Why will the financial crisis affect the media industry?

A preliminary study on the impact of the financial crisis on the media industry and countermeasures

October 23, 2008 11:02 People's Daily Online

The financial crisis caused by the U.S. substandard goods crisis The crisis is intensifying. The global financial market is extremely turbulent. The bankruptcy of several major financial institutions has spread to national bankruptcy. The US and global economic slowdown has not only affected the banking industry, real estate, and retail industries, but also gradually affected the cultural industry and information service industry. media industry. How has China's media industry been and will be affected? This is a major issue that industry insiders and media academics cannot ignore. We intend to briefly analyze this from the perspective of historical facts and logical relationships, with a view to providing constructive suggestions for the media industry to respond to the financial crisis.

1. The world’s media industry cannot escape the impact of the financial crisis

From the perspective of the development of the world’s media industry, Western developed countries led by the United States have an absolute advantage. The four major Western mainstream news agencies, Associated Press, United Press International, Reuters, and AFP, account for 4/5 of the world's news releases every day. Under the guidance of media industry giants such as Time Warner, Sony, and Disney, 50 Western media and entertainment companies occupy 95% of the media industry market in the world today. The current development level of the media industry in the United States exceeds that of any previous era. It is not only huge in scale, but also industry refined and globally expanded. At present, U.S. economic experts are unwilling to say which industrial sectors will be directly affected by the economic slowdown. However, everyone in the media industry knows that once the economic weakness continues for a long time, no industry will be immune to the recession. Some senior media industry analysts and investors in the United States believe that although American media companies and groups have different operational focuses, they will all be affected by the economic contraction to a greater or lesser extent.

Of all the media tycoons, CBS is feeling the pain of the economic slowdown the most because, compared with other film and television production peers, Columbia's profits mainly rely on advertising revenue. Analysts at Goldman Sachs say CBS is the least favored company among the entertainment and media industry sectors they focus on. Analysts at JPMorgan Chase & Co. predict that Columbia's broadcast business earnings are likely to fall 2% to 6% after the U.S. economic slowdown, while economic experts at Bernstein & Co. estimate that in the event of an economic downturn, Columbia's per-share share price may decline. Earnings could take a 20% hit.

In addition to CBS, financial analysts are not very optimistic about Disney's prospects. Some economic experts believe that Disney's stock price may shrink by 12.3% after the economic slowdown. The reason is that 21% of Disney's economic income comes from advertising revenue, and about 25% comes from theme park sales, and these two incomes can be expected at any time. Affected by fluctuations in tourism industry benefits. Analysts at Citi Investment recently rated Disney stock as "sell." Economic analysis experts also clearly see that Disney, like other media companies, has undergone a huge change in its business strategy, and it is no longer the same as the media companies during the previous economic depressions in the United States. Investigation and analysis by investment companies show that after the Great Depression in the United States in 1991, Disney's main business income has shifted away from theme parks. Rupert Murdoch, chairman and CEO of News Corporation, revealed that News Corporation no longer relies on a single market or a single media. It is News Corporation that acquired overseas MySpace, Sky Italy and TV broadcast systems in Eastern European countries. Evidence of expansion into countries with rapidly growing economies.

As one of the major media giants in the United States, Time Warner is not an outsider. Recently, Wall Street observers have been waiting to see what reform measures newly appointed CEO Jeffrey Buch will take to protect this recession-prone media tycoon. Time Warner has shifted its revenue focus away from television networks in recent years. Although people are not sure what impact the decline in advertising revenue will have on the digital industry, nor can they predict how many Internet users the subprime mortgage crisis will reduce, analysts still believe that the shift in business focus can withstand some Recession risk.

The situation of advertising in other media is generally not optimistic. Wachovia Securities released a report this month predicting that advertising expenditures on magazines will decrease by 2% in 2009, and advertising expenditures on newspapers will decrease by 9.8%, worsening from previous expectations. But John McCann, vice president of advertising sales at Fox Business Network, said some advertisers have no choice but to stay in the market. "For financial companies, those survivors must protect their market share. Being silent is not an option." But many advertisers may still choose to cut advertising investment. "Most (advertisers) will wait for the market to calm down before taking action," said Jim Spanfeller, president and CEO of Forbes.com.

On October 13, a spokesman for the Russian Union of Journalists said that the Russian media industry has been hardest hit by the economic crisis, and the amount of advertising is being reduced sharply. Igor Yakovenko, head of the Russian Union of Journalists and the Center for the Development of Media and Civil Society, said in an interview: “Through the advertising market, the media field was affected the fastest and was hit hardest.

