple magazine copies sent to an individual addressee. Bulk sales are the purchase
of five or more copies of a periodical for distribution to promote the buyers business or professional interests (e.g., hotels that
give away newspapers).
Business press/business publicationPublications whose content is specific to a business, industry, occupation, or
profession, rather than directed to a general consumer audience.
Buying serviceA company primarily engaged in buying media space or time for advertising purposes.
Cable television (CATV)A television delivery system that gives subscribers 50 to 200 or more channels of video programming
via coaxial or fibre-optic cable. Cable system operators receive signals from program providers via special antennas, microwave
relay systems, Earth stations, or fibre-optic cables. Operators amplify the received signals, combine them with locally originated
programs and ancillary services, and distribute them to subscribers. The four functional parts of a cable system are the headend,
trunk lines, feeder lines, and drop lines.
CirculationThe number of paid or unpaid copies of a periodical publication that are circulated.
Classified advertisingLocally placed, typically brief, text-only newspaper ads organized by category, such as real estate for
sale or help wanted; also, display-type advertisements in various categories.
Click-throughA measure of activity at a given place on the web. A click-through is counted if a viewer selects a web page
ad, thereby triggering the link assigned to it.
Click-through rateThe percentage of Internet advertisement views that result in a click-through. This is an indication of the
effectiveness of online advertising. The click rate depends on a variety of factors, such as the attractiveness and duration of the
ad, how often it is displayed to the same Internet user, etc.
Controlled circulationDistribution of a free publication to a list of people, households, or organizations that share some
defining characteristic, such as occupation, industry, or hobby. (See Paid circulation.)
CopyrightThe exclusive legal right to reproduce, publish, and sell the matter and form of a literary, musical, or artistic work.
Cost per thousand (CPM)A measure used when quoting costs for an advertising medium: cost per thousand banner ad
impressions on the web, viewers of a TV commercial, or readers of a print ad; sometimes referred to as CPT.
Cover mountGift attached to the cover of a magazine.
Cover positionAn advertisement on the front or back page of a publication, often sold at a premium price. Prices vary for
outside/inside, front and back covers. The outside back cover is widely regarded as the most desirable spot in a magazine.
Coverage/reachThe percentage of a target audience receiving at least one opportunity to see or hear the advertising.

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Customer relationship management (CRM)A concept of maximizing profitability by enhancing relations with customers.
For advertising and marketing companies, CRM entails event marketing, brand design, and direct, field, and promotional marketing.
Database marketingUsing electronic databases to identify markets and fine-tune messages. The data can come from the
clients internal sources (retail checkout, order entry, sales lead tracking, or accounts receivable) or from outside sources (such as
third-party market research databases).
DemographicsThe vital statistics of a human population, such as aggregate size, growth, density, and distribution. Marketers
use these data to delineate market segments by age, gender, postal code, income level, education, nationality, and religion.
Direct broadcast satellite (DBS)A system of high-powered satellites orbiting 22,300 miles above the Earths surface that
beam digital signals directly to subscribers; the signals are picked up by dish antennas as small as 18 inches in diameter. Each
dish is wired to a receiver connected to a television set.
Direct marketingAny communication sent to a consumer or business recipient designed to generate a response, such as a
request for information (lead generation), a merchandise order (direct order), and/or a visit to a store to make a purchase (traffic
generation). It must include both sufficient product information for the recipient to make a purchase decision, as well as a response
mechanism (phone or mail order contact; store location and hours of operation).
Direct responseAdvertising that is designed to get the customer to respond immediately, whether by calling the company,
accessing a website, or redeeming a coupon at a store.
Direct terrestrial television (DTT)Digital signals delivered to homes via a conventional aerial, converted through a set-top box.
Display advertisingAny newspaper advert other than classified; uses visual and copy elements to present its message.
EditionPart of the total distribution of a periodical, whose copy or advertising may differ by region, time of day, or other variable.
Educational publishingTextbook and materials publishing directed at primary through secondary school curricula. Textbooks
and materials are usually sold to school systems on a contract basis, with most deliveries made during the contracts first few years.
EffortA publishing promotion (usually part of a series) directed to existing or potential subscribers to generate renewals or
new subscriptions.
FormatThe look (size, shape, style, and appearance) of a publications printed page or advertisement.
Four-colourA process using red, yellow, blue, and black ink that allows the full spectrum of colours to be printed; also called
full colour.
FrequencyThe number of issues published in a given period. The term can also refer to the number of times that individuals
or households see, hear, or read a particular marketing message within a given timeframe.
FrontlistA publishers catalogue of first-edition books in print.
FulfilmentTasks involved in creating and maintaining an active subscriber listinputting new subscribers, renewals, address
changes, and cancellations.
Fulfilment houseA company or division of a magazine publisher that responds to and tracks orders sold through direct mail or email.
GatefoldAn advertisement that folds out. It is often attached to the inside front cover of a magazine.
General advertisingDisplay advertising by national advertisers that promotes products or brand names on a nationwide basis.
Grace copiesCopies sent after a subscription expires. Magazine publishers often send one or two grace copies per expiration.

