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Industry Surveys Publishing & Advertising Joseph Agnese, Publishing & Advertising Analyst May 27, 2010

Current Environment ............................................................................................ 1 Industry Profile .................................................................................................... 10 Industry Trends ................................................................................................... 13 How the Industry Operates ............................................................................... 21 Key Industry Ratios and Statistics................................................................... 30 How to Analyze a Publishing or Advertising Company................................ 32 Industry References........................................................................................... 38 Comparative Company Analysis ......................................................... Appendix

CONTACTS: INQUIRIES & CLIENT RELATIONS 800.852.1641 clientrelations@ standardandpoors.com MEDIA Michael Privitera 212.438.6679 michael_privitera@ standardandpoors.com REPLACEMENT COPIES 800.852.1641 Standard & Poor’s Equity Research Services 55 Water Street New York, NY 10041

This issue updates the one dated October 22, 2009. The next update of this Survey is scheduled for November 2010.


Topics Covered by Industry Surveys Aerospace & Defense

Environmental & Waste Management

Natural Gas Distribution

Airlines

Financial Services: Diversified

Oil & Gas: Equipment & Services

Alcoholic Beverages & Tobacco

Foods & Nonalcoholic Beverages Healthcare: Facilities

Oil & Gas: Production & Marketing

Healthcare: Managed Care

Pharmaceuticals

Healthcare: Products & Supplies Heavy Equipment & Trucks

Publishing & Advertising Real Estate Investment Trusts

Broadcasting, Cable & Satellite

Homebuilding Household Durables

Restaurants Retailing: General

Chemicals

Household Nondurables

Retailing: Specialty

Communications Equipment Computers: Commercial Services

Industrial Machinery Insurance: Life & Health

Savings & Loans Semiconductor Equipment

Computers: Consumer Services & the Internet Computers: Hardware

Insurance: Property-Casualty

Semiconductors

Investment Services Lodging & Gaming

Supermarkets & Drugstores

Metals: Industrial Movies & Entertainment

Telecommunications: Wireline

Airlines

Food Retail

Pharmaceuticals

Autos & Auto Parts

Foods & Beverages

Telecommunications

Banking

Media

Tobacco

Apparel & Footwear: Retailers & Brands Autos & Auto Parts Banking Biotechnology

Computers: Software Computers: Storage & Peripherals Electric Utilities

Paper & Forest Products

Telecommunications: Wireless Transportation: Commercial

Global Industry Surveys

Oil & Gas

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C LIENT S UPPORT : 1-800-523-4534. ISSN 0196-4666. USPS N O . 517-780. V ISIT THE S TANDARD & P OOR ’ S W EBSITE : http://www.standardandpoors.com STANDARD & POOR’S INDUSTRY SURVEYS (ISSN 0196-4666) is published weekly. Annual subscription: $10,500. Please call for special pricing: 1-800-852-1641, option 2. Reproduction in whole or in part (including inputting into a computer) prohibited except by permission of Standard & Poor’s. Executive and Editorial Office: Standard & Poor’s, 55 Water Street, New York, NY 10041. Officers of The McGraw-Hill Companies, Inc.: Harold McGraw III, Chairman, President, and Chief Executive Officer; Kenneth M. Vittor, Executive Vice President and General Counsel; Robert J. Bahash, Executive Vice President and Chief Financial Officer; John Weisenseel, Senior Vice President, Treasury Operations. Periodicals postage paid at New York, NY 10004 and additional mailing offices. Postmaster: Send address changes to Standard & Poor’s, Industry Surveys, Attn: Mail Prep, 55 Water Street, New York, NY 10041. Information has been obtained by Standard & Poor’s INDUSTRY SURVEYS from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, INDUSTRY SURVEYS, or others, INDUSTRY SURVEYS does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Copyright © 2010 Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. STANDARD & POOR’S, S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC. S&P MIDCAP 400 and S&P SMALLCAP 600 are trademarks of Standard & Poor’s Financial Services LLC.


CURRENT ENVIRONMENT Electronic readers offer opportunity as advertising market fragments The Internet is presenting consumers with an unprecedented number of alternatives to traditional print media. Through the use of both mobile devices (such as cell phones and BlackBerrys) and social networking sites, consumers are being increasingly exposed to nearly instantaneous sources of news in custom formats. This fragmentation of media markets has resulted in increased pressure on print circulation volumes and advertising rates. Additionally, with strong growth of available consumer options expected to continue, print publications are shrinking as publishers look to monetize content creation online. We expect the availability of new, portable electronic devices to further encourage consumers to move away from traditional print platforms, and toward viewing material on digital screens. The electronic reader (ereader) market is one such market expected to expand rapidly. Forrester Research, a technology research company, estimates that 10 million e-readers will be sold by the end of 2010. Growth and acceptance of electronic readers have presented both opportunities and threats to print publishers. Publishers hope the ease with which print can be published and read on wireless reading devices will lead to an increase in consumption, boost reach, and grow revenues. Additionally, growth of electronic markets is leading to a significant reduction in costs for print publishers. Operating benefits are achieved through a reduction in inventory carrying risk, lower distribution costs, and decreased raw material costs (less paper). Publishers desire a healthy competitive environment within the e-reader market. If a single device maker were to consolidate a majority of the market, publishers could face a significant threat as they might eventually be forced to decide between lower prices or losing access to its market—an outcome likely to result in increased pricing pressure. Although the e-reader market remains relatively new, Amazon.com’s Kindle reading device took an early, but significant, market share lead in 2009. Apple Inc. (iPad), Sony Corp. (electronic reader), Barnes & Noble Inc. (Nook), and Google Inc., among others, have also entered the market for electronic readers. Following iPad’s release, publishers prepare for significant growth of e-reader market Apple began selling its iPad electronic reader in April 2010. The iPad reader offers color and both audio and video capabilities, unlike Amazon’s Kindle. Additionally, the iPad offers improved accessibility, with 125 million customers already comfortable using Apple i-Tune accounts. Standard & Poor’s estimates the company will sell four million iPad units in 2010 and an additional six million units in 2011, quickly expanding the e-reader market. With expectations for significant growth in the e-reader market, newspaper and magazine publishers are hoping its popularity will help them monetize online content offerings. Publishers are working to establish a convenient and superior reading experience in an effort to entice readers to purchase content through the devices. Audio and visual capability may enable publishers to charge customers for added features such as embedded video or music. While not all newspapers are available on the iPad, the newspaper industry is working on a project that would enable Apple to offer content from multiple newspaper sources, to be available in 2010.

BOOK PUBLISHERS STRIVE TO RETAIN PRICING POWER Book publishers are looking for competition within the market to help them retain pricing power. As a result, most of the largest book publishers have quickly signed agreements with Apple to offer books through its new iPad electronic reader. As of April 2010, five of the six largest book publishers had agreed to provide digital content to the iPad: Hachette Book Group (a division of Hachette Livre), HarperCollins Publishers Inc. (News Corp.), Macmillan Publishers Ltd. (privately owned), the Penguin Group (Pearson INDUSTRY SURVEYS

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plc), and Simon & Schuster Inc. (CBS Corp.). Random House Inc. (a division of Bertelsmann AG), the largest book publisher, had not agreed to provide digital content for the iPad as of that date. Under agreements with Apple, publishers will be able to charge consumers between $12.99 and $14.99 for most digital general fiction and nonfiction books, with Apple receiving 30% of the sales price and publishers taking 70%. This is based on an “agency model”—the concept that the publisher sets the price and sells directly to the consumer, while the retailer gets a commission from each sale. Initially, Amazon had been using a “wholesale model” with publishers for digital book sales. While publishers were to receive higher wholesale payments (in line with what booksellers typically pay for print editions) under Amazon’s original deal than under PUBLISHERS' NET BOOK SALES* the iPad arrangement, Amazon controlled the final (In millions of dollars) selling price of the books it sold. Under this 2007 2008 F2009 F2010 arrangement, Amazon had set a price of $9.99 on Trade, total 15,048 14,734 14,812 15,135 digital titles for its Kindle, taking a loss on the Adult trade, total Table B05: 11,392 11,125 11,214 11,483 difference between the wholesale and the retail Juvenile, total 3,657 3,609 3,598 3,652 PUBLISHERS’ price. The company planned to use the attractive Religious, total 2,575 2,318 2,225 2,296 NET BOOK sales prices to entice consumers to purchase its Professional, total 8,358 8,696 8,961 9,116 SALES* Scholarly 1,375 1,428 1,446 1,470 Kindle e-reader, essentially subsidizing losses on El-hi texts & materials 7,056 7,373 7,606 7,827 books with profits from e-reader sales. Higher education 5,524 5,772 TOTAL NET SALES 39,936 40,321 F-Forecast. Source: Book Industry Study Group.

