By Liam Proud
LONDON (Reuters Breakingviews) - The Daily Mail is finally succumbing to the media industry’s malaise. After years of defying gravity while rival publishers watched circulation and revenue crash, the right-wing tabloid’s parent company expects its media business to shrink next year. That complicates boss Paul Zwillenberg’s plan to show that Daily Mail and General Trust is more than a struggling publisher.
Full-year results for the financial year to the end of September, released on Thursday, were complex even for the sprawling DMGT, which spans newspapers, data providers, conference organisers and insurance risk management. The group chaired by major shareholder Jonathan Harmsworth, the Viscount Rothermere, reported a 112 million pound pre-tax loss after writing down the value of struggling data subsidiaries. It also flagged a higher future tax rate because of changes to how companies can use historic losses to offset current charges.
But the main culprit behind the 24 percent share-price fall which wiped out 600 million pounds of market value was the revelation that DMGT expects a “mid-single digit” decline in media revenues in the coming financial year. That unit, which includes the Daily Mail, Mail on Sunday and MailOnline website, saw revenue grow by 1 percent to 683 million pounds in the financial year to September – bringing in more than 40 percent of the group total.
The decline is modest compared to the likes of Trinity Mirror, which in October said third-quarter publishing revenue was down 9 percent from a year earlier. For DMGT investors, though, the new guidance is both mysterious and disconcerting. The tough newspaper-advertising market is hardly front-page news. But given that MailOnline is growing, the shrinkage in print ads would have to be unprecedentedly catastrophic to yield a division-wide decline. If the website known for its “sidebar of shame” continues to grow revenue by 20 percent, and smaller operations like Metro stagnated, revenue at the Daily Mail and Mail on Sunday would have to fall by 12 percent to produce an overall 5 percent drop. That’s possible but implausible, even though the group has no room to raise cover prices after hikes this year.
The logical conclusion is that MailOnline’s growth might also slow, just after it has finally become profitable. Throw in recent troubles for web publishers like Buzzfeed and Vice and it’s no wonder DMGT investors are feeling depressed.
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