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High-definition television (HDTV)A new broadcast technology offering sharply improved picture resolution and digital quality
sound. HDTV has 1,125 lines down a screen, compared with the US standard of 525 lines. To send HDTV, broadcasters must invest
in new equipment; to receive it, consumers must purchase specially designed TV sets.
House agencyAn advertising agency owned and operated by the advertiser/marketer.
Image advertisingPromoting an overall perception of a company, product, or service rather than touting specific attributes. It
is generally used to position a product relative to the competition; for example, to create an image of a luxury brand.
InfomercialA television or radio commercial designed to seem like a documentary or news story. The print or web equivalent
is known as an advertorial.
Interactive cable (or TV)A cable system with two-way communications that allows the cable TV viewer to respond to what is
being telecast via a remote-control handset, which transmits messages directly to the cable operator. These systems make it
possible for the subscriber to converse with the service provider in true real-time.
Make-goodsAdvertising time or space set aside to compensate marketers when broadcast audiences or print circulation fall
short of levels promised. Thus, media make good on their earlier promises.
Mass marketingThe distribution of sales communications through mass media to all residents in a geographic area. The mass
market is the broader population, although mass media can provide access to narrower audiences that have some common
characteristics or who are drawn by a shared interest in the media content.
Mass-market paperbackFiction and nonfiction softcover books, for adults or juveniles, with at least 50% of copies
distributed to such mass-market outlets as newsstands, drugstores, chain stores, and supermarkets.
Microwave multi-distribution system (MMDS)Also known as wireless cable, MMDS distributes signals using
microwaves. A home receiver picks up the signal and then distributes it via internal wiring.
Mini-spotsCommercial spots ranging from one to several seconds longmuch shorter than traditional commercials, which
range from 15 seconds to 1 minute.
National spotA form of broadcast advertising (also called spot advertising) in which national advertisers, such as Toyota or
BMW, place ads in selected local markets through local media.
NetworkA broadcast entity that airs programming and sells commercial time nationally via affiliated and/or licensed local
stations. Many different kinds of networks exist in terms of ownership ties, programming and commercial agreements,
management structures, and market coverage. Affiliate networks are commonly found in geographically large countries like
Australia, Brazil, Mexico, Russia, and the US. In Europe, where national land areas are much smaller, a number of countries have
regional or local TV networks, many of which are publicly funded and under central state ownership.
OutdoorAny form of advertising visible outside the home, such as posters placed on billboards, street furniture (kiosks and
bus stops), and mass transportation.
Paid circulationDistribution of a publication via paid subscription or newsstand sales. Editorial content tends to attract an
audience with certain shared characteristics, though the publisher does not restrict readership. (See Controlled circulation.)
Pay TVGeneral term for all subscription TV and on-demand TV services, though the term is often used to refer more
specifically to premium program services for which subscribers are charged fees in addition to the basic subscription.
Pay-per-view (PPV) TVCable service in which subscribers pay for individual programs rather than for a monthly subscription.
PenetrationDifferent definitions in different contexts. For television, the proportion of TV households to total households in a
given locale or the percentage of households subscribing to a given service. More generally, the percentage of a market that an
individual medium or vehicle reaches, or alternatively, the percentage of the market that a particular advertising message reaches,
regardless of the media used.
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PositioningDefining a brands place in the market relative to competing brands or products. This effort to differentiate a
product from the competition distinguishes positioning from other marketing communications messages.
Primary (or elementary) schoolA school classification set by national and local practice, comprising any span of grades not
above grade eight. Preschool or kindergarten is included under this heading only if it is an integral part of an elementary school
or a regularly established school system.
Primary readershipThe purchaser-readers of a publication, or addressees in the case of a free publication. The primary
readership is likely to show a greater interest in a publication than a pass-on reader, who is not the original purchaser of the
newspaper or magazine or the original recipient of a free-distribution newspaper or magazine.
Product placementThe prominent inclusion of, or reference to, a brand or service within a program in return for payment or
other valuable consideration.
Professional bookBooks covering business, law, medicine, technical fields, science, or education, and created primarily for
practitioners, researchers, or teachers; often used in educational settings, particularly in the senior college and graduate levels.
PromotionA special event or an incentive (such as a coupon or free product sample) designed to stimulate near-term sales
and raise product awareness and/or acceptance.
Public relations (PR)Communicating information about an organization and/or its products and services to audiences
beyond prospective customers; i.e., other groups that the organization wishes to influence, such as investors or governments.
PublicityMass communications for which the originating organization usually makes no direct payment to the media outlet, in
contrast to advertising. Publicity builds awareness of and/or fosters an attitude toward a particular company, product, and/or service.
PublisherOversees the overall profitability of a publication by setting the direction editorially and visually, determines target
markets, manages staffing and production, and controls resources and budgets.
Radio time sales categoriesThe bulk of a radio stations revenue is derived from local advertising sales, which the station
solicits for its own benefit. Spot sales are usually placed on a station by national or regional advertisers through the stations rep
firm, which acts as the regional and/or national sales force for that station and others.
Rate baseAverage circulation level, which many publishers guarantee to advertisers, who use it to calculate their CPM.
Rate cardA list of the standard advertising rates for a publication, radio station/network, TV station or network, website, or
other ad vehicle.
Rating/shareA TV or radio audience measurement term, calculated by AGB Nielsen Media Research as rating points and
share points. These measures are tabulated for local, regional, and national markets. One rating point equals 1% of the total
television households in a television stations designated market area. One share point equals 1% of the households in a DMA
that are using TV.
ReachThe number of individuals or households within a specific target audience that see a particular marketing message. It
can be stated as a percentage of the target audience.
Reach and frequency (R&F)An industry-accepted method of judging the potential effectiveness of a radio advertising
schedule. Reach is the number of people who hear a commercial campaign, expressed as the percentage of the scheduled target
audience. Each person is counted only once, regardless of how many times he or she is exposed to the schedule. Frequency is the
average number of times a person in the target audience is exposed to a given schedule. Both components are key to a
successful radio ad campaign.
ReadershipThe number of readers of a publication within a target audience. There are a number of ways to measure
readership; the most common is to ask survey respondents whether they have read a publication within its latest publication
periodover the last week for a weekly magazine, the last month for a monthly, and so on. A publication is generally considered
as having been read if the respondent has looked at the publication for at least two minutes.
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ReturnsUnsold books returned by retailers to publishers, usually for a full refund. For publishers, gross sales minus returns
equal net sales. The return ratio equals returned books as a percentage of gross sales.
RightsA publications ability to legally publish a writers work, noted in terms of frequency, location, medium, distribution,
and period of time.
RunTotal number of copies printed.
Sales promotionAll forms of paid communication that are attributed to a sponsor, but are not advertising or selling.
Examples include cents-off coupons, samples, demonstrations, and point-of-purchase materials.
Shelter magazinesMagazines focused on home decorating and maintenance, gardening, and food.
Single-copy salesCopies of a magazine or newspaper sold individually at retail outlets.
SpamThe use of email systems to send large volumes of unsolicited email to address lists compiled without the recipients
consent. Sending spam to private consumers is illegal in the European Union.
SpotTV or radio commercial time purchased market by market, as opposed to nationally; also, a commercial announcement on TV.
Subscription televisionA term used to denote cable or satellite television. Subscription TV services may be delivered by a
number of technologies, including: multipoint microwave distribution systems (MDS); broadcast direct by satellite to the home
(DS or DTH); and broadband cable communications systems (CATV or cable).
SyndicationA method of distributing radio, TV, and cable programs on a market-by-market basis, rather than across a network,
generally for periods other than primetime. Many programs (including talk, magazine, and game shows) are produced specifically for
syndication. The syndication market also includes reruns of series originally produced for primetime network broadcast.
TabloidA newspaper about half the page size of a broadsheet, typically 10 inches wide and 15 inches deep.
Tip-onAn attachment to a magazine page; e.g., a sample sachet of face cream or a product information leaflet.
Total market coverage (TMC)Distribution of a newspaper intended to reach 100% of a markets total population (not just
subscribers) in order to attract advertisers. Also known as an alternate distribution system (ADS), TMC usually involves a weekly
or monthly shopper.
Trade booksAdult and juvenile books, both hardback and paperback, published for the general consumer. Most are marketed
directly through trade channels such as bookstores and libraries, or through wholesalers and jobbers.
Trade magazine/publicationA publication focused on a specific industry, business, technical, or scientific audience. Also
called a business-to-business or specialized business magazine.
Unpaid copies Publications distributed to readers free of charge. Also, circulation distributed at a price too low to qualify as
paid according to the Audit Bureau of Circulations.
Video on demand (VOD)A relatively new service that enables viewers to select a video from a central library of films
accessible with a digital box and watch it at their convenience. Most major cable operators currently offer VOD to digital subscribers
for a modest additional charge. A variant of this service, subscription video-on-demand (SVOD), requires a monthly service fee.
Viral marketingAdvertising sent via email, in the form of attachments or web links. Attachments may be text, images, or video
clips. The success of viral marketing campaigns depends largely on the rate at which the message is forwarded to other recipients.
Virtual advertisingThe use of computer graphics and digital editing to put products or advertising into television
programming after it is taped. The advertisement appears superimposed on the original programming.

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INDUSTRY REFERENCES
PUBLICATIONS
Advertising Age
http://www.adage.com
Biweekly; news on advertisers, ad agencies, and marketing
and advertising.
Campaign
http://www.campaignlive.co.uk
Weekly from Brand Republic, a source of information on UK
marketing, media, and communications industries; also
publishes Marketing, PRWeek, and Revolution weekly.
The McKinsey Quarterly
http://www.mckinseyquarterly.com
Print and online publication aimed at businesses and
industries around the world. Articles include business
strategies, industry scenarios, and market analysis.
TRADE ASSOCIATIONS
Advertising Association
http://www.adassoc.org.uk
Federation of 26 advertising and marketing industry
members in the United Kingdom.
Association des Agences Conseils en
Communication (AACC)
http://www.aacc.fr
French advertising trade association.
Association of Commercial Television in Europe
http://www.acte.be
Trade group for commercial television broadcasters
throughout Europe.
Association of Magazine Media (MPA)
http://www.magazine.org/international
Trade group for consumer magazines. Lobbies on behalf of
members and industry, compiles statistics, and conducts
research. Formerly named the Magazine Publishers of
America International.
Associazione delle Imprese di Comunicazione
(AssoComunicazione)
http://www.assocomunicazione.it
Italian association of communication companies.

58

Cable Europe
http://www.cable-europe.eu
Trade group for broadband cable operators and their
national associations in Europe.
Confederation of Paper Industries (CPI)
http://www.paper.org.uk
Umbrella association for several paper-related associations
in the UK; provides industry statistics.
ESOMAR (European Society for Opinion and
Marketing Research)
http://www.esomar.org
Association with more than 4,800 members in over 120
countries. It promotes the use of opinion and marketing
research to improve decision-making in business and society.
European and International Booksellers Federation
(EIBF)
http://www.eibf-booksellers.org
Represents and promotes the interests of booksellers
throughout Europe and internationally; members are
national bookseller associations. Provides information and
statistics on bookselling and the book industry.
European Magazine Media Association (EMMA)
http://www.magazinemedia.eu
Independent organization representing national
associations and individual periodical publishers in Europe;
provides statistical research and other services; formerly
called European Federation of Magazine Publishers.
European Newspaper Publishers Association (ENPA)
http://www.enpa.be
Lobby group representing the EU newspaper publishing
industry; provides a comprehensive information network.
The Federation of European Publishers (FEP)
http://www.fep-fee.eu
Umbrella association of book publishers associations in
the EU; deals with European legislation, advises publishers
associations on copyright and other legislative issues, and
provides statistics, research, and other services.

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FIPP
http://www.fipp.com
Worldwide magazine media association. Supports freedom
of the press, advertising, and distribution; intellectual
property rights of publishers; and development of industry
ecological standards. It produces the quarterly Magazine
World and the annual World Magazine Trends.

Zentralverband der deutschen Werbewirtschaft e.V.

(ZAW) [Central Federation of the German Advertising Industry]
http://www.zaw.de
Federation comprised of all German advertising groups.
Members are organizations (not individual companies)
belonging to four categories, including agencies, industry,
other advertising professions and market research, and media.

Institut de Recherches & dtudes Publicitaires (IREP)

http://www.irep.asso.fr
Research institute for advertising, media, marketing, and
communications professions.