5,990 41,040

6,184 42,028

While Amazon’s agreement is more likely to result in greater growth in volumes sold initially (due to more aggressive retail pricing), publishers were concerned that if Amazon gained significant market power, it would eventually push for (and receive) lower wholesale pricing. Meanwhile, publishers feared the lower sales prices were weakening pricing power of physical books, which account for the vast majority of current sales and sell at significantly higher prices than digital books. Therefore, publishers welcomed the arrival of Apple and its competing product as it allowed them to gain greater leverage in future pricing negotiations with Amazon. Following the launch of Apple’s iPad, Amazon was forced to re-negotiate with book publishers due to the risk they might withhold books.

SECULAR FORCES PRESSURING PUBLISHERS The secular fragmentation of advertising markets and the growth of digital media pose a significant risk to newspaper publishers. As consumers’ behavior shifts to the utilization of multiple news formats, advertisers continue to diversify spending by allocating greater portions of their spending budgets away from print publications. Advertising revenue is generally based on audience levels and demographics, price, service, and advertising results. In 2009, advertising competition intensified on the continued development and fragmentation of digital media, and an unfavorable economic environment. Rising competition from the development of alternative media sources negatively affected newspapers’ ability to attract and retain advertisers and consumers and to maintain or increase advertising rates. Other factors that have negatively impacted advertising revenue include weak consumer and business spending, high unemployment, declining home sales, and other challenges affecting the economy. In order to better compete, newspapers are seeking to maintain and improve their reputations while differentiating themselves by offering quality journalism and content. While timeliness is very important to consumers and is what drives electronic demand for news, newspapers continue to seek to differentiate by investing time in more detailed analysis of news events. Advertising contraction eases in fourth quarter According to statistics compiled by the Newspaper Advertising Association (NAA), a trade group, total newspaper advertising revenues (including print and online) dropped 27.2% in 2009, compared to a 16.6% drop in 2008. While annual contraction in advertising for newspapers accelerated in 2009, quarterly 2

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advertising performance improved in the fourth quarter of 2009, potentially signaling that the worst of the current cyclical downturn has passed. NEWSPAPER ADVERTISING EXPENDITURES ------------------- EXPENDITURES (MIL.$) ------------------- -------------- YEAR-TO-YEAR % CHANGE -------------YEAR NATIONAL RETAIL CLASSIFIED ONLINE TOTAL NATIONAL RETAIL CLASSIFIED ONLINE TOTAL

Table B12:

2009 4,424 14,218 6,179 2,743 2008 5,996 18,769 NEWSPAPER 9,975 3,109 2007 7,005 21,018 ADVERTISING 14,186 3,166 2006 7,505 22,121 EXPENDITURES 16,986 2,664 2005 7,910 22,187 17,312 2,027 2004 8,083 22,012 16,608 1,541 2003 7,797 21,341 15,801 1,216 2002 7,210 20,994 15,898 … 2001 7,004 20,679 16,622 … 2000 7,653 21,409 19,608 … 1999 6,732 20,907 18,650 … Source: Newspaper Association of America.

27,564 37,848 45,375 49,275 49,436 48,244 46,155 44,102 44,305 48,670 46,289

(26.2) (14.4) (6.7) (5.1) (2.1) 3.7 8.1 2.9 (8.5) 13.7 17.7

(24.2) (10.7) (5.0) (0.3) 0.8 3.1 1.7 1.5 (3.4) 2.4 2.8

(38.1) (29.7) (16.5) (1.9) 4.2 5.1 (0.6) (4.4) (15.2) 5.1 4.3

(11.8) (1.8) 18.8 31.4 31.5 26.7 … … … … …

(27.2) (16.6) (7.9) (0.3) 2.5 4.5 4.7 (0.5) (9.0) 5.1 5.4

Cyclical pressures easing, but still a factor in 2010 Overall, advertising revenues for newspapers (print and online) declined 23.7% in the fourth quarter of 2009, compared to a 27.9% decline in the third quarter. Standard & Poor’s believes the improvement likely reflects rising client advertising budgets in the face of easing cyclical pressures, as GDP growth increased 6.3% in the fourth quarter versus a 1.3% contraction for all of 2009. While Standard & Poor’s believes the unemployment rate likely peaked in the fourth quarter of 2009 at 10%, unemployment is expected to remain at high levels through 2010 (9.8% for full-year 2010, according to Standard & Poor’s). Due to significant ongoing secular pressures, classified contraction continues to lead the declines in advertising, with revenues, year over year, down 31.7% in the fourth quarter and 38.1% for all of 2009. By category, auto classifieds fell 37.0% (41.5% in 2009) in the fourth quarter, real estate ads declined 44.1% (44.6%), recruitment ads were off 55.7% (64.0%), and other classified advertising declined 8.0% (10.9%). Retail and national advertising also dropped, falling 24.3% in the fourth quarter (24.2% in full-year 2009) and 19.8% (26.2%), respectively. Online revenues declined only 1.0% (11.8%). While still contracting, the rate of decline represents an improving trend in almost all categories from even sharper slowdowns in the third quarter. Below, we note major factors that we expect to influence near-term publishing advertising for the various segments.  Retail. Major problems include ongoing housing market weakness, which we expect will continue to hurt department store and home-related advertising.  Classifieds. We expect continued softness in automotive, real estate, and recruitment advertising. Real estate prices remain weak and unemployment is expected to stay at high levels throughout 2010. As a result of these factors, all three classified ad categories are likely to continue to remain weak, in our opinion. While auto classifieds are expected to be weak versus historical levels, comparisons should be easier, which may aid the trend in 2010. Classified advertising is the category hardest hit by the continued secular shift of advertising to the Internet.  National. We expect a moderation in declines in this category during 2010. Discretionary spending budgets are expected to improve across large corporations in a more stable credit market environment. With auto companies on improved financial footing following the bankruptcies of General Motors Corp. and Chrysler Corp., we expect this ad category to benefit from an increase in advertising from large automakers.  Online. We expect companies to continue to generate a greater proportion of their revenues online, helping leverage their cost structures and thus increase the likelihood of profitability. In our view, companies that are ahead of peers in transforming to digital content (such as the New York Times Co., with INDUSTRY SURVEYS

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13.8% of revenues from the Internet in 2009) are likely to be ahead of pure-play newspapers in generating earnings per share (EPS) growth in this beaten-down sector. While the trend appears to have improved in the fourth quarter of 2009, we note that contraction is still occurring. In fact, media services provider ZenithOptimedia forecasts that US major media (newspapers, magazines, television, radio, cinema, outdoor, Internet) will experience a 2.0% decline in advertising in 2010. By medium, newspapers are expected to contract 3.8% and magazines 4.4%, while the Internet is forecast to grow 12.9%. As a share of total advertising spending in 2010, newspapers’ share is expected to decline to 21.7% from 23.1% in 2009, magazines to fall to 9.6% from 10.3%, while the Internet expands to 13.9% from 12.6%. TOP 15 CATEGORIES BY AD SPENDING—2008 (Ranked by total US print ad spending, in millions of dollars)

CATEGORY

1. Retail 2. Automotive Table B03: 3. General services TOP 15 4. Media CATEGORI 5. Financial services ES BY AD 6. Airlines, hotels, car rental, travel SPENDING 7. Medicine & remedies 8. Personal care 9. Food, beverages & candy 10. Telecommunications, Internet service 11. Apparel 12. Real estate 13. Movies, recorded video & music 14. Home furnishings & appliances 15. Government, politics, religion Source: Advertising Age.

------------------- PRINT AD SPENDING (MIL.$) -------------------- TOTAL AD SPENDING TOTAL PRINT % CHG. FROM TOTAL AS % OF TOTAL MAGAZINES NEWSPAPERS PRINT AD SPENDING MIL.$ PREV. YR.