Hundreds of companies, mainly in the advertising business, have gone bankrupt. "He said that even state-owned or public media will not be immune. In another 2-3 months, the changes in demand structure caused by inflation and the bankruptcy of a large number of companies will make these companies also experience the impact of settlement and retail Pressure.

According to the British "Financial Times" report, the latest survey shows that as companies around the world have reduced IT and advertising expenditures to cope with the impact of the subprime mortgage crisis, the global online advertising business has declined after five consecutive years. After rapid development, it may stop growing in 2008. It is also reported that due to the impact of the financial crisis, the overall expenditure of the British advertising market fell by 0.7% year-on-year, and the advertising expenditure of the US financial services industry fell by 27% year-on-year.

At present, Sony seems to be the most able to withstand the economic crisis among all media giants because it does not operate a TV network business. Economic experts analyze that Sony's entertainment industry has not yet been affected by the US economy, and its TV business is mainly focused on. Technology integration has little to do with the increase or decrease in the U.S. advertising industry. Even if there is an impact, it mainly comes from the electronics sector. Statistics from the business sector show that the U.S. retail industry fell by 0.6% in February, and sales of electronic products decreased by 0.2% this month. The sales volume of computer game hardware and software surged by 34%, which is undoubtedly a good thing for Sony's game business.

2. The complexity of the relationship between the financial crisis and the media industry

As far as history is concerned. Judging from the financial crises that have occurred in the past, defensive industries, such as media, computer equipment, retail, communication equipment, and pharmaceutical biology, are the least affected by the economic cycle downturn. However, various industries in the world are more closely connected. The impact on the media industry cannot be underestimated.

Whether it is a capitalist country such as the United States or a socialist country such as China, whether the media is the mouthpiece and mouthpiece of the ruling party, the operating model of the media industry is actually the same. Similar: Under market economy conditions, an industrialization model relies mainly on advertising revenue and is supplemented by other business methods. Therefore, once the financial crisis causes an economic downturn, enterprises will inevitably suffer losses, investment in media advertising will decrease, and the media industry will suffer accordingly. This is the most basic relationship between the two. Whether looking at the 1997 Asian financial crisis or the financial crisis caused by the US subprime mortgage crisis, there is such a chain, but it develops vertically over time, and the media in different regions are different. The degree and scope of the impact are different. The following is a comparison between the 1997 Asian financial crisis and this financial crisis:

The first is the difference in the impact of the 1997 financial crisis. Thailand swept across Southeast Asia and then affected the world. The countries that were hit hard were Thailand, South Korea and other countries involved. The financial crisis that year started in Asia and spread from Asia. In comparison, Western Europe, the United States and other countries were less affected. In the Asian circle, the financial crisis did not sweep across the world as quickly as this time. Correspondingly, the outbreak of the financial crisis on a smaller scale had a smaller impact on the media industry in the United States, Western Europe and other countries. The United States, the financial center of the world, has rapidly impacted Western countries and even the world in a short period of time. Western countries account for 95% of the global media industry market, and they, represented by the United States, have borne the brunt of this financial crisis. Therefore, it can be said that the entire media industry has been affected in a larger area and in a wider scope. Countries in Asia and other countries are still relatively little affected. Although this fast-moving financial crisis is spreading to the world, judging from the current situation, the impact on Asia and China is relatively small, and it is not even clear yet. On October 16, insiders of Enlight Media revealed that the financial crisis has not affected the company’s plan to list in A-shares. The company’s president Wang Changtian has recently frequently discussed private equity and listing matters with China Renaissance Capital. At the same time, Enlight has quietly implemented an annual salary system and option system. He believes that Ray's listing plan has not been affected by the financial crisis. What makes him even more gratified is that since the financial crisis, investors have not reduced their enthusiasm for light. To some extent, it has even exceeded his imagination. Of course, this may be their own optimism or speculation, or it may just be a phased phenomenon. Future development still needs to be carefully observed.

In addition, the impact of financial crises on the media industry varies in different periods. Several financial crises have had different impacts on the media industry. From a global perspective, due to the rapid development of the global media industry in recent years, related industries such as movies, games, and animation industries have developed greatly compared with previous years, and the media industry has expanded. Therefore, the financial crisis has affected The scope of the industry will also be relatively broader. Since the outbreak of the financial crisis, the responses of a series of media industries (including large media industries such as movies) have shown the wide scope of the crisis. Data released by the U.S. film-related statistical agency show that in the past two months, U.S. theaters The market has been in a freezing period, and the number one film on the North American box office list has not exceeded US$30 million, and has hovered around US$20 million most of the time. Two months ago, the top spot on the list was generally worth more than $50 million, and the gap was staggering. Hollywood will also face problems such as funding abortion, release delays, theater depression, and resurgence of strikes this time. In order to prevent "out of stock" in the future, some companies postpone the release of films that have already been filmed. "Harry Potter 6" was postponed from its originally scheduled release in November this year to next summer, and the new James Bond film "Quantum of Solace" was also postponed by a week.