RESEARCH FIRMS

Interactive Advertising Bureau Europe (IAB)

http://www.iabeurope.eu
Trade association of the European digital and interactive
marketing industry. It aims to promote the growth of
Europes interactive advertising markets, regulate practices
in the market, and educate the stakeholders in the digital
landscape. Provides links to national IABs in Europe.
MRS
www.mrs.org.uk
Trade association that represents companies whose
primary business is market research.

AGB Nielsen Media Research

http://www.agbnielsen.net
Provides television audience measurements in more than
30 countries around the world through its Television
Audience Measurement (TAM) system.
TNS, a Kantar Group Company
http://www.tns-global.com
Global marketing research firm that provides television
audience measurements in dozens of countries; formerly
named Taylor Nelson Sofres.
ZenithOptimedia
http://www.zenithoptimedia.com
Media services company fully owned by Publicis Groupe.
Publishes estimates and forecasts of advertising spending
by media in various countries throughout the world.

The Newspaper Society (NS)

http://www.newspapersoc.org.uk
Trade group for the British press.

REGULATORY & GOVERNMENT AGENCIES

Periodical Publishers Association (PPA)

http://www.ppa.co.uk
Trade group for magazine and business-to-business media
publishers in the UK. Provides research and statistics on
magazine publishing.

Europa
http://europa.eu/index_en.htm
Official website for the European Union. It provides up-todate information on EU affairs and European integration,
and a broad range of EU statistics.

The Publishers Association (PA)

http://www.publishers.org.uk
Trade group serving book, journal, and online publishers
with industry news and statistics for the UK.

Institut National de la statistique et des tudes

conomiques (INSEE)
[National Institute of Statistics and Economic Studies]
http://www.insee.fr
Source of extensive economic data for France and Europe.

Satellite & Cable Broadcasters Group (SCBG)

http://www.scbg.org.uk
Trade group for satellite and cable broadcasters in the UK.
World Association of Newspapers and News
Publishers (WAN-IFRA)
http://www.wan-ifra.org
Provides numerous services to newspapers and
associations globally, including advocacy, training, and
statistics. WAN also identifies and analyses media trends,
new technology, new business models, multichannel
distribution, and the impact of convergence, etc.

INDUSTRY SURVEYS

Office of Communications (Ofcom)

http://www.ofcom.org.uk
Independent regulator and competition authority for the UK
communications industries, with responsibilities for
television, radio, telecommunications, and wireless
communications services.
Statistisches Bundesamt Deutschland
[Germanys Federal Statistical Office]
http://www.destatis.de
Source of extensive census data, and commerce and
economic statistics for Germany.

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59

UK National Statistics
http://www.statistics.gov.uk
Offers commerce, economic, and education statistics, as
well as census data, for the UK.
SELF-REGULATORY AGENCIES
Advertising Standards Authority (ASA)
http://www.asa.org.uk
Self-regulatory organization for the UK advertising industry.
Covers all media, including, from 1 March 2011, marketing
on websites. Applies the Advertising Codes to ensure ads
are legal, decent, honest, and truthful.
Alliance for Audited Media (AAM)
http://www.auditedmedia.com
http://www.ifabc.org
AAM is an independent organization that verifies the
circulation claims of newspapers and magazines, businessto-business publications, directories, leaflets, exhibitions,
and websites; formerly called Audit Bureau of Circulations.
The second link above is to the International Federation of
Audit Bureaux of Circulations (IFABC), which has members
in Europe and elsewhere.
Autorit de Rgulation Professionnelle de la
Publicit
http://www.arpp-pub.org
Self-regulatory organization for Frances advertising
industry.
Deutscher Werberat
http://www.werberat.de
Advertising self-regulatory organization for issues of taste
and decency in Germany.
European Advertising Standards Alliance (EASA)
http://www.easa-alliance.org
Non-profit organization that represents the views of the
advertising self-regulatory and industry bodies across
Europe. It aims to support effective advertising selfregulation in Europe, coordinate the handling of crossborder complaints regarding advertising, and provide
information and research on advertising self-regulation.

ONLINE RESOURCES
ABYZ News Links
http://www.abyznewslinks.com
Provides links to news sources worldwide. Focuses on
newspapers, but also includes many broadcast sources,
Internet services, magazines, and press agencies.
European Publishers Council (EPC)
http://www.epceurope.org
Provides information and fact sheets on issues affecting
the publishing industry, as well as links to other sites. The
council, including senior representatives of Europes
magazine and newspaper publishers, is intended to allow
the industry to express a unified view on EU media issues.
Infotrieve
http://www.publist.com
Provides information on more than 150,000 US and
international print and electronic publications; also
provides access to subscription services and information on
articles through rights and permissions providers, and
document delivery services.
Internet World Stats
http://www.internetworldstats.com
Offers worldwide Internet usage and market research data
for more than 200 countries and regions. A source for ecommerce data, online international market research,
broadband and penetration data, world population
statistics, and telecommunications markets information
and reports.
Media UK
http://www.mediauk.com
Website that provides directories of UK media
(newspapers, magazines, television, radio); discussions;
news; links; and program schedules.
Newslink
http://newslink.org/nonuse.html
Provides links to all of Europes newspapers, by country, as
well as to magazines, radio, television, and other
resources; it is an online venture of NewsLink Associates, a
US-based research, consulting, and publishing firm.

Zentrale zur Bekmpfung unlauteren Wettbewerbs

e.V (ZEN)
http://www.wettbewerbszentrale.de
Advertising self-regulatory organization for issues of
misleading advertising and unfair competition in Germany.

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COMPARATIVE COMPANY ANALYSIS

Operating Revenues
Million $
Company

Country

2012

EUROPEAN ADVERTISING COMPANIES

AEGIS GROUP PLC
United Kingdom
CHIME COMMUNICATIONS PLC
United Kingdom
HAVAS
France
HIGH CO SA
France
JC DECAUX SA
France

DEC
DEC
DEC
DEC
DEC

NA
545.6
2,286.1
170.0
3,372.4

1,820.4
522.7
2,289.8
190.9
3,428.5

2,255.6
463.4
2,066.7
187.9
3,117.4

2,107.0
470.9
2,007.4
186.6
2,673.0

2,486.0
513.9
2,305.8
214.6
3,189.0

2,214.2
413.4
2,099.7
181.9
2,887.2

889.3
180.3
1,878.9
244.2
1,491.6

NA
11.7
2.0
(3.6)
8.5

PUBLICIS GROUPE SA
WPP PLC

France
JEY

DEC
DEC

8,499.1
16,440.4

8,095.9
16,073.5

7,187.2
14,421.5

6,302.1
13,589.4

6,917.3
13,850.8

6,401.8
12,379.7

2,766.2
5,872.3

11.9
10.8

EUROPEAN PUBLISHERS
AXEL SPRINGER VERLAG AG
BERTELSMANN SE & CO KGAA
DAILY MAIL & GENERAL TRUST
INDEPENDENT NEWS & MEDIA PLC
LAGARDERE (GROUPE)

Germany
Germany
United Kingdom
Ireland
France

DEC
DEC
SEP
DEC
DEC

4,256.4
20,694.9
2,754.2
693.9
9,476.3

4,433.4
21,262.8
3,195.3
776.7
10,658.6

3,838.8
21,245.8
3,067.7
830.9
10,567.2

3,638.1
21,738.4
3,279.4
1,749.5
10,993.9

4,012.4
24,075.3
4,556.2
2,171.4
12,078.8

3,533.2
26,040.3
4,402.5
2,293.6
11,762.0

2,625.0
17,312.1
2,858.7
1,238.8
12,494.4

5.0
1.8
(0.4)
(5.6)
(2.7)

PEARSON PLC
REED ELSEVIER GROUP
TRINITY MIRROR PLC
WOLTERS KLUWER NV

United Kingdom
United Kingdom
United Kingdom
Netherlands

DEC
DEC
DEC
DEC

8,018.0
9,693.3
1,119.7
4,632.7

9,401.8
9,626.3
1,197.4
4,668.8

8,752.5
9,358.3
1,176.9
4,717.2

8,800.6
9,500.1
1,194.4
4,771.2

8,912.3
9,881.1
1,614.8
4,961.5

8,329.3
9,173.8
1,943.8
4,677.7

6,490.9
7,542.7
1,641.1
3,682.3

EUROPEAN BROADCASTERS
ATRESMEDIA CORP DE MEDIOS
BOUYGUES SA
BRITISH SKY BROADCASTING GRP
SOCIETE D EDITION DE CANAL P
LAGARDERE (GROUPE)