2,348 1,739 987 1,857 1,133 1,514 2,466 2,578 2,411 821 2,168 244 240 831 361

5,719 3,529 2,437 1,311 1,899 1,199 215 19 79 1,554 131 1,010 886 99 518

8,068 5,268 3,424 3,168 3,031 2,713 2,681 2,597 2,491 2,375 2,299 1,254 1,126 929 879

47.0 33.7 40.1 67.1 31.4 52.4 30.9 43.1 31.8 23.5 79.7 66.5 22.0 53.5 25.0

17,160 15,609 8,547 4,722 9,664 5,174 8,687 6,029 7,820 10,101 2,885 1,885 5,110 1,738 3,510

(6.0) (15.0) (0.1) (6.8) (0.3) (2.7) (6.5) (3.5) 2.4 (5.2) (2.1) (28.7) (3.2) (15.5) 46.8

SUPREME COURT CAMPAIGN FINANCE RULING EXPECTED TO BENEFIT AD SPENDING The Supreme Court ruled in January 2010 that money spent by corporations and unions on supporting or opposing candidates could not be restricted. The same ruling also reversed the McCain-Feingold law that kept corporations and unions from running ads within a certain date before elections. As a result, Standard & Poor’s Equity Research believes the easing of restrictions on corporate political spending will have favorable implications on future political advertising spending, likely as early as the US mid-term elections as well as future presidential elections. Borrell Associates Inc., a research and consulting firm, estimates that $4.2 billion will be spent on political advertising in 2010, up from $2.8 billion in 2008. Borrell believes that a significant portion of such advertising will be local, and most of it centered on issues, not candidates. Hot states for 2010 spending will be Massachusetts, Kentucky, Pennsylvania, Colorado, and others where issues and races may pressure publicity machines to open wallets. The company expects newspapers to get about 8% of the total spending and to be best positioned to capture dollars from local and state political candidates. Publishers’ political revenues tend to benefit when there are a number of issues to vote on or when there are more close races, because efforts to influence those elections often mean increased spending. Craig Dubow, CEO of Gannett Co., told investors in February 2010 to expect increased political ad revenue to boost its results in the second half of 2010. However, the long-term outlook is less clear, as the potential exists for counter legislation from Washington.

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NEWSPAPERS: CIRCULATION REMAINS WEAK Since 1990, newspaper circulation has been in a steady decline. In recent years, the pace of industry outflow has accelerated, particularly among the top 25 metropolitan-area newspapers. According to the Audit Bureau of Circulations, newspaper circulation volumes declined 8.7%, year over year, for the six months that ended March 31, 2010. The negative circulation volume trend reflects adverse cyclical and secular factors. Secular factors include intense competition for readership due to the development of new media formats (e.g., mobile devices) and from other free nontraditional print competition (such as broadcast TV and radio). As a result, more people are choosing to receive part or all of their news content from sources other than newspaper publications. Cyclical factors are also playing a role in a negative circulation volume trend. Due to an adverse economic environment, consumers’ personal consumption expenditures fell 0.6% in 2009 and are expected to rise only 2.2% in 2010. While unemployment likely peaked in the fourth quarter of 2009 at 10%, Standard & Poor’s projects only a slight decline in the unemployment rate in 2010 to 9.8%. In the six months ended March 2010, only one of the top 25 newspapers experienced a rise in circulation. Circulation rose 0.5% at News Corp’s Wall Street Journal. Those newspapers with the biggest loses included the San Francisco Chronicle (–23.0%), USA Today (–13.6%), the Washington Post (–13.1%), and the New York Times (–8.5%). Newspapers experimenting with paid models Print publishers face a delicate balancing act within their online businesses in trying to maximize both reach and advertising revenues. Expected significant expansion of alternative advertising markets (through mobile devices) pose a significant threat to the future of print publications. As such, print publishers are looking to develop paid online business models in an effort to be rewarded for content they produce. Some media conglomerates are subsidizing print business losses with profits made in competing media formats. Sites that target niche markets with specialized content for which competition is limited have experienced success within a paid-content model. One example is the Wall Street Journal, which charges a fee to access analytical content. However, for non-specialized news sites, which may provide redundant general news content, risks are high, as competition from free news sources is intense. In an American Press Institute poll of 118 newspapers across the US, half of respondents planned to charge for content by the beginning of summer 2010. Rupert Murdoch, the CEO of News Corp. (owner of the Wall Street Journal, the New York Post, the London Times, and other newspapers around the world) announced the company would begin charging for online content for all of its websites by July 2010. MediaNews Group Inc. (publisher of the Denver Post, the Detroit News, and 52 other daily newspapers) began to use a metered model at its newspapers in May 2010. Although the company has not released a timetable, its plans include no longer reproducing all printed content online, gearing online content to a younger demographic, and charging a fee to those who are not subscribers to its print edition. In October 2009, Cablevision Systems Corp. (owner of Newsday) began implementing a paid model for online access to Newsday.com, while offering online access at no charge to existing newspaper customers, or users of its television, Internet, and phone businesses. The company is utilizing its print offering as a form of differentiation from competitors. The New York Times Co. announced in January 2010 that it would introduce a paid model for NYTimes.com at the beginning of 2011, with the intention to create a second revenue stream while preserving NYTimes.com’s advertising business. Companies that adopt a paid online model risk declining traffic levels, which would likely hurt the advertiser base and advertising rates and result in an overall decline in online revenues. Other top newspapers, including the Boston Globe and the New York Daily News, suggested in August 2009 that they would consider fee-based online access. In fact, 58% of companies in the American Press Institute poll say they are considering charging for content. However, a newspaper instituting a “paid wall” to access online content, while competition remained free, would likely experience a significant drop in INDUSTRY SURVEYS

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online views and the resulting ability to collect ad dollars from advertisers. Standard & Poor’s believes a more successful model for non-niche–serving sites would likely involve a consortium of publishers charging for news distributed online, as was also suggested by News Corp. executives in August 2009. Publishers are cautiously examining the possibilities of instituting differing kinds of accessibility to their websites’ content. Fee-based considerations include monthly charges for access, daily passes, and micropayments (fees to access individual articles, which is geared mostly to search-directed site visits), as well as a mixture of free and fee-based access. Federal Trade Commission may offer support to news organizations The FTC is studying whether to aid struggling news organizations. Support may be in the form of regulatory changes, such as exempting news gathering companies from antitrust laws, and changing rules that prevent a company from owning newspapers and TV stations in a single market. Other potential forms of support include an extension of subsidies to commercial news organizations, granting them special tax treatment or an exemption from antitrust regulations. Risks posed by news aggregation websites that divert traffic from newspaper web sites Increased popularity of news aggregation sites—where news headlines are collected—is creating both opportunities and threats for newspaper publishers. Opportunities to benefit from aggregators stem from the increased traffic driven from aggregator sites where only news headlines are presented. Examples of news aggregator sites that help drive traffic to newspaper sites include Google, Yahoo Inc., and MSN (Microsoft Corp.’s portal). Such aggregator sites could help generate interest in the news and lead to increased readership of newspapers’ websites. News aggregation sites that provide both a link through headlines and a summary of the news story pose a threat to newspapers. Publishers believe such sites not only drive less traffic to newspaper sites, but also depress traffic (and advertising dollars) as readers no longer feel a need to visit newspaper sites directly for news information. One site that provides news headlines and summaries is Google News. Additionally, publishers are concerned that news aggregation sites are using newspaper content for free and reaping the benefit from ad dollars. In an attempt to appease publishers, Google announced in December 2009 that it would let publishers set a daily limit on the number of articles readers can view for free through Google’s search engine. Publishers can limit users to five free articles per day. However, some believe the limit will have a negligible impact as consumers cast a wide net in search of targeted news interests and thus can avoid the limitation. Major newspaper publishers with valuable brands who participate in news aggregation sites also risk weakening their brand strength. Participation in such sites can commoditize their product offerings by making their site simply one more in a list of many sites with similar stories.

MAGAZINES: INDUSTRY FACES TOUGH TIMES In the first quarter of 2010, the number of ad pages in consumer magazines fell about 9.4%, according to the Publishers Information Bureau (PIB), a compiler of industry data. This followed a 25.6% decline in fullyear 2009. Based on rate cards (posted prices that are often discounted), ad sales for consumer magazines dropped 3.9% in 2010’s first quarter on a year-over-year basis. Magazines experienced ad revenue and page growth in three of 12 major advertising categories in the first quarter of 2010, aided by easier comparisons. The three categories were automotive; financial, insurance, and real estate; and toiletries and cosmetics. Auto gains were driven by a healthier auto industry in Detroit, following the negative impact from the bankruptcy of General Motors and Chrysler in 2009. Increased spending on recession-resistant segments of cosmetics, personal hygiene, and hair products helped the toiletries category. Improvement in credit cards and banking contributed to the growth in financial.

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In the year ahead, we expect the rate of decline for consumer magazine advertising to moderate. Modest growth may possibly resume by the end of the year, as year-over-year comparisons will be easier and the economic environment should improve. MAGAZINE AD PAGE LEADERS (Ranked by total 2009 ad pages)

MAGAZINE

--------- TOTAL AD PAGES --------- --- TOTAL AD SPENDING (MIL.$)† --3 MOS. 3 MOS. 2010 2008 2009 % CHG. 2010 2008 2009% CHG.