The American media predicts that as the financial crisis continues to spread, such situations will emerge one after another. In addition, other media and entertainment industries have also responded. Goldman Sachs in the United States will reduce its holdings of entertainment company stocks by 10%. Standard & Poor's media and entertainment industry credit assessment experts said that the performance income of media companies in the next quarter will be the first to reflect the initial impact of the economic downturn.

Take China as an example. With the emergence of emerging media in recent years, cultural and creative industries related to media such as animation, games, film and television, and entertainment industries have developed vigorously. Therefore, the impact of this financial crisis on it must be greater than that of previous financial crises. In 1997, when the Internet had just emerged, traditional media occupied an absolute dominance in the media industry. In recent years, the output value scale, growth rate and composition structure of various industries within the media industry have undergone rapid changes. Compared with traditional media, the rapid growth of new media has brought new changes to the structure of China's media industry. The media industry is showing a strong industrialization development trend. The prototype of the media industry has been formed, and the rapid development of the media industry has driven or promoted the development of related industries. From the perspective of media capital, the process of market-oriented reform of China's media is significantly accelerating, and relevant national policies have also begun to loosen, from strict control to restrictive entry. In this way, global economic fluctuations and market changes will affect China's media industry faster and more directly than before. However, the current media industry has a stronger ability to resist risks and is more mature and rational. When the financial crisis occurred in 1997, the Internet had not yet emerged. Related companies were still in the exploratory stage of development models and were mostly burning money. Therefore, once a financial crisis occurred, everyone fled in a hurry. In addition, the capital market at that time Without a good understanding of the Chinese market, they would not make additional investments once problems arose, causing many companies that were developing towards industrialization to die midway. Although there is a financial crisis now, the media industry is more able to see the situation clearly, including some investors, so that companies that should have opportunities still have opportunities.

The media in different countries and regions are affected by the financial crisis in different ways. For example, the differences between Chinese and foreign media industries include different profit models. The proportion of advertising revenue of Chinese media in industry revenue is larger than that of Western media. The financial crisis directly affects the advertising industry, and in turn affects the media industry on which it depends for survival. With the outbreak of the financial crisis, corporate profitability has been affected, which will inevitably lead to companies reducing publicity funds and advertising expenditures. As a result, media revenue will also decrease after the advertising that the media relies on for survival is reduced. It will definitely affect all domestic media, large and small. Different media advertising structures will be affected to different extents in the financial crisis. As far as "Chengdu Commercial Daily" is concerned, more than 50% of its advertisements are real estate advertisements. The financial crisis caused by the subprime mortgage crisis has had the greatest impact on the real estate industry. Therefore, more than half of its advertisements like "Chengdu Commercial Daily" rely on real estate. The advertising media industry will be more affected than other media that rely on real estate advertising for a smaller proportion.

Different types of media have been affected differently by the financial crisis. The Internet, television, radio, newspapers, and magazine media are all affected differently. Data from the month after the outbreak of the financial crisis show that website click-through rates and TV ratings have increased, especially for major portal websites. Therefore, advertising revenue from online and TV media is not bleak. On the contrary, magazines with poor timeliness are facing serious advertising shrinkage.

Internet and TV: Since the Internet is the fastest and easiest way for people to obtain information today, the Internet can even display the event with pictures, text and sound at the same time as it occurs, and has the ability to be browsed repeatedly Its information preservation and in-depth reading are thematic, and its timely updating speed is unmatched by other media. Therefore, in order to obtain more updated news about the financial crisis as quickly as possible, people go to the Internet to become a common choice. Denise Warren, chief advertising officer of the New York Times Media Group, pointed out that the financial crisis in September caused a surge in visits to the New York Times website (NYTimes.com), and advertising growth was significantly higher than the above-mentioned level. "Because it is impossible to predict this part of the traffic , so we can't sell ads in advance," Dennis Warren said. The click-through rate of the financial information website Boursorama increased by 50%, reaching 1.05 million clicks on the 7th alone.

In addition to the Internet, television also has the advantage of communicating with both sound and picture. After the outbreak of the financial crisis, in addition to browsing the Internet, turning on the TV every day has become another quick way to learn about the latest news about the financial crisis. According to surveys, after the financial crisis broke out in September, the ratings of TV stations in various countries, especially news channels, generally increased. After the outbreak of the financial crisis, CNBC in the United States set a record for the highest ratings since 9/11. CNN's ratings were up 27%, while FOX's ratings were up 35%. In addition, another reason for the rising TV ratings is that the unemployment rate and rising oil prices caused by the financial crisis are keeping fans away from stadiums and concerts. More people, especially in European and American countries More people choose to watch TV at home or watch online.