Spain
France
United Kingdom
France
France

DEC
DEC
JUN
DEC
DEC

916.2
43,134.6
10,757.3
2,414.7
9,476.3

1,083.9
45,526.8
10,495.5
2,584.9
10,658.6

1,025.8
41,421.0
9,348.5
2,370.5
10,567.2

906.5
43,676.0
8,635.5
2,472.6
10,993.9

1,128.6
47,731.5
9,920.8
2,666.0
12,078.8

1,285.0
40,585.9
8,797.5
2,384.7
11,762.0

MEDIASET SPA
PROSIEBEN SAT 1 MEDIA AG
RTL GROUP
VIVENDI

Italy
Germany
Luxembourg
France

DEC
DEC
DEC
DEC

4,734.9
3,029.6
7,712.2
37,280.4

5,857.8
3,836.6
8,024.9
40,107.8

5,642.5
3,979.6
7,416.6
38,307.6

5,314.5
3,846.0
7,536.4
37,796.0

6,173.5
4,491.3
8,490.8
37,339.4

OTHER COMPANIES WITH MAJOR PUBLISHING OR BROADCASTING OPERATIONS IN EUROPE

GANNETT CO
USA
DEC
5,353.2
5,240.0
GRUPO TELEVISA SAB
Mexico
DEC
5,270.6
5,053.5
MCGRAW HILL FINANCIAL
USA
DEC
4,450.0
6,246.0
TWENTY-FIRST CENTURY FOX INC
USA
JUN
33,706.0
33,405.0
SCHOLASTIC CORP
USA
# MAY
1,792.4
2,148.8

5,438.7
4,581.1
6,168.3
32,778.0
1,906.1

5,613.0
3,883.0
5,951.8
30,423.0
1,912.9

THOMSON-REUTERS CORP
TIME WARNER INC
VIACOM INC
WILEY (JOHN) & SONS

13,070.0
26,888.0
9,337.0
1,742.6

12,997.0
25,785.0
13,619.0
1,699.1

CAN
USA
USA
USA

DEC
DEC
SEP
# APR

13,278.0
28,729.0
13,887.0
1,760.8

2011

13,807.0
28,974.0
14,914.0
1,782.7

2010

2009

CAGR (%)

Yr. End

2008

2007

2002

10-Yr.

5-Yr.

Index Basis (2002 = 100)

1-Yr.

2012

2011

2010

2009

2008

NA
NA
5.7
4.4
1.7
(0.2)
(1.3) (10.9)
3.2
(1.6)

NA
303
122
70
226

205
290
122
78
230

254
257
110
77
209

237
261
107
76
179

280
285
123
88
214

307
280

293
274

260
246

228
231

250
236

3.8
(4.0)
(4.5)
(2.7)
(9.0) (13.8)
(21.3) (10.7)
(4.2) (11.1)

162
120
96
56
76

169
123
112
63
85

146
123
107
67
85

139
126
115
141
88

153
139
159
175
97

2.1
2.5
(3.8)
2.3

(0.8) (14.7)
1.1
0.7
(10.4)
(6.5)
(0.2)
(0.8)

124
129
68
126

145
128
73
127

135
124
72
128

136
126
73
130

137
131
98
135

601.9
21,032.2
4,004.1
1,437.0
12,494.4

4.3
7.4
10.4
5.3
(2.7)

(6.5) (15.5)
1.2
(5.3)
4.1
2.5
0.3
(6.6)
(4.2) (11.1)

152
205
269
168
76

180
216
262
180
85

170
197
233
165
85

151
208
216
172
88

187
227
248
186
97

5,527.1
3,703.9
7,821.7
29,681.9

2,155.5
1,791.6
4,123.8
54,974.8

8.2
5.4
6.5
(3.8)

(3.0) (19.2)
(3.9) (21.0)
(0.3)
(3.9)
4.7
(7.0)

220
169
187
68

272
214
195
73

262
222
180
70

247
215
183
69

286
251
206
68

6,767.6
4,342.3
6,355.1
32,996.0
1,849.3

7,439.5
3,803.5
6,772.3
28,655.0
2,205.6

6,422.2 B
2,235.4
4,787.7
16,329.1
1,958.3

(1.8)
9.0
(0.7)
7.5
(0.9)

(6.4)
2.2
6.7
4.3
(8.1) (28.8)
3.3
0.9
(4.1) (16.6)

83
236
93
206
92

82
226
130
205
110

85
205
129
201
97

87
174
124
186
98

105
194
133
202
94

11,707.0
46,984.0
14,625.0
1,611.4

7,296.0
46,482.0
13,423.1
1,673.7

7,756.0
40,961.0
NA
854.0

5.5
(3.5)
NA
7.5

12.7
(9.2)
0.7
1.0

171
70
**
206

178
71
**
209

169
66
**
204

168
63
**
199

151
115
**
189

5.8
5.8

5.0
2.3

(3.8)
(0.8)
(6.9)
(1.2)

Source: Standard & Poor's Compustat Global Data. CAGR-Compound annual growth rate. # Of the following calendar year. ** Not calculated; data for base year or end year not available. A - Includes excise taxes. B - Includes other (nonoperating) income.

INDUSTRY SURVEYS

MEDIA: EUROPE / JANUARY 2014

61

Net Income
Million $
Company

Yr. End

2012

EUROPEAN ADVERTISING COMPANIES

AEGIS GROUP PLC
CHIME COMMUNICATIONS PLC
HAVAS
HIGH CO SA
JC DECAUX SA

DEC
DEC
DEC
DEC
DEC

NA
(6.4)
162.0
7.7
209.3

PUBLICIS GROUPE SA
WPP PLC

DEC
DEC

EUROPEAN PUBLISHERS
AXEL SPRINGER VERLAG AG
BERTELSMANN SE & CO KGAA
DAILY MAIL & GENERAL TRUST
INDEPENDENT NEWS & MEDIA PLC
LAGARDERE (GROUPE)

DEC
DEC
SEP
DEC
DEC

PEARSON PLC
REED ELSEVIER GROUP
TRINITY MIRROR PLC
WOLTERS KLUWER NV

DEC
DEC
DEC
DEC

448.5
1,694.3
37.7
442.3

1,534.9
1,218.9
124.8
339.6

EUROPEAN BROADCASTERS
ATRESMEDIA CORP DE MEDIOS
BOUYGUES SA
BRITISH SKY BROADCASTING GRP
SOCIETE D EDITION DE CANAL P
LAGARDERE (GROUPE)

DEC
DEC
JUN
DEC
DEC

41.0
813.9
1,435.2
54.0
114.4

MEDIASET SPA
PROSIEBEN SAT 1 MEDIA AG
RTL GROUP
VIVENDI

DEC
DEC
DEC
DEC

947.6
1,303.9

306.1
622.3
319.1
(314.8)
114.4

(369.2)
418.1
768.9
210.9

2011

2010

DEC
DEC
SEP
APR

2,068.0
3,019.0
2,345.0
144.2

CAGR (%)
2008

2007

Index Basis (2002 = 100)

2002

10-Yr.

5-Yr.

1-Yr.

2012

2011

2010

2009

2008

128.1
24.9
167.0
8.0
295.9

63.7
20.3
145.9
10.9
229.9

98.1
19.5
128.2
9.2
34.1

153.4
20.0
152.9
6.5
159.0

179.3
17.6
113.8
14.2
302.9

21.2
(60.8)
22.2
(2.5)
24.6

NA
NM
22.0
NM
23.9

NA
NM
7.3
(11.4)
(7.1)

NA
NM
(3.0)
(3.3)
(29.3)

**
NM
730
NM
852

605
NM
753
NM
1,204

301
NM
658
NM
935

463
NM
578
NM
139

724
NM
690
NM
647

835.2
1,347.4

697.8
905.7

561.4
684.9

657.3
813.4

619.5
932.4

139.0
132.2

21.2
25.7

8.9
6.9

13.5
(3.2)

682
986

601
1,019

502
685

404
518

473
615

335.2
683.2
259.8
(71.0)
216.2

422.8
(114.2)
(471.7)
(122.3)
190.8

823.6
419.1
(0.4)
(241.8)
872.0

373.9
296.0
209.8
151.7
731.9

60.0
877.3
121.7
(39.2)
(275.1)

17.7
(3.4)
10.1
NM
NM

(3.9)
16.0
8.8
NM
(31.0)

(14.7)
(23.7)
78.1
NM
NM

510
71
262
NM
NM

598
93
147
NM
NM

559
78
213
NM
NM

704
(13)
(388)
NM
NM

1,372
48
(0)
NM
NM

805.2
992.2
175.1
382.0

665.1
611.8
45.8
164.4

707.6
848.4
(109.5)
460.3

622.4
1,783.1
135.7
450.9

(166.8)
272.0
(29.0)
23.6

NM
20.1
NM
34.0

(6.3)
(1.0)
(22.6)
(0.4)

(70.8)
39.0
(69.8)
30.2

NM
623
NM
1,871

NM
448
NM
1,437

NM
365
NM
1,616

NM
225
NM
695

NM
312
NM
1,947

130.1
1,489.4
1,205.9
68.2
(984.1)