1. People Weekly 3,422 3,367 (1.6) 813 899.4 933.1 3.8 229.9 2. Flex 2,508 2,591 3.3 554 33.6 35.7 6.3 8.0 3. New York Magazine 3,133 2,332 (25.6) 495 219.2 169.8 (22.5) 40.8 4. In Style 2,749 2,312 (15.9) 515 363.5 326.4 (10.2) 75.3 5. Bride's 2,592 2,109 (18.6) 820 192.8 166.9 (13.5) 66.0 6. Elle 2,623 2,083 (20.6) 453 325.5 273.8 (15.9) 60.2 7. New York Times Magazine* 3,379 2,067 (38.8) 461 395.0 241.5 (38.9) 54.0 8. Muscle & Fitness 1,930 1,989 3.1 406 96.2 101.8 5.9 22.0 Table2,890 B11: 1,989 (31.2) 9. Vogue 560 395.8 289.1 (26.9) 83.0 MAGAZINE 10. The Economist 2,468 1,971 (20.2) 467 131.5 114.7 (12.8) 28.3 AD PAGE 11. Forbes 2,774 1,937 (30.2) 342 337.9 251.5 (25.6) 46.9 LEADERS 12. Family Circle 1,560 1,739 11.5 331 375.5 442.7 17.9 86.3 13. Better Homes & Gardens 1,689 1,725 2.1 357 753.4 811.8 7.8 172.8 14. US Weekly 1,794 1,712 (4.6) 364 308.8 310.7 0.6 70.9 15. Texas Monthly 2,015 1,642 (18.5) 278 77.4 62.6 (19.1) 10.6 16. Sports Illustrated 1,902 1,596 (16.1) 367 642.6 560.4 (12.8) 134.7 17. Bridal Guide 1,931 1,544 (20.0) 597 76.4 62.9 (17.6) 25.3 18. Fortune 2,383 1,524 (36.0) 266 276.6 182.9 (33.9) 33.6 19. Harper's Bazaar 2,066 1,523 (26.3) 418 220.4 171.4 (22.2) 49.1 20. Woman's Day 1,561 1,514 (3.0) 347 387.8 398.0 2.6 93.6 21. Glamour 1,831 1,508 (17.7) 277 333.7 289.5 (13.2) 54.4 22. Modern Bride 1,940 1,504 (22.5) 0 145.1 118.4 (18.4) 0.0 23. Time 1,752 1,447 (17.4) 278 466.3 404.1 (13.3) 82.7 24. Real Simple 1,702 1,442 (15.2) 288 262.1 237.1 (9.6) 48.5 25. Good Housekeeping 1,618 1,439 (11.1) 336 538.3 508.2 (5.6) 117.0 †Based on rate cards, whose prices may exceed what advertisers actually paid. May exclude Internet advertising. *Sunday magazine. Source: Magazine Publishers of America.

ADVERTISING: SPENDING TO REMAIN IN DECLINE IN 2010 Spending on measured media in North America (of which about 96% is from the US and the remainder from Canada) fell 12.7% to $156.9 billion in 2009, according to ZenithOptimedia. (The measured media category includes television, radio, press, cinema, outdoor, and Internet; it excludes direct mail, promotions, and other categories.) Despite the 2010 Winter Olympics in Vancouver, Canada, and the mid-term US elections, this forecasting group projects that ad spending will fall by 1.5% to $154.5 billion in 2010, marking the third consecutive year of declines. North America is expected to join the rest of the world in an industry recovery by 2011, when a 1.8% increase in ad spending to $157.3 billion is projected. Globally, ZenithOptimedia sees growth of 2.2% in advertising in 2010, following a 9.8% contraction in 2009. Internet advertising is expected to lead the way, rising 12.9% (versus an 8.8% gain in 2009), for an overall advertising market share of 13.9% (up from 12.6% in 2009). Television advertising, with its 40.3% projected market share (up from 39.4% in 2009), is expected to rise 4.4% (versus a 6.7% decline in 2009) to $181.0 billion.

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Rounding out the forecaster’s estimates, newspapers’ share of advertising is expected to dip to 21.7% in 2010 (from 23.1% in 2009), with spending down 3.8% (versus a decline of 17.0% in 2009). Magazines’ share is projected at 9.6% (down from 10.3% in 2009), with ad spending increasing 4.4% (–19.6%), while radio’s share is projected at 7.5% (changed only slightly from 7.7% a year earlier), with ad spending down only 0.5% (–10.4%). Outdoor share is projected at 6.5% (in line with 2009), with an ad spending growth of 1.7% (–11.2%); cinema’s share is projected to be stable at 0.5%, though with a rise in spending of 3.1% (–6.2%). ZenithOptimedia projects global advertising growth of about 13.9% to $449.3 billion in 2010, led by a 12.9% advance in Internet advertising. Real US GDP fell 2.4% in 2009, though growth of 2.2% and 5.6% was experienced in the third and fourth quarters, respectively. As of April 2010, Standard & Poor’s was projecting real GDP to grow 3.0% in 2010 and 2.9% in 2011. Unemployment likely peaked in the fourth quarter of 2009 at 10%. However, Standard & Poor’s expects unemployment to remain at high levels throughout 2010. Given that wages have also been stagnant and that US consumers are exhibiting a newfound parsimony, we think consumer spending may be adjusting to a “new normal.” Moreover, the dramatic remaking of vast swathes of the US economy during this recession has likely resulted in a new equation: not only how much businesses spend on advertising, but also where they spend the remaining dollars allocated to advertising. Internet ad spending share continues to advance In recent years, online spending has been the fastest growing of all direct marketing channels, driven largely by advertisers’ desire to tap the rapid growth of the online retail market. However, in 2009, US Internet advertising revenues were down 3.4% from the yearTOP 10 ADVERTISERS, BY MEDIUM ago period, according to a report from the Interactive (Ranked by 2008 ad spending) Advertising Bureau (IAB), a trade association, and TOTAL AD SPENDING (MIL.$) PricewaterhouseCoopers LLP. Standard & Poor’s COMPANY 2007 2008 % CHG.* expects that softness in Internet advertising was due MAGAZINES largely to weak economic conditions. Recovery began 1. Procter & Gamble Co. 948.5 956.2 0.8 in the third quarter of 2009, with revenues growing Table B09:374.5 2. General Motors Corp. 447.5 19.5 2.6%, year-over-year. Among various media TOP 10 468.2 3. Kraft Foods 401.6 (14.2) advertising categories (e.g., newspapers, ADVERTISE 4. Johnson & Johnson 405.1 399.6 (1.4) broadcasting), Standard & Poor’s thinks that the 5. L'Oreal 330.8 324.3 (2.0) RS, BY Internet still gained significant market share in ad 6. Walmart Stores MEDIUM 115.2 266.1 131.1 spending during 2009. 7. Campbell Soup 197.6 234.1 18.5 8. GlaxoSmithKline 9. Time Warner 10. Unilever

369.8 278.2 275.0

231.7 230.2 218.4

(37.4) (17.2) (20.6)

723.9 609.7 145.9 328.3 229.3 270.7 170.2 201.3 207.2 197.8

681.9 583.3 320.9 288.6 205.0 204.2 197.9 191.2 187.1 171.0

(5.8) (4.3) 120.0 (12.1) (10.6) (24.6) 16.3 (5.0) (9.7) (13.6)

NEWSPAPERS

1. Verizon Communications 2. Macy's 3. General Motors Corp. 4. AT&T 5. Fry's Electronics 6. Time Warner 7. News Corp. 8. Sears Holdings Corp. 9. Procter & Gamble Co. 10. General Electric Co. *Based on unrounded data. Source: Advertising Age.

Internet ad revenues in the US declined 3.4% to $22.7 billion in 2009, from $23.5 billion in 2008, according to the IAB. The largest portion of online advertising was from keyword search, which garnered a 47% share of Internet advertising in 2009, at $10.7 billion, up 1.4% from 2008. Display advertising had a 35% share and grew nearly 4.3% in 2009, including digital video advertising sales of about $1.0 billion, up 63% from $734 million in 2008. Classified revenue represented only 10% of online advertising, and fell 29% in 2009 in a weak economic environment. Lead generation revenues accounted for 6% ($1.5 billion) of the total in 2009.

