Madison and Wall: Saturday Summary

For the week ending June 9, 2023

Publishing: Is The Best Way To Make A Billion To Start With Two?

I calculate that publishers which maintain a print business saw ad revenue declines of around 12% during the first quarter of 2023 following on a 14% decline in 2022 in the United States.   Both figures include digital advertising activities. This isn’t about the economic cycle: it’s reflective of an ongoing shift of spending away from traditional publishers towards platforms, and a shift of spending away from content and towards audiences.  Publishers need to build out their subscription businesses as much as they can and invest against ancillary businesses as well, because the advertising business won’t likely ever come back.

While I wrote about publishing in a broad sense, I noted there was a lot of overlap between the issues and opportunities that publishers face and those which TV news networks face.   This is particularly relevant for CNN, now leaderless as of this past weak, and operating as a subsidiary of a division with a very limited appetite for investment.   At least publishers have opportunities to sell directly to consumers, and so have some opportunity to focus on subscription revenue rather than advertising revenue.   CNN won’t have that luxury any time soon, and so is going to be subjected to the ongoing declines in pay TV subscriptions and a weak market for TV advertising.  There is hope for CNN as there is for news-focused publishers, but it will require more financial flexibility and access to capital than they are likely to see within Warner Bros. Discovery.

Do Ad Budgets Correlate With Marketer Profit Margins? Not Really

I’ve been developing a data set of hundreds of marketers and this past week wanted to see whether or not profit margins are correlated with advertising expenses.  In short, they aren’t, although it doesn’t mean that profit expectations don’t maintain a role for at least some brands.  However, it does serve to remind everyone that qualitative factors are probably just as if not more important in causing marketer budgets to increase or decrease in any given year, with an underlying trajectory that is undoubtedly informed by the broadly-defined health of a given category.