144.8
1,420.7
1,388.4
53.1
216.2

84.6
1,817.9
417.4
55.7
190.8

133.8
2,177.8
(254.4)
69.1
872.0

274.2
1,885.9
964.6
64.4
731.9

(28.4)
629.6
(1,994.2)
18.0
(275.1)

NM
2.6
NM
11.6
NM

(31.6)
(15.5)
8.3
(3.5)
(31.0)

(68.5)
(45.4)
19.0
(20.8)
NM

NM
129
NM
301
NM

NM
237
NM
380
NM

NM
226
NM
295
NM

NM
289
NM
310
NM

NM
346
NM
385
NM

313.2
365.4
1,102.5
3,732.0

467.2
414.8
886.1
2,915.7

380.3
201.3
285.6
1,156.2

675.0
(189.9)
285.3
3,827.8

694.6
122.4
771.6
3,597.7

342.2
14.2
(52.9)
(22,028.7)

NM
40.3
NM
NM

NM
27.8
(0.1)
(43.3)

NM
14.4
(30.3)
(94.3)

(108)
2,948
NM
NM

92
2,577
NM
NM

137
2,925
NM
NM

111
1,420
NM
NM

197
(1,339)
NM
NM

355.3
445.5
730.5
(3,378.0)
58.7

(6,647.6)
706.4
799.5
5,387.0
13.2

975.6
739.7
1,013.6
3,426.0
110.6

1,160.1
76.5
576.8
(6,732.2)
58.6

(9.6)
24.2
1.6
NM
(4.8)

(15.3)
(2.1)
(7.8)
(19.2)
(20.2)

(7.5)
19.8
(19.0)
(60.6)
(67.1)

37
871
117
NM
61

40
727
145
NM
185

49
795
144
NM
74

31
582
127
NM
100

(573)
923
139
NM
23

821.0
2,079.0
1,591.0
143.5

1,405.0
(13,402.0)
1,233.0
128.3

1,096.0
4,051.0
1,630.2
147.5

606.0
(44,574.0)
NA
87.3

13.1
NM
NA
5.2

13.5
(5.7)
7.5
(0.5)

NM
4.6
9.3
(32.2)

341
NM
**
165

(230)
NM
**
244

150
NM
**
197

135
NM
**
164

232
NM
**
147

358.9
815.7
179.2
(56.5)
(984.1)

OTHER COMPANIES WITH MAJOR PUBLISHING OR BROADCASTING OPERATIONS IN EUROPE

GANNETT CO
DEC
424.3
458.7
567.3
GRUPO TELEVISA SAB
DEC
666.4
556.3
608.4
MCGRAW HILL FINANCIAL
DEC
676.0
835.0
828.1
TWENTY-FIRST CENTURY FOX INC
JUN
1,179.0
2,993.0
2,539.0
SCHOLASTIC CORP
# MAY
35.8
108.7
43.6
THOMSON-REUTERS CORP
TIME WARNER INC
VIACOM INC
WILEY (JOHN) & SONS

2009

(1,394.0)
2,886.0
2,146.0
212.7

909.0
2,578.0
1,175.0
171.9

Note: CAGR-Compound annual growth rate. # Of the following calendar year. ** Not calculated; data for base year or end year not available.

62

MEDIA: EUROPE / JANUARY 2014

INDUSTRY SURVEYS

Return on Revenues (%)

Company

Return on Assets (%)

Return on Equity (%)

Yr. End

2012

2011

2010

2009

2008

2012

2011

2010

2009

2008

2012

2011

2010

2009

2008

EUROPEAN ADVERTISING COMPANIES

AEGIS GROUP PLC
CHIME COMMUNICATIONS PLC
HAVAS
HIGH CO SA
JC DECAUX SA

DEC
DEC
DEC
DEC
DEC

NA
NM
7.1
4.5
6.2

7.0
4.8
7.3
4.2
8.6

2.8
4.4
7.1
5.8
7.4

4.7
4.1
6.4
4.9
1.3

6.2
3.9
6.6
3.0
5.0

NA
NM
2.6
2.7
3.7

1.9
6.2
2.6
3.0
5.4

1.0
5.7
2.3
4.6
4.2

1.7
6.5
2.1
3.8
0.6

2.4
6.7
2.5
2.5
2.8

NA
NM
10.2
7.4
6.3

14.8
10.7
10.1
7.9
9.5

7.4
10.1
9.2
10.9
7.8

14.7
12.2
8.6
9.7
1.2

24.6
14.6
10.8
7.1
5.5

PUBLICIS GROUPE SA
WPP PLC

DEC
DEC

11.1
7.9

10.3
8.4

9.7
6.3

8.9
5.0

9.5
5.9

4.4
3.3

4.0
3.5

3.6
2.4

3.2
1.9

3.8
2.3

17.0
12.2

17.5
13.2

16.3
9.2

15.4
7.7

20.4
10.0

EUROPEAN PUBLISHERS
AXEL SPRINGER VERLAG AG
BERTELSMANN SE & CO KGAA
DAILY MAIL & GENERAL TRUST
INDEPENDENT NEWS & MEDIA PLC
LAGARDERE (GROUPE)

DEC
DEC
SEP
DEC
DEC

7.2
3.0
11.6
NM
1.2

8.1
3.8
5.6
NM
NM

8.7
3.2
8.5
NM
2.0

11.6
NM
NM
NM
1.7

20.5
1.7
NM
NM
7.2

5.2
2.6
9.2
NM
1.0

7.0
3.3
5.2
NM
NM

7.4
2.6
7.2
NM
1.4

10.4
NM
NM
NM
1.2

17.3
1.4
NM
NM
4.9

13.1
9.0
194.4
144.3
3.0

16.7
11.5
152.2
NM
NM

17.9
9.5
NM
NM
4.0

27.6
NM
NM
54.1
3.2

53.6
5.8
NM
355.9
13.7

PEARSON PLC
REED ELSEVIER GROUP
TRINITY MIRROR PLC
WOLTERS KLUWER NV

DEC
DEC
DEC
DEC

5.6
17.5
3.4
9.5

16.3
12.7
10.4
7.3

9.2
10.6
14.9
8.1

7.6
6.4
3.8
3.4

7.9
8.6
NM
9.3

2.5
9.5
1.5
5.1

9.0
6.9
4.8
3.9

5.0
5.5
6.6
4.4

4.5
3.3
1.8
1.9

4.9
4.5
NM
5.5

4.9
47.9
3.6
22.0

17.1
38.0
11.8
16.3

10.3
34.0
18.9
18.7

9.6
29.3
5.9
8.5

10.0
23.3
NM
24.9

EUROPEAN BROADCASTERS
ATRESMEDIA CORP DE MEDIOS
BOUYGUES SA
BRITISH SKY BROADCASTING GRP
SOCIETE D EDITION DE CANAL P
LAGARDERE (GROUPE)

DEC
DEC
JUN
DEC
DEC

4.5
1.9
13.3
2.2
1.2

12.0
3.3
11.5
2.6
NM

14.1
3.4
14.9
2.2
2.0

9.3
4.2
4.8
2.3
1.7

11.9
4.6
NM
2.6
7.2

3.2
1.7
16.7
4.3
1.0

12.6
3.2
15.3
5.5
NM

13.2
2.9
18.9
4.2
1.4

7.4
3.7
5.3
4.5
1.2

10.7
4.4
NM
5.1
4.9

9.9
7.3
91.3
14.1
3.0

32.9
12.8
96.5
18.4
NM

36.7
11.5
378.9
14.1
4.0

23.2
16.0
NM
14.9
3.2

32.5
21.0
212.0
19.1
13.7

MEDIASET SPA
PROSIEBEN SAT 1 MEDIA AG
RTL GROUP
VIVENDI

DEC
DEC
DEC
DEC

NM
13.8
10.0
0.6

5.3
9.5
13.7
9.3

8.3
10.4
11.9
7.6

7.2
5.2
3.8
3.1

10.9
NM
3.4
10.3

NM
6.1
7.3
0.3

3.2
4.9
9.8
4.9

5.0
4.8
7.3
3.6

4.3
2.4
2.3
1.4

7.4
NM
2.2
5.3

NM
21.8
13.1
0.9

9.3
22.7
17.4
13.0

13.6
37.9
12.9
9.1

11.2
27.5
4.0
3.7

18.7
NM
3.6
12.5

OTHER COMPANIES WITH MAJOR PUBLISHING OR BROADCASTING OPERATIONS IN EUROPE

GANNETT CO
DEC
7.9
8.8
10.4
6.3
GRUPO TELEVISA SAB
DEC
12.6
11.0
13.3
11.5
MCGRAW HILL FINANCIAL
DEC
15.2
13.4
13.4
12.3
TWENTY-FIRST CENTURY FOX INC
JUN
3.5
9.0
7.7
NM
SCHOLASTIC CORP
# MAY
2.0
5.1
2.3
3.1

NM
16.3
12.6
16.3
0.7

6.5
5.6
10.0
2.0
2.3

6.8
5.0
12.4
5.1
6.9

8.1
5.9
12.2
4.7
2.8

4.8
4.8
11.6
NM
3.7

NM
7.9
12.9
8.6
0.8

18.1
15.9
59.4
4.4
4.2

20.4
15.1
44.9
11.0
13.8

30.1
18.5
40.8
10.5
5.6

26.7
15.0
46.7
NM
7.3

NM
22.0
55.3
17.5
1.6

THOMSON-REUTERS CORP
TIME WARNER INC
VIACOM INC
WILEY (JOHN) & SONS

12.0
NM
8.4
8.0

6.3
4.4
10.4
5.4

NM
4.3
9.6
8.6

2.6
3.9
5.3
7.2

2.3
2.3
7.2
6.3

4.8
NM
5.4
5.3

12.4
10.1
29.1
14.4

NM
9.2
23.9
21.3

4.7
7.8
13.1
20.2

4.2
5.5
20.2
23.2

8.4
NM
17.4
21.3

DEC
DEC
SEP
APR

15.6
10.5
16.9
8.2

NM
10.0
14.4
11.9

7.0
9.6
12.6
9.9

6.3
8.1
11.7
8.4

Note: # Of the following calendar year.