In addition to providing another way to target and reach consumers, the Internet offers the transparency and accountability that advertisers seek. Webmasters can track the number of “page views”—connections made to a website over the Internet or another network—on a given site. In addition, search engines can be used to monitor the kinds of searches that viewers conduct, generating valuable consumer data. For example, a web surfer interested in airfares is also 8

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INDUSTRY SURVEYS


likely to want information on hotels at the requested destination and perhaps rates on car rentals. A job seeker may be interested in professional training opportunities. Tracking search patterns enables advertisers to target their ads more effectively. Fragmentation yields opportunity for ad agencies Because new media are essentially uncharted territory, both advertisers and agencies are still exploring this segment’s marketing potential, which may be immense given the reach, immediacy, and possibilities for customization that it offers. The increased use of digital advertising on the Internet and other forms of interactive media have led to the creation of a large number of agencies specializing in one or more areas, such as e-mail or mobile communications. While the proliferation of new media outlets has hurt traditional media, advertising agencies have benefited from the trend, in our view. As the number of media advertising alternatives increases, it becomes increasingly difficult for advertisers to know where to best spend their advertising budget. Thus, one of the main functions of an advertising agency has become advising clients how to get the best return on investment for their advertising budget. The increased complexity creates an opportunity for agencies to add value to clients by providing informed opinions on how advertising dollars should be apportioned across various alternatives. Consolidation among ad agencies The advertising industry has also had its share of consolidation in recent years, which has led to a concentration of ad spending among fewer, more powerful players. Such shifts have provided many new opportunities for large advertising holding companies, which have responded in part by acquiring independent agencies. Consolidation among independent agencies is an ongoing trend as well. Perceived low barriers to entry make it relatively easy for creative talents to launch their own agencies, causing an inherent oversupply in this segment. Independent agencies are more vulnerable than their holding company counterparts to shifts in market conditions, and the loss of a single major account can force an agency to close entirely or be sold to a competitor. Because of the recession, merger and acquisition activity has moderated, with fewer, smaller deals being done. Over the longer term, we expect the consolidation trend to continue, especially among those agencies that specialize in new media or focus on emerging markets. ď Ž

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INDUSTRY PROFILE New delivery systems change the mix for publishers and advertisers The publishing industry continues to focus on the delivery of information and entertainment to consumers, often supported by advertising. However, changes in the way published material is delivered—largely involving the Internet—have brought many new industry entrants, including such large companies as Google Inc. and Yahoo Inc. As a result, we believe that traditional definitions of the publishing industry are in flux. We see traditional print product providers increasingly aiming for distribution and revenue from the Internet and other forms of digital delivery. The three main forms of print publishers are newspapers, magazines, and books, all of which are increasingly providing content on the Internet or through digital platforms such as electronic readers (e.g., Amazon.com’s Kindle). The potentates of print increasingly face competition from other Internet publishers who have eschewed ink and paper altogether. While traditional print publishers remain a major presence, including their development of popular websites, we think the publishing industry’s barriers to entry have dropped dramatically. With no need for printing presses or postage, a new publishing website can be started with very little capital. With lower delivery costs, electronic publishers can rely less on advertising dollars to support their ventures. In addition, we see search engines and aggregators of web-based information enabling consumers to sift and choose among thousands of publishing sites. As a result, consumers often find free material to read that in TOP 25 COMPANIES BY US AD SPENDING—2008 (Ranked by total ad spending, in millions of dollars) COMPANY

MAGAZINE NEWSPAPER OUTDOOR

1. Procter & Gamble 956.2 187.1 2. Verizon CommunicationsTable B06: 108.6 TOP 25681.9 3. AT&T 54.0 288.6 COMPANIES BY US 4. General Motors 447.5 320.9 AD SPENDING 5. Johnson & Johnson 399.6 46.8 6. Unilever 218.4 29.1 7. Walt Disney 198.4 145.1 8. Time Warner 230.2 204.2 9. General Electric 138.0 171.0 10. Sears Holdings 59.8 191.2 11. Ford Motor 123.4 54.0 12. GlaxoSmithKline 231.7 29.1 13. Toyota Motor 146.5 18.9 14. L'Oreal 324.3 32.5 15. Walmart Stores 266.1 29.3 16. Bank of America 31.8 163.5 17. Anheuser-Busch InBev 50.3 10.4 18. Sprint Nextel 90.4 142.5 19. Sony 122.3 106.0 20. JPMorgan Chase 23.7 121.4 21. News 69.9 197.9 22. J.C. Penney 63.6 150.4 23. PepsiCo 167.9 29.3 24. Pfizer 197.7 24.8 25. Kraft Foods 401.6 33.3 †Totals may not add due to rounding. Source: Advertising Age.

10

2.3 85.9 63.2 23.4 5.4 2.1 45.2 50.8 43.9 0.3 11.4 0.3 20.9 1.4 2.3 10.0 44.2 46.7 17.4 26.7 27.1 0.3 2.9 0.8 3.8

TV

2,153.6 1,164.9 1,329.3 1,176.4 901.9 478.7 672.0 691.0 672.0 432.3 721.0 742.4 761.4 431.4 448.2 138.6 431.4 572.5 527.4 215.1 423.8 162.7 516.9 531.3 372.3

RADIO INTERNET

21.0 206.3 174.2 76.3 20.5 7.6 88.8 49.5 114.3 35.6 44.2 7.6 17.9 1.6 96.6 50.2 30.1 28.1 33.1 52.6 90.2 38.2 41.3 1.6 15.3

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47.0 143.3 69.6 187.5 46.3 16.3 108.7 76.8 52.1 16.5 57.9 13.6 56.3 6.5 22.8 223.2 12.8 57.1 30.5 34.4 100.8 14.4 18.0 19.2 10.5

TOTAL AD OTHER SPENDING†

1,470.8 1,309.2 1,094.2 669.1 1,108.8 1,670.3 959.4 905.2 827.9 1,129.2 844.0 802.3 668.5 875.6 794.4 1,032.7 1,008.1 562.7 628.3 882.9 428.1 884.4 517.6 517.0 435.4

4,838.1 3,700.0 3,073.0 2,901.1 2,529.2 2,422.6 2,217.6 2,207.7 2,019.3 1,864.9 1,856.0 1,827.0 1,690.4 1,673.1 1,659.8 1,650.0 1,587.3 1,500.0 1,464.9 1,356.8 1,337.8 1,314.0 1,293.9 1,292.4 1,272.1

INDUSTRY SURVEYS


the past would have either been unknown to them or required a purchase. However, even when published material is seen as free, it may be preceded or accompanied by advertising. US consumers still spend billions of dollars annually on printed books, magazines, and newspapers, mostly in the form of single-copy purchases or subscriptions. In addition, we see millions of hours and billions of dollars being directed toward Internet access and various digital reading devices. Much of the financial support for newspapers and magazines comes from advertisers, who are looking to attract readers to their products. Overall, for traditional print publishing, we estimate that advertising represents roughly 80% of revenues for US newspapers, 55% for consumer magazines, and up to 100% for some other publications, such as business trade magazines.

NEWSPAPERS: AN ADVERTISING MAGNET Newspaper advertising revenues totaled $27.6 billion in 2009 (versus $37.8 billion in 2008), according to the Newspaper Association of America. Among mass media that sell advertising space, newspapers have the third largest share of advertising across measured media in the US (after network television and consumer magazines). Circulation declined 4.2% in 2009 to 39.1 million. Newspaper circulation is fairly concentrated among the largest papers: the 20 biggest US newspapers account for about 25% of average weekday circulation. The biggest parent companies account for a disproportionate share of newspaper circulation. The top five newspaper companies own more than 300 daily newspapers. The largest newspaper company in terms of circulation and newspaper revenues is Gannett Co., which owns 84 US dailies.

MAGAZINES: FRAGMENTED, BUT WITH SOME BIG PARTICIPANTS Thousands of consumer and business magazines are published in the US, but we believe that a relatively small number account for much of the industry’s circulation and advertising revenue. Many of these leading publications are owned by a small group of companies, some of which also have other media properties. According to the Magazine Publishers of America (MPA), 20,590 consumer magazines were published in North America in 2008. According to the MPA, paid circulation totaled $9.8 billion in 2008 (latest available). The vast majority of circulation occurs through subscriptions, which generated $6.7 billion (68% of paid circulation) in revenue generation. Single copy circulation generated the remaining $3.1 billion in revenues in 2008.

BOOK PUBLISHING: A CONCENTRATED CORE Americans, traditionally big book buyers, continue to spend more on books than on any other medium except cable TV. According to the Book Industry Study Group (BISG), a nonprofit industry group that sets standards and conducts research, US publishers’ net book sales (excluding sales of standardized tests) totaled an estimated $40.3 billion in 2008 (latest available), up 1.0% from $39.9 billion in 2007. Of the more than 87,000 book publishers in the United States, most are small mom-and-pop desktop operations. Compared with other industries, book publishing is not highly concentrated. Larger firms have been gaining market share, however, and certain industry segments are dominated by a handful of publishers. Educational publishing is one such highly concentrated sector: it is dominated by Houghton Mifflin Harcourt Publishing Co., McGraw-Hill Education (like Standard & Poor’s, a unit of the McGraw-Hill Companies), Pearson Education Inc. (a unit of Pearson plc), Scholastic Corp., and John Wiley & Sons Inc. Other categories dominated by a relatively small number of giants include adult and children’s trade books, mass-market paperbacks, and religious books. According to BISG data, the top five trade publishers— Random House Inc. (a division of Bertelsmann AG), HarperCollins Publishers Inc. (News Corp.), the Penguin Group (Pearson plc), Simon & Schuster Inc. (CBS Corp.), and Time Warner Book Group (Time Inc.)—account for roughly 50% of total sales of trade books (adult, children’s, and mass-market INDUSTRY SURVEYS

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paperbacks). Thousands of other publishers also participate in these segments because the barriers to entry are not as high as in educational publishing, where only the biggest can compete.