Newspapers and magazines: some are happy and some are sad.

The financial crisis has boosted sales of financial magazines. A spokesman for The Economist magazine said that the magazine's retail sales increased by 20-25% compared with the same period last year. Its growth coincided with the outbreak of the financial crisis and readers' increased attention to financial news. related. The "Financial Times" owned by Pearson PLC increased its retail sales by 30% in the United States in October; the "Wall Street Journal" also increased its retail sales by 20% in several weeks. The "Wall Street Journal" website welcomed 24.5 million visitors in September. Readers set a single-month record, up 137% from the same period last year. Sales of French economic newspaper Les Echos increased by 21.5% year-on-year in September. According to the British "Independent" report, as the financial tsunami swept across the world, the world-renowned magazine "Playboy" was also severely affected and even faced the threat of bankruptcy. Recently, it has been widely rumored that Hefner may have to lay off employees to tide over the difficulties. Hearing the news, Hefner's stars jumped ship to protect themselves. This move undoubtedly adds insult to injury. The share price of the business empire built by Hefner recently plummeted from 6.2 pounds to 1.55 pounds, and the business was in red. According to 83-year-old Hugh Hefner, his stock has fallen by 70%, and there are rumors that he will be forced to lay off employees to survive the economic crisis. "Faced with the current unexpected economic climate, we felt it was necessary to create something that would make Wall Street smile," Gary Cole, senior vice president and director of photography for Playboy, said proudly. According to the requirements of Playboy, all women over 18 years old and living in the United States will have the opportunity to take nude photos as long as they can provide proof that they have worked or currently work on Wall Street and fill out relevant information. The "draft" campaign has already begun. According to Reuters, Playboy plans to launch a nude photo album featuring female Wall Street employees in February 2009. It can be seen from this that compared with the surge in ratings and reading volume of other media after the financial crisis, the situation of magazines is not promising, and some investors have even withdrawn their shares in previous magazines.

3. Analysis of the response situation and breakout strategies of the media industry

Faced with this sudden financial crisis, the development prospects of the media industry are cloudy. After the outbreak of the financial crisis, the media industry giants They also have to make some preparations for the economic recession and temporarily adjust the direction of industrial development. Major media groups around the world have successively taken measures to cautiously deal with this financial crisis. CBS CEO Leslie Movis said: "If the U.S. economic downturn, which obviously has already occurred, affects the radio and television businesses where we operate, we will take steps to intervene."

At the media summit held by McGraw-Hill Publishing Company, CBS CEO Leslie Movis began to prepare for the war and mobilize before the war. He explained to the participants that there are many ways and means for media companies to operate and change production. Colombian companies have reduced some operating project expenses, and some money-burning project funds have also been compressed. The company's management is capable of coping with the economic slowdown. .

How does China’s media industry respond to this financial crisis? This is a question that everyone should seriously consider. This crisis continues to develop. We still don’t know the extent of its impact, and there is great uncertainty about how it will develop. However, it is necessary to follow closely and conduct in-depth analysis to continuously adjust the pace of response. Based on past experience and combined with the current characteristics of the media industry, the following countermeasures are provided for reference by the media industry:

1. Make good content and stabilize and expand the market. The financial crisis has made people pay more attention to every disturbance in the market, giving the media an unprecedented opportunity to expand its audience base.

2. Reduce operating costs. Since the reduction of advertising affects media revenue, the media should work hard to reduce its own operating costs, save expenses, reduce costs, streamline personnel and organizations when necessary, and improve employee work efficiency.

3. Secondly, explore new revenue channels, develop new cultural products, and seek to break through. The media industry can expand into games, film and television and other fields, and develop related cultural and creative products and services.

4. By exploring other related industries, you can seize the opportunity to "buy the dip" in related industries. From a macro perspective, stimulating domestic demand is also an inevitable trend. Under the guidance of the government's macro policies, once domestic demand is expanded, market demand will amplify accordingly, and the media industry should carry out corresponding industrial strategic layout.

It remains to be seen how much damage the crisis will cause to the media industry and even the entire economy. The evaluation of the final destructiveness of the crisis has obviously exceeded the scope of economists' expectations. Its impact will not only be on the financial system and the economy, but will gradually appear over a long period of time. Therefore, the media industry must make longer-term preparations. to cope with this unknown storm. When the sea is changing, heroes will show their true qualities. Each media should take some targeted and selective response measures based on their different media characteristics, resource structures, and strategic needs to avoid risks, find opportunities, and achieve their own healthy development.