INDUSTRY SURVEYS

MEDIA: EUROPE / JANUARY 2014

63

Current Ratio
Company

Debt as a % of
Net Working Capital

Debt / Capital Ratio (%)

Yr. End

2012

2011

2010

2009

2008

2012

2011

2010

2009

2008

EUROPEAN ADVERTISING COMPANIES

AEGIS GROUP PLC
CHIME COMMUNICATIONS PLC
HAVAS
HIGH CO SA
JC DECAUX SA

DEC
DEC
DEC
DEC
DEC

NA
0.9
0.9
0.9
1.1

1.0
1.0
1.0
0.9
1.2

0.9
0.9
1.1
1.0
1.1

1.0
0.6
1.1
1.0
0.9

1.0
0.8
0.9
0.9
1.2

NA
7.9
30.6
1.4
5.0

54.9
4.6
31.5
1.8
12.1

47.8
2.4
35.5
1.0
16.3

55.7
0.3
40.1
1.3
20.1

PUBLICIS GROUPE SA
WPP PLC

DEC
DEC

0.9
0.9

0.9
1.0

1.0
0.9

1.0
0.9

0.9
0.9

13.1
32.9

26.1
34.5

33.2
33.3

EUROPEAN PUBLISHERS
AXEL SPRINGER VERLAG AG
BERTELSMANN SE & CO KGAA
DAILY MAIL & GENERAL TRUST
INDEPENDENT NEWS & MEDIA PLC
LAGARDERE (GROUPE)

DEC
DEC
SEP
DEC
DEC

1.0
1.4
0.7
0.4
1.1

1.0
1.2
0.7
0.5
1.0

1.2
1.3
0.6
0.6
0.8

1.4
1.2
0.6
1.1
0.9

1.6
1.2
0.6
0.5
1.0

23.8
42.9
78.6
519.0
40.4

25.7
38.6
92.4
104.8
37.3

PEARSON PLC
REED ELSEVIER GROUP
TRINITY MIRROR PLC
WOLTERS KLUWER NV

DEC
DEC
DEC
DEC

1.7
0.6
0.8
0.6

1.8
0.6
0.6
0.6

1.9
0.7
0.8
0.7

1.9
0.7
1.1
0.6

1.7
0.6
0.8
0.6

24.2
49.7
10.4
51.8

EUROPEAN BROADCASTERS
ATRESMEDIA CORP DE MEDIOS
BOUYGUES SA
BRITISH SKY BROADCASTING GRP
SOCIETE D EDITION DE CANAL P
LAGARDERE (GROUPE)

DEC
DEC
JUN
DEC
DEC

0.7
1.0
1.1
1.4
1.1

0.9
0.9
1.2
1.4
1.0

0.9
1.0
1.2
1.4
0.8

0.8
1.0
0.9
1.4
0.9

0.8
0.9
0.9
1.3
1.0

MEDIASET SPA
PROSIEBEN SAT 1 MEDIA AG
RTL GROUP
VIVENDI

DEC
DEC
DEC
DEC

0.6
2.5
1.5
0.7

0.5
1.5
1.5
0.7

0.7
1.2
1.6
0.7

0.6
1.0
1.6
0.6

OTHER COMPANIES WITH MAJOR PUBLISHING OR BROADCASTING OPERATIONS

GANNETT CO
DEC
1.1
1.2
GRUPO TELEVISA SAB
DEC
1.5
1.4
MCGRAW HILL FINANCIAL
DEC
1.1
0.9
TWENTY-FIRST CENTURY FOX INC
JUN
2.0
2.3
SCHOLASTIC CORP
# MAY
1.7
1.9
THOMSON-REUTERS CORP
TIME WARNER INC
VIACOM INC
WILEY (JOHN) & SONS

DEC
DEC
SEP
APR

0.8
1.4
1.3
1.0

0.9
1.5
1.3
0.9

2012

2011

2010

2009

2008

57.3
0.0
28.2
2.0
27.1

NA
NM
NM
NM
157.0

NM
NM
NM
NM
219.1

NM
NM
272.1
NM
709.9

NM
NM
291.6
NM
NM

NM
NM
NM
NM
613.1

37.0
34.2

33.9
36.8

NM
NM

NM
NM

NM
NM

NM
NM

NM
NM

16.2
42.9
86.9
85.5
32.4

21.9
42.3
106.5
61.8
33.1

29.5
42.1
61.7
80.3
33.6

NM
174.2
NM
NM
477.9

NM
305.3
NM
NM
NM

161.7
223.4
NM
NM
NM

133.1
314.1
NM
NM
NM

130.1
479.0
NM
NM
NM

23.0
49.2
14.3
54.6

24.1
54.7
18.5
53.6

27.5
42.8
30.5
53.9

27.0
69.4
31.5
52.5

110.9
NM
NM
NM

113.5
NM
NM
NM

99.1
NM
NM
NM

131.8
NM
NM
NM

154.1
NM
NM
NM

0.1
46.2
71.7
0.0
40.4

0.2
44.3
69.2
0.0
37.3

0.4
41.7
81.3
0.0
32.4

5.2
39.6
102.9
0.0
33.1

7.4
44.2
108.7
0.0
33.6

NM
NM
NM
0.0
477.9

NM
NM
557.6
0.0
NM

NM
938.8
856.4
0.0
NM

NM
NM
NM
0.0
NM

NM
NM
NM
0.0
NM

0.7
1.0
1.5
0.8

35.6
60.9
0.3
39.4

32.4
60.7
0.2
38.1

28.5
75.5
1.9
25.4

24.1
83.1
1.4
23.1

24.6
83.8
1.5
23.8

NM
136.4
1.1
NM

NM
619.4
0.9
NM

NM
NM
5.7
NM

NM
NM
5.2
NM

NM
NM
7.0
NM

IN EUROPE
1.3
1.2
1.8
2.1
1.2
1.2
2.0
1.5
1.8
2.3

1.1
2.2
0.9
1.6
2.0

37.8
48.5
32.9
35.4
6.2

43.1
52.0
34.2
31.6
20.1

51.1
50.6
34.5
31.3
22.5

64.5
48.3
39.2
30.9
23.7

75.1
43.3
46.9
27.4
27.9

NM
310.7
344.4
154.4
19.2

NM
381.1
NM
126.6
48.9

956.4
176.5
195.2
144.0
64.1

NM
119.2
247.3
234.8
51.4

NM
100.0
NM
255.4
73.8

0.7
1.5
1.3
0.7

0.8
1.2
0.9
0.7

25.2
37.4
51.6
36.2

28.7
37.5
45.2
28.4

24.7
32.1
41.7
22.0

24.5
30.5
42.6
38.6

23.0
41.0
52.7
52.2

NM
552.8
794.8
NM

NM
432.4
556.6
NM

NM
367.6
639.5
NM

NM
362.0
979.4
NM

NM
NM
NM
NM

0.8
1.5
1.2
0.7

Note: # Of the following calendar year.