ADVERTISING: CONTINUED EVOLUTION Media services provider ZenithOptimedia estimates that global spending on major media declined 9.8% in 2009, and as of April 2010, was projecting an increase of 2.2% to $456 billion in 2010. Global growth was hurt in 2009 by the absence of some incremental advertising that supported results in 2008 (e.g., the US presidential elections and the Summer Olympics in Beijing). ZenithOptimedia anticipates global growth of 4.1% in 2011. Gains in 2010 and 2011 are expected to be led by gains in online advertising, but dragged down by continued sluggish traditional media spending, particularly in North America. ZenithOptimedia anticipates North American ad spending will decline 1.5% in 2010 and rise 1.8% in 2011. In 2009, North America accounted for an estimated 35.2% of the global advertising market, followed by Western Europe (24.2%), Asia-Pacific (22.8%), Latin America (6.8%), Central and Eastern Europe (6.1%), and the rest of the world (4.9%). (See the table below for details.) GLOBAL AD SPENDING FORECAST --------- ADVERTISING EXPENDITURES (MIL. $) ---------- ------------ PERCENT OF TOTAL -----------2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 REGION*

North America Western Europe Other Europe Asia Pacific Latin America Africa/M. East/ROW TOTAL MEDIUM*

179,776 121,293 35,583 107,332 30,405 20,297 Table 494,686

156,926 154,501 107,865 108,266 27,356 28,909 101,683 107,680 30,535 33,369 21,891 23,275 B13: GLOBAL 446,257 456,000

157,285 110,868 31,373 114,774 35,533 24,712 474,544

162,044 114,463 34,555 123,654 38,328 26,494 499,539

36.3 35.2 33.9 33.1 32.4 24.5 24.2 23.7 23.4 22.9 7.2 6.1 6.3 6.6 6.9 21.7 22.8 23.6 24.2 24.8 6.1 6.8 7.3 7.5 7.7 4.1 4.9 5.1 5.2 5.3 100.0 100.0 100.0 100.0 100.0

AD SPENDING FORECAST 56,342 45,272 43,279

Magazines 42,476 42,284 11.6 10.3 9.6 9.1 8.6 Newspapers 122,282 101,514 97,685 96,264 95,429 25.1 23.1 21.7 20.6 19.4 Television 185,813 173,399 180,952 189,614 199,730 38.1 39.4 40.3 40.6 40.6 Radio 37,614 33,718 33,548 34,331 35,896 7.7 7.7 7.5 7.3 7.3 Cinema 2,328 2,183 2,250 2,359 2,469 0.5 0.5 0.5 0.5 0.5 Outdoor 32,116 28,532 29,023 30,286 31,708 6.6 6.5 6.5 6.5 6.5 Internet 50,947 55,433 62,592 71,974 83,896 10.5 12.6 13.9 15.4 17.1 TOTAL 487,443 440,050 449,329 467,304 491,411 100.0 100.0 100.0 100.0 100.0 *The totals by medium are lower than the totals by region since the regional table includes figures for a few countries for which spending is not itemized by medium. Source: ZenithOptimedia's March 2010 forecast report.

Holding companies set the tone Advertising is a global industry dominated by multinational holding companies that offer a wide array of services. According to Advertising Age, approximately 54% of US ad agency revenues and 65% of the world’s ad agency revenues are controlled by four agency networks. These are US-based Omnicom Group Inc., London-based WPP Group plc, US-based Interpublic Group of Companies Inc., and Paris-based Publicis Groupe SA. Japan-based Dentsu Inc. is the fifth largest marketing organization in the world, but unlike its larger competitors, it is an agency brand, not a holding company. In addition to the multinational conglomerates, the industry has many boutique firms that specialize in such areas as consulting, media planning and buying, direct marketing, customer relationship management (CRM), e-commerce, and public relations. Firms may specialize in a particular field, such as healthcare, financial, or human resources communications; recruitment advertising; sports or entertainment marketing; field marketing (on-site—at a store or shopping center, for example); event marketing; digital and interactive marketing; or directory and business-to-business advertising. 12

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Finally, companies may manage activities such as brand identity, promotions, custom publishing, research, databases, lectures (managing/procuring distinguished speakers for corporate and organizational appearances), and so forth. There are many other specialties as well. Competition between agencies is fierce, and clients can change agencies with relative ease. The fact that barriers to entry are low—virtually any creative talent can start an independent agency—adds to the challenge. Over the past 20 years, many specialty agencies have extended their market reach, attracting major accounts from their global competitors. In addition, new agencies have been able to parlay their creative work into major accounts won from their more established competitors. TOP 10 GLOBAL MEDIA AGENCIES COMPANY

HEADQUARTERS

1. WPP Group Table Dublin B10: 2. Omnicom Group New York TOP 10 3. Publicis Groupe Paris GLOBAL 4. Interpublic Group New York MEDIA 5. Dentsu* Tokyo AGENCIES 6. Aegis Group London 7. Havas Suresnes, France 8. Hakuhodo DY Tokyo 9. Acxiom Corp. Little Rock, Ark. 10. MDC Partners Toronto/New York *Figures are estimated. Source: Advertising Age.

WORLDWIDE REVENUES ----- US REVENUES ------OUTSIDE US REVENUES 2008 2009% CHG. 2008 2009% CHG. 2008 2009% CHG.

13,598 13,598 13,360 11,721 6,900 6,287 6,963 6,028 3,296 3,113 2,490 2,109 2,307 2,010 1,572 1,522 899 750 585 546

0.0 (12.3) (8.9) (13.4) (5.6) (15.3) (12.9) (3.2) (16.6) (6.6)

4,446 6,890 2,946 3,786 95 504 702 12 745 485

4,440 6,178 2,911 3,372 97 421 639 10 632 453

(0.1) (10.3) (1.2) (10.9) 1.4 (16.4) (9.0) (13.4) (15.2) (6.6)

9,152 6,470 3,954 3,176 3,201 1,986 1,605 1,560 154 99

9,158 5,542 3,376 2,655 3,016 1,687 1,371 1,512 118 93

0.1 (14.3) (14.6) (16.4) (5.8) (15.0) (14.6) (3.1) (23.3) (6.6)

INDUSTRY TRENDS Among the major print media, we believe that newspapers faced the earliest large disruption from new, digitized ways of delivering material to consumers. In our view, this is because newspapers are especially vulnerable to competition from the timely information and search capabilities that the Internet offers. Also, with local newspapers, a significant portion of their content is in the form of listings or short items that can be replicated and provided more conveniently on the Internet. Looking ahead, as Internet access becomes increasingly mobile (e.g., wireless networks, smart phones), we expect that the amount of reading time and advertising dollars allotted to traditional newspapers will continue to decline. Initially, we think that magazines held up better against Internet competition, partly due to the appeal of their specialized subject matter (e.g., sports, business, hobbies) and visual content. In addition, magazines often provide lengthier articles, with more depth and context, than what is available in newspapers. In our view, online reading is generally more suited to shorter items. However, in 2009, we saw an accelerating decline in magazine advertising, which we attribute to both economic weakness, and an effort by advertisers to follow consumers on the path to digitized electronic media. For books, the biggest early impact of the Internet was the way that websites such as Amazon.com created huge electronic product catalogs, providing access to many items that could not be found readily in local retail outlets. However, a shift in the way consumers view their reading material has been slower to occur with books. In our view, comfortable reading of longer-form publications on a screen is more likely to require special features (e.g., ease of holding and viewing the reading device, page turning capability) that computers may lack. However, with development of new electronic reading devices, we expect books to be read increasingly in digital form. Consumer interest should be augmented by the ability of a portable book reader to store many titles at the same time. Long term, we expect that readership and advertising will continue to shift toward digital platforms, at the expense of traditional print media. In part, this is likely to follow demographic patterns, with younger consumers more likely to rely on computers and portable digital devices for information and entertainment. INDUSTRY SURVEYS