64

MEDIA: EUROPE / JANUARY 2014

INDUSTRY SURVEYS

Price - Earnings Ratio (High-Low)

Yr. End

2012

2011

2010

2009

Dividend Payout Ratio (%)

2008

Dividend Yield (High-Low, %)

2012

2011

2010

2009

2008

2012

2011

2010

2009

2008

NA - NA
10 2
14 5
21 - 11
54 - 17

NA
NM
NM
NM
NM

NA
NM
NM
NM
NM

NA
NM
NM
NM
NM

NA
NM
NM
NM
NM

NA
NM
NM
NM
NM

NA 4.63 3.47 3.24 2.83 -

NA
2.62
2.39
2.22
1.84

NA
4.00
4.12
4.49
0.00

NA
2.08
2.47
1.97
0.00

NA 3.37 2.55 2.03 0.00 -

NA
2.19
1.83
1.50
0.00

NA 13.78 3.33 2.08 0.00 -

NA
2.00
1.23
1.25
0.00

NA 10.19 3.82 2.43 5.48 -

NA
2.07
1.27
1.21
1.75

11 19 -

5
7

NM
NM

NM
NM

NM
NM

NM
NM

NM
NM

1.98 3.93 -

1.46
2.83

2.46 3.39 -

1.72
2.27

1.92 2.80 -

1.41
2.01

3.76 4.98 -

1.96
2.53

4.79 6.29 -

2.31
2.33

52
NA - NA
NM - NM
NM - NM
12 5

NM
NA
NM
NM
NM

NM
NA
NM
NM
NM

NM
NA
NM
NM
NM

NM
NA
NM
NM
NM

NM
NA
NM
NM
NM

5.60 NA 4.99 0.00 7.10 -

4.29
NA
3.42
0.00
4.96

6.87
NA
4.74
0.00
8.46

4.09
NA
2.69
0.00
3.91

6.20 NA 3.70 0.00 5.26 -

3.65
NA
2.85
0.00
3.73

9.48 NA 7.71 0.00 7.09 -

4.99
NA
3.06
0.00
3.38

11.45 NA 5.81 38.77 6.34 -

4.52
NA
2.16
5.85
2.50

16 NA NM 21 -

10
NA
NM
10

NM
NA
NM
NM

NM
NA
NM
NM

NM
NA
NM
NM

NM
NA
NM
NM

NM
NA
NM
NM

3.92 NA 0.00 6.22 -

3.39
NA
0.00
4.39

4.19
NA
0.00
6.17

3.33
NA
0.00
3.99

4.28 NA 0.00 4.90 -

3.48
NA
0.00
3.83

6.23 NA 0.00 5.73 -

3.63
NA
0.00
3.57

7.24 NA 79.95 6.22 -

4.36
NA
5.27
3.10

EUROPEAN ADVERTISING COMPANIES

AEGIS GROUP PLC
CHIME COMMUNICATIONS PLC
HAVAS
HIGH CO SA
JC DECAUX SA

DEC
DEC
DEC
DEC
DEC

PUBLICIS GROUPE SA
WPP PLC

DEC
DEC

EUROPEAN PUBLISHERS
AXEL SPRINGER VERLAG AG
BERTELSMANN SE & CO KGAA
DAILY MAIL & GENERAL TRUST
INDEPENDENT NEWS & MEDIA PLC
LAGARDERE (GROUPE)

DEC
DEC
SEP
DEC
DEC

17
NA
10
NM
37

13
NA
7
NM
26

16
NA
20
NM
NM

9
NA
12
NM
NM

16
NA
NA
NM
26

PEARSON PLC
REED ELSEVIER GROUP
TRINITY MIRROR PLC
WOLTERS KLUWER NV

DEC
DEC
DEC
DEC

36
NA
10
14

- 31
- NA
3
- 10

10
NA
3
21

8
- NA
1
- 14

16
NA
4
18

- 13
- NA
1
- 14

17 - 10
NA - NA
17 2
44 - 27

EUROPEAN BROADCASTERS
ATRESMEDIA CORP DE MEDIOS
BOUYGUES SA
BRITISH SKY BROADCASTING GRP
SOCIETE D EDITION DE CANAL P
LAGARDERE (GROUPE)

DEC
DEC
JUN
DEC
DEC

36
13
16
15
37

18
9
12
12
26

16
11
20
15
NM

8
6
- 15
- 10
- NM

17
14
13
21
26

7
- 10
9
- 15
- 18

28 9
11 5
40 - 23
20 - 12
35 - 17

24 8
13 5
NM - NM
22 - 10
12 5

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

12.48 9.33 3.72 6.79 7.10 -

6.23
6.25
2.73
5.33
4.96

12.80
7.84
3.05
7.17
8.46

6.11
4.60
2.34
4.74
3.91

8.83 5.19 3.79 5.53 5.26 -

3.81
3.71
2.71
3.91
3.73

7.16 7.47 4.84 6.26 7.09 -

2.32
3.81
2.84
3.94
3.38

20.86 7.49 3.55 7.40 6.34 -

7.02
2.89
2.24
3.31
2.50

MEDIASET SPA
PROSIEBEN SAT 1 MEDIA AG
RTL GROUP
VIVENDI

DEC
DEC
DEC
DEC

NM
16
NA
143

- NM
9
- NA
- 99

24
20
NA
11

9
9
- NA
7

21
16
NA
13

- 14
6
- NA
9

25 - 12
14 1
NA - NA
35 - 25

17 8
NM - NM
NA - NA
15 8

NM
NM
NM
NM

NM
NM
NM
NM

NM
NM
NM
NM

NM
NM
NM
NM

NM
NM
NM
NM

8.90 8.19 7.98 8.10 -

3.80
4.79
6.36
5.63

20.10
9.92
8.87
9.92

7.47
4.81
6.73
6.55

4.92 0.21 7.07 8.70 -

3.18
0.08
4.62
5.78

12.82 2.39 15.12 8.28 -

6.15
0.21
6.59
6.04

13.55 114.29 18.04 8.31 -

6.71
7.95
6.03
4.40

OTHER COMPANIES WITH MAJOR PUBLISHING OR BROADCASTING OPERATIONS IN EUROPE

GANNETT CO
DEC
11 7
10 4
85
11 1
GRUPO TELEVISA SAB
DEC
21 - 15
25 - 17
20 - 14
23 - 12
MCGRAW HILL FINANCIAL
DEC
24 - 17
17 - 12
15 - 10
15 7
TWENTY-FIRST CENTURY FOX INC
JUN
48 - 28
16 - 10
18 8
NM - NM
SCHOLASTIC CORP
# MAY
31 - 22
12 7
24 - 17
20 - 11

NM - NM
18 9
19 7
13 8
90 - 27

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

NM
NM
NM
NM
NM

6.57 0.67 8.38 1.35 2.00 -

4.00
0.48
6.13
0.79
1.45

2.90
0.81
2.86
1.29
1.93

1.27
0.56
2.13
0.82
1.12

1.37 0.00 3.49 1.70 1.58 -

0.81
0.00
2.38
0.79
1.09

8.65 10.26 5.23 2.42 1.67 -

1.00
5.49
2.55
0.77
0.95

32.00 2.54 5.13 0.80 3.23 -

4.10
1.31
1.87
0.51
0.96

THOMSON-REUTERS CORP
TIME WARNER INC
VIACOM INC
WILEY (JOHN) & SONS

22 - 11
NM - NM
22 6
25 9

NM
NM
NM
NM

NM
NM
NM
NM

NM
NM
NM
NM

NM
NM
NM
NM

NM
NM
NM
NM

4.83 3.09 2.99 2.70 -

4.25
2.14
1.89
1.85

4.86
3.40
2.24
1.91

2.94
2.43
1.52
1.51

3.65 3.22 1.11 1.83 -

2.95
2.49
0.81
1.21

4.98 4.21 0.00 1.91 -

3.12
2.24
0.00
1.25

5.31 3.57 0.00 2.77 -

2.69
1.48
0.00
0.95

DEC
DEC
SEP
APR

NA
NM
14
11
33

NA
NM
10
8
21

13 9
14 - 10

12
15
13
21

- 11
- 11
8
- 15

NA
16
15
19
26

- NA
8
9
8
- 15

13 13 -

NM
14
14
15

9
8

NM
10
10
12

NA
13
16
12
30

- NA
8
- 12
9
- 22

14 - 10
17 - 12

36
15
19
19

9
NA
NA
NM
18

29
12
14
12

NA - NA
13 2
15 6
13 8
NM - 64
14 18 -

7
9

8NA NM NM 35 -

4
NA
NM
NM
17

36 - 23
19 - 10
12 5
18 - 12

Note: # Of the following calendar year.