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MEDIA MAGNETS—PULL VERSUS PUSH Historically, we saw programmers, packagers, and advertisers pushing content at consumers, for utilization at specific times in particular formats. Now, we believe that consumers are increasingly enabled to pull information and entertainment to a growing assortment of electronic devices, where they can read, watch, and listen at their convenience. In some ways, we see print publishing on a path that looks similar to what the broadcasting industry experienced during the past several decades. The availability of additional bandwidth (cable for broadcasting; the Internet for reading) has made targeted programming and advertising much more achievable. The difference is that the broadcasting industry was generally able to require payment for what was offered, in the form of monthly cable subscriptions. Also, while broadcasting audiences have become more fragmented, we believe that TV in particular still provides advertisers with much larger viewership for individual shows than what is likely to be available from an Internet site at a given point in time. On the web, people are much less likely to follow a programmer’s schedule for when to tune in. Value-oriented, but still trendy In our view, an increased ability on the Internet to compare prices, coupled with a weaker economy, is threatening the worth of various consumer brands. We see increased consumer emphasis on value, or price, indicated by growing market shares for store-brand (private label) products, which tend to be less expensive than national brands. Furthermore, we think that consumers’ many media choices, their propensity to multitask, and their emphasis on quick access to information has diminished the attention they pay to some advertising, and even their willingness to view an unsolicited message. However, we also see social networks and digital media making it easier and faster to identify and share information about hot new products. As a result, styles are likely to change more rapidly, creating additional advertising opportunities for the right products. We also believe that the appeal of advertising should be enhanced by growing interactivity, including links to shopping sites and customer reviews. However, we think that the role of traditional stores is changing. We believe that consumers are increasingly visiting a store to get the touch and look of a product, but then making the purchase online, based on price. We see stores increasingly in the role of catalog showrooms. Internet suited to both current and past information We believe that consumers’ interest in timely information has led to newspaper websites generally attracting more Internet usage than those of magazines. Based on number of visits in March 2010, the New York Times had the leading market share (4.6%) among print media websites, according to Hitwise data provided by marketingcharts.com. Gannett Company Inc.’s USA Today ranked second (3.8%), followed by Time Warner Inc.’s People magazine (2.2%), and the Washington Post (2.1%). Of the top 10 print media websites, six were newspapers and four were magazines. In addition, websites make it easier to provide access to publishers’ archives (past issues), and to provide features such as online social networks for people who share an interest. By doing so, there is opportunity to build customer loyalty. Online marketing can also cut the cost of selling subscriptions, reducing publishers’ reliance on more costly postal mailings to potential subscribers. We think the Internet’s ability to keep track of consumers’ interests and usage creates both advantages and concerns. Publishers and advertisers should be able to more effectively target audiences who have shown interest in their products. However, the gathering and storage of personal information raises questions about privacy and how such data might be used. More voices and opinions We see the publishing industry being populated with new voices, especially through entrepreneurial or personal websites. We see this leading to further audience fragmentation, as people seek out and gravitate toward others who share their interests or opinions. In addition, personal information that would have once been confined to a private journal or diary is now receiving public display. 14

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In the past, the publishing industry being largely limited to industry professionals. Now, low-cost technology increasingly provides opportunities for self-publishing, with outlets ranging from an Internet blog to a newsletter produced on a home printer. With so many more publishers available, we see this heightening the issue of who to trust for information and well-reasoned opinions. We see the Internet creating a more level playing field, with increased quantity and varying quality of published material.

NEWSPAPER PUBLISHERS LOSING AD MARKET SHARE According to Kantar Media, a provider of competitive advertising and marketing information, newspapers experienced a 19.7% decline in measured media advertising spending in 2009, following a 17.8% drop in 2008. Only radio media suffered a greater drop in 2009 (–20.3%); also declining were television media (–9.5%), magazine media (–17.4%), and outdoor advertising (–13.2%). The Internet saw an increase in spending (+7.3%). Measured media are those weighed by outside sources, such as Nielsen Media Research Inc., Arbitron Inc., and others; they include TV, radio, newspapers, magazines, outdoor, and the Internet. Total measured media advertising declined at a rate of 12.3% in 2009. In 2008 (latest available), newspapers had a 16.3% share of measured media advertising in the US. As recently as 2004, newspapers received 20.4% of the total ad pie. The trend in declining newspaper ad share extends back more than five decades, with the growth of broadcast television stations in the 1950s and 1960s and cable television in the 1970s, 1980s, and 1990s, as well as the strength of the Internet and other new media since the mid-1990s. We do not expect the downtrend to end in the foreseeable future.

EXPANDING PORTAL PARTNERSHIPS To combat audience fragmentation, publishers have been expanding their web presence through partnerships and other initiatives. The Newspaper Consortium In November 2006, a newspaper consortium led by Belo Corp., E.W. Scripps Co., Lee Enterprises Inc., and Hearst Corp.’s newspapers, partnered with Yahoo! Inc. in a deal that signaled the newspaper industry recognized the need to cooperate with its web-based competition. The consortium included seven publishing companies and 176 newspapers across the US. The goal was to accelerate web advertising growth for both Yahoo and the consortium by tapping each other’s strengths: Yahoo’s national audience and newspapers’ local content. The initial phase of the partnership gained traction in 2007 as newspaper advertisers became able to post jobs on Yahoo’s HotJobs online recruiting site. Essentially, the agreement allows newspapers to sell online advertising inventory for a national job recruiting network using their existing sales force. Newspaper publishers pay a wholesale advertising rate to Yahoo HotJobs, and pocket the difference between the rate they charge clients and the rate they pay to Yahoo. Newspaper sales representatives also gain a more comprehensive product to sell to clients. For Yahoo, benefits include additional inventory sales and more listings on HotJobs, which makes the site more valuable to recruiters, job seekers, and, ultimately, advertisers. Although financial details are vague, it appears the initial phase of the consortium agreement has gone well. Lem Lloyd, who runs the consortium for Yahoo, said that among the various newspaper partners, the effect has been varied, since all charge different prices. Shortly after Lee Enterprises joined the consortium, the company said online ad sales rose 56%. Another indicator of success is the consortium’s continued growth, rising to 264 papers across 44 states with the addition of the McClatchy Co. in April 2007. By September 2009, the partnership reached 800 papers, equivalent to 32% of all US daily circulation and 41% of all US Sunday circulation. Notably, Gannett Co. and the Tribune Co. have not joined the consortium, as they are co-majority owners of Careerbuilder.com, which competes with HotJobs. The New York Times Co. also has not joined the INDUSTRY SURVEYS

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consortium, but it did contribute 16 regional papers to the consortium in November 2007 (though not its flagship New York Times newspaper). The consortium agreement allows Yahoo’s sales force to sell newspaper advertising inventory to national advertisers, while the newspapers’ sales forces can sell Yahoo local inventory to their advertisers. This phase of development will include all forms of advertising, instead of just help-wanted ads. Newspapers will benefit from greater access to national advertisers, which in the past were generally not interested in buying ads in local newspapers. Traditionally, to advertise nationally through local newspapers, an advertiser would have to call the ad sales representatives of newspapers across the United States. Yahoo, however, will make it easy for advertisers to buy national print advertising by effectively aggregating these local newspapers into a national network, a process that will also create incremental advertising opportunities for newspapers. In turn, Yahoo will gain local content that it otherwise could not create on its own, which will draw more eyes to its website and generate incremental local advertising revenue. We believe that newspapers need to generate incremental revenue sources by leveraging their competitive advantage of local content creation, and we think the agreement with Yahoo is a good start. Although online advertising is usually cheaper than print advertising, and, thus, print customers that become online customers generate less revenue, the alternative of losing a print customer altogether is far less appealing. We note that there is more operating leverage for online operations relative to print operations; thus, as online revenue increases, we believe segment profitability will grow quickly. quadrantOne In February 2008, Tribune, Hearst, Gannett, and the New York Times announced the industry’s latest online partnership with the creation of quadrantOne, a sales organization that sells the online inventory of media companies participating in the initiative. The initiative has a reach of over 500 local news and information sites and across the country. Members contribute guaranteed premium online ad inventory, which is then sold to national advertisers. Member companies benefit by creating a unified online platform with significant reach that is attractive to national advertisers, just as the Newspaper Consortium benefits by creating a national platform for print advertising.