INDUSTRY SURVEYS

MEDIA: EUROPE / JANUARY 2014

65

Earnings per Share ($)

Company

Tangible Book Value per Share ($)

Yr. End

2012

2011

2010

2009

2008

2012

2011

2010

2009

2008

EUROPEAN ADVERTISING COMPANIES

AEGIS GROUP PLC
CHIME COMMUNICATIONS PLC
HAVAS
HIGH CO SA
JC DECAUX SA

DEC
DEC
DEC
DEC
DEC

NA
(0.08)
0.42
0.74
0.94

NA
0.31
0.39
0.77
1.33

NA
0.28
0.34
1.06
1.04

NA
0.30
0.30
0.86
0.15

NA
0.35
0.36
0.61
0.72

NA
(0.52)
(1.74)
(1.51)
5.49

NA
(0.37)
(0.90)
(2.00)
4.69

NA
(0.38)
(1.02)
0.14
3.64

NA
(0.78)
(1.20)
0.68
2.42

NA
(0.61)
(1.38)
(0.23)
3.40

PUBLICIS GROUPE SA
WPP PLC

DEC
DEC

4.76
1.05

4.49
1.09

3.83
0.73

3.00
0.56

3.68
0.67

(13.47)
(5.85)

(16.01)
(5.80)

(13.05)
(5.76)

(14.95)
(6.31)

EUROPEAN PUBLISHERS
AXEL SPRINGER VERLAG AG
BERTELSMANN SE & CO KGAA
DAILY MAIL & GENERAL TRUST
INDEPENDENT NEWS & MEDIA PLC
LAGARDERE (GROUPE)

DEC
DEC
SEP
DEC
DEC

3.10
NA
0.83
(0.50)
0.90

3.64
NA
0.47
(0.09)
(7.73)

3.41
NA
NA
(0.11)
1.70

4.73
NA
(1.23)
(0.22)
1.50

9.25
NA
(0.00)
(1.12)
6.87

(7.58)
NA
(3.67)
(0.91)
0.97

(2.82)
NA
(4.25)
(0.41)
3.73

6.10
NA
NA
(0.48)
4.83

PEARSON PLC
REED ELSEVIER GROUP
TRINITY MIRROR PLC
WOLTERS KLUWER NV

DEC
DEC
DEC
DEC

0.56
NA
0.15
1.50

1.88
NA
0.51
1.15

1.01
NA
0.69
1.27

0.83
NA
0.18
0.55

0.89
NA
(0.43)
1.57

(1.07)
NA
(1.80)
(13.90)

(0.76)
NA
(1.89)
(13.96)

EUROPEAN BROADCASTERS
ATRESMEDIA CORP DE MEDIOS
BOUYGUES SA
BRITISH SKY BROADCASTING GRP
SOCIETE D EDITION DE CANAL P
LAGARDERE (GROUPE)

DEC
DEC
JUN
DEC
DEC

0.20
2.51
0.87
0.43
0.90

0.66
4.73
0.69
0.54
(7.73)

0.72
3.94
0.80
0.42
1.70

0.42
5.16
0.24
0.44
1.50

0.66
6.39
(0.15)
0.55
6.87

0.28
4.42
(0.51)
3.02
0.97

MEDIASET SPA
PROSIEBEN SAT 1 MEDIA AG
RTL GROUP
VIVENDI

DEC
DEC
DEC
DEC

(0.32)
1.97
NA
0.16

0.28
1.73
NA
2.81

0.41
1.95
NA
2.21

0.33
0.95
NA
0.88

0.59
(0.87)
NA
3.06

OTHER COMPANIES WITH MAJOR PUBLISHING OR BROADCASTING OPERATIONS IN EUROPE

GANNETT CO
DEC
1.83
1.92
2.38
1.52 (29.11)
GRUPO TELEVISA SAB
DEC
0.26
0.21
0.26
0.19
0.30
MCGRAW HILL FINANCIAL
DEC
2.43
2.80
2.68
2.34
2.53
TWENTY-FIRST CENTURY FOX INC
JUN
0.47
1.14
0.97
(1.29)
1.82
SCHOLASTIC CORP
# MAY
1.12
3.47
1.31
1.61
0.35
THOMSON-REUTERS CORP
TIME WARNER INC
VIACOM INC
WILEY (JOHN) & SONS

DEC
DEC
SEP
APR

2.50
3.14
4.42
2.43

(1.68)
2.74
3.65
3.53

1.09
2.27
1.93
2.86

0.99
1.75
2.62
2.45

1.82
(11.22)
1.97
2.20

Share Price (High-Low, $)

2012
NA
4.03
5.89
8.48
30.69

2011

2010

2009

2008

NA
2.28
4.06
5.80
19.88

NA
4.88
5.81
14.64
35.03

NA
2.54
3.48
6.41
20.66

NA
3.66
5.51
12.76
31.08

NA
2.38
3.95
9.44
22.91

NA
3.76
4.57
11.27
25.22

NA
0.55
1.68
6.75
9.82

(16.89)
(6.63)

60.19 14.43 -

44.32
10.37

58.65 13.64 -

40.98
9.12

51.97 12.39 -

38.20
8.92

43.10 9.97 -

4.97
NA
(5.86)
(3.68)
(2.69)

4.38
NA
(5.00)
(10.37)
0.38

52.18
NA
8.01
0.36
33.54

39.96
NA
5.49
0.02
23.44

56.50
NA
9.58
0.79
47.61

33.65
NA
5.42
0.23
22.03

53.90
NA
8.23
1.19
43.85

31.75
NA
6.32
0.57
31.06

38.79
NA
7.52
2.47
52.50

0.14
NA
(1.80)
(13.25)

(1.58)
NA
(2.88)
(13.85)

(1.09)
NA
(2.38)
(15.14)

20.19
NA
1.55
20.39

17.44
NA
0.40
14.39

19.50
NA
1.47
24.26

15.52
NA
0.61
15.69

16.12
NA
2.77
23.12

13.10
NA
0.95
18.09

0.52
6.68
(0.34)
2.87
3.73

0.48
10.57
(0.54)
2.80
4.83

0.14
9.95
(1.19)
2.93
(2.69)

0.04
5.55
(1.51)
2.80
0.38

7.04
33.67
13.73
6.49
33.54

3.52
22.57
10.08
5.09
23.44

10.66
50.27
13.88
8.16
47.61

5.08
29.49
10.61
5.40
22.03

12.46
54.16
10.40
8.68
43.85

(2.06)
(8.46)
NA
(11.34)

(2.23)
(26.32)
NA
(9.67)

(1.54)
(45.31)
NA
(5.78)

(1.55)
(51.44)
NA
(7.48)

(1.17)
(47.43)
NA
(4.31)

3.37
31.24
105.58
22.75

1.44
18.28
84.16
15.82

6.72
33.83
107.29
29.63

2.50
16.43
81.49
19.58

8.71
31.56
101.69
29.47

(4.33)
1.29
(6.48)
2.76
22.98

(4.38)
0.93
(4.42)
3.40
22.01

(4.98)
1.05
(1.30)
1.68
19.31

(7.66)
0.72
(1.35)
(0.05)
19.03

(10.52)
0.77
(3.37)
(2.46)
16.73

19.99
5.33
57.44
22.73
34.55

12.17
3.83
42.02
13.38
25.03

18.93
5.36
46.99
18.35
40.17

8.28
3.71
34.95
11.61
23.32

(10.93)
(11.07)
(8.61)
(16.31)

(11.77)
(10.38)
(5.55)
(11.78)

(12.01)
(6.71)
(3.99)
(11.68)

(11.04)
(6.32)
(5.89)
(15.95)

(11.15)
(23.51)
(9.30)
(20.43)

30.19
48.54
55.60
51.96

26.55
33.62
35.13
35.62

42.17
38.62
52.67
53.04

25.51
27.62
35.70
41.89

NA
3.62
4.89
13.07
39.09

NA
0.73
1.63
6.48
12.48

22.44
5.06

40.97 12.73 -

19.73
4.72

20.41
NA
2.99
0.51
25.05

46.48
NA
13.83
13.89
80.77

18.34
NA
5.15
2.10
31.90

14.47
NA
3.11
24.01

8.43
NA
0.28
14.95

14.44
NA
6.81
32.54

8.69
NA
0.45
16.20

5.37
38.80
7.44
6.14
31.06

11.87
55.43
9.48
8.70
52.50

3.84
28.27
5.56
5.48
25.05

15.53
81.65
14.51
11.89
80.77

5.22
31.53
9.14
5.32
31.90

5.63
11.57
66.43
19.58

8.45
13.31
70.11
30.62

4.05
1.17
30.53
22.35

9.97
24.46
130.55
44.46

4.94
1.70
43.67
23.54

19.69
5.25
39.45
17.00
32.00

11.65
3.56
26.95
7.94
22.21

15.99
4.33
35.24
15.62
31.50

1.85
2.32
17.22
4.95
18.00

39.00
5.49
47.13
23.58
31.37

5.00
2.83
17.15
14.96
9.28

39.39
34.07
37.07
53.00

31.88
26.43
27.04
34.96

35.94
33.45
31.56
44.64

22.50
17.81
13.25
29.35

40.24
50.70
44.19
54.75

20.39
21.00
11.60
18.74

Note: # Of the following calendar year. C - This amount includes intangible assets that cannot be identified.

The analysis and opinion set forth in this publication are provided by S&P Capital IQ Equity Research and are prepared separately from any other analytic activity of
Standard & Poors. In this regard, S&P Capital IQ Equity Research has no access to nonpublic information received by other units of Standard & Poors.
The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.

66

MEDIA: EUROPE / JANUARY 2014

INDUSTRY SURVEYS

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67