USED BOOK MARKET A GROWING CONCERN FOR COLLEGE PUBLISHERS The used book market has always been a concern for book publishers. This is particularly true for publishers of college textbooks and materials, given that roughly three-quarters of used book sales in the US are college sales. According to the 2009 College Store Industry Financial Report from the National Association of College Stores (NACS), the average price of a required college text dropped to $49 in 2007– 08 from $50 in 2006–07 for used textbooks, compared with an average cost for new textbooks of $57 in 2007–08 and $56 in 2006–07. While widening, the disparity in prices has fostered a strong market for used textbooks. The availability of used books can reduce the demand for a new title within two or three years of its initial publication—and sometimes sooner. To counter this, textbook publishers typically issue new editions every few years, although this has not slowed demand for used books. The NACS reports that used texts usually sell out before new ones. Used books are attractive not only to students but also to college bookstores. The NACS reports that used books accounted for about 19.8% ($1.9 billion) of all college store sales and 30.5% of all course material sales during the 2007–08 academic year. College publishing hurt by free online dissemination College textbook publishers are up in arms about illegal downloads of course materials. The use of electronic course materials has soared in recent years, and most US universities employ course-management systems that let professors post course outlines, reading requirements, and homework assignments online. One of the most common uses for such electronic systems on campuses is to provide students with online copies of published articles and textbook chapters.

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The use of online teaching tools has grown since the late 1990s, and the trend is expected to continue. While the BISG notes that the dental schools of the State University of New York at Buffalo and the University of Texas Health Science Center are unique in that each mandate that students use only digital books, it also says that studies show most college students prefer their textbooks in print rather than in a digital format. Online teaching tools and growth in the used book market have become sticking points for college publishers, which have seen their sales gains remain modest in recent years despite healthy college enrollments and rising textbook prices. The BISG estimates that sales by US college publishers will grow 3.5% a year, on average, from 2008 to 2010. Although illegal downloads and used books are culprits, we believe that increases in college tuition and other costs—as well as cuts in government subsidies, which have forced students to economize on book and materials purchases—are also to blame. While exported books typically carry lower price tags than books sold in the US market, unit sales in the export market are expected to rise only modestly, from 6.4 million units in 2006 to 6.9 million units in 2012. High textbook prices draw scrutiny College textbook publishers are on the defensive because of their pricing practices. According to the NACS, the average price of a college hardcover textbook was $92.80 in 2007, with a further 3.4% annual growth rate projected through 2012. The average dollars per unit that publishers received across all college texts was $60.60 in 2007. A widely publicized report released in January 2004 by the California Public Interest Research Group (CALPIRG), a nonprofit watchdog group, concluded that textbook prices are unnecessarily high. A followup report, released by CALPIRG in January 2005, added fuel to the fire. That 2005 report was the result of an expanded survey that uncovered more evidence to support the contention that college textbook prices are improperly inflated and that US students pay more than students in other countries do for the same books. US publishers are therefore being assailed because they generally sell titles to wholesalers and retailers abroad at sharply lower prices than those available to US college stores. Thanks to the Internet, US consumers can buy from foreign wholesalers and distributors at substantially lower prices than are available domestically. For example, the 2005 CALPIRG study noted that the average textbook costs 20% more in the US than in the UK. This has done nothing to improve the reputation of US textbook publishers, which have been unable to justify the wide price differentials. Textbook rentals: the wave of the future? In July 2005, CALPIRG released Affordable Textbooks for the 21st Century: A Guide to Establishing Textbook Rental Services, a report that provides a 12-step process to set up a textbook rental system on any campus. The report includes case studies from colleges that already have set up rental systems. About 25 US colleges have textbook rental programs, some in operation for more than a century. CALPIRG stated in its report that rental systems benefit students, colleges, and college bookstores. The average college student could see his or her textbook costs drop up to 85% per year. The report also states that, as such programs grow, they will put pressure on publishers to change their pricing practices. In response to concerns raised over the high prices for college textbooks, the Higher Education Opportunity Act (H.R. 4137) was passed in 2008, providing $10 million for grants to support textbook rental pilot programs. In August 2009, Cengage Learning, one of the largest textbook publishers in the US, announced it would start renting books on several hundred titles to students at a 40% to 70% discount of the sale price. Follett Higher Education Group, a bookstore manager, is starting a pilot rental program at about 12 bookstores, charging 42.5% of the purchase price on about 20% of textbook offerings. Additionally, Barnes & Noble College Booksellers LLC, a wholly owned subsidiary of Barnes & Noble Inc., said at the beginning of the 2009 fall semester that it was test piloting a rental program in three of its 636 campus bookstores; as of January 2010, the program had been expanded to 25 of their campus bookstores. INDUSTRY SURVEYS

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MAGAZINES: CIRCULATION LARGELY FROM SUBSCRIPTIONS In our view, the roughly 550 magazines tracked by the Audit Bureau of Circulations (ABC), a member organization that examines and compiles magazine industry data, much of the circulation for traditional print magazines is represented by. In 2008, circulation for 592 magazines audited by the ABC totaled 368.4 million, according to the Magazine Publishers of America (MPA). This total included two titles with circulations of more than 10 million, another 36 magazines with circulations of at least two million, plus 55 additional titles at one million or more. According to the ABC, subscription circulation for these 592 magazines totaled 324.8 million in 2008 (88% of total copies), while single-copy sales amounted to 43.7 million (12%). For the magazine industry, single-copy sales are in a long-term decline. In the first half of 2009, single-copy sales for 521 ABC-audited titles were down 12%, according to foliomag.com, while subscription circulation was up slightly. The MPA indicates that the closing of a national distributor (Anderson News) affected availability of newsstand copies during a portion of 2009’s first half. At newsstands, the cover price is often a higher price that what subscribers pay on a per-copy basis. In addition, single-copy prices have risen more rapidly than subscription prices over time. The MPA reports an average single-copy price of $4.70 in 2008, up 37% from 1999. In comparison, the average subscription cost $28.01 in 2008, an increase of just 13% in the same nine-year period. In 2008, the MPA says that subscriptions represented 68% ($6.7 billion) of circulation revenues, while single-copy sales accounted for 32% ($3.1 billion). Fewer ad pages in consumer magazines We also see a long-term decline in the number of advertising pages in consumer magazines. In 2009, the number of advertising pages in approximately 240 consumer magazines declined 25.6% from 2008, to 169,218, with most of the titles having fewer ad pages, according to the MPA. Time Inc.’s People had the largest number of ad pages (3,367; down 1.6% from the year-ago period), followed by Flex (2,591 pages; up 3.3%); and New York Magazine (2,332; down 25.6%). Meanwhile, among seven Sunday newspaper magazines listed separately, New York Times Magazine had the largest number of ad pages (2,067), but this was down 38.8%, year over year. Based on rate cards, gross magazine advertising revenue in 2009 totaled $19.5 billion, down 18.1% from 2008. Topping the list in gross ad revenue were People ($933.1 million; up 3.8%) and Better Homes and Gardens ($811.8 million; up 7.8%). Meanwhile 11 of 12 magazine advertising categories reported by PIB had lower ad pages and gross ad revenue in 2009. This included a 31% decline for technology ad pages, and a 29% drop in each of the apparel and accessories, home furnishings and supplies, and public transportation, hotels and reports categories. The category holding up the best was food and food products (up 9.8% in ad pages). With thousands of titles being published, each year brings hundreds of magazines launches and closures. In 2009, 275 new US or Canadian magazines were introduced, while 428 closed, according to data compiler mediafinder.com. In comparison, full-year 2008 included 335 North American launches, and 525 closures. In some cases, we see print magazines being discontinued, but a related online site remaining in operation. This way, a publisher can still look to leverage its brand, provide access to previously published material, and offer newer material with a scaled-down cost structure. Other trends or factors facing the magazine industry include the prospect of reduced delivery frequency and higher costs from the US Postal Service, including a possible absence of regular Saturday delivery to homes. In addition, cost-conscious consumers are more likely to read magazines at libraries or other public places, which would likely cut into personal purchases. While library patronage is likely to rise at times, they may be under financial pressure to reduce the number of titles they carry.

ELECTRONIC PUBLISHING: AN EVOLVING OPPORTUNITY Publishers are positioning themselves to take advantage of the expanding revenue opportunities brought on by the proliferation of devices such as handheld and laptop computers, and cell phones. 18

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Electronic versus print Electronic editions of a publication often include articles published in the print version. Most online publications, however, offer features not available in the printed products. Depending on the publication and the online service, online subscribers may be able to interact with writers and editors via e-mail or electronic bulletin boards. Some host online conferences that give users an opportunity to chat with editors or noted personalities. The extent to which readers of a printed publication will switch to an electronic version of the same publication is hard to predict, but a number of factors are supporting the switch. The proliferation of personal digital assistants (PDAs) and other electronic devices has increased the convenience and portability of online publications. Electronic versions of books or magazines may contain sound and video clips not available in the printed form. In addition, electronic information, which can be cut and pasted from one file to another, is a valuable resource for researchers, students, and writers. Online publications have the potential to attract new readers who otherwise might never have examined the print version. Computer users are more likely than the general population to read a newspaper or magazine, and computer services give them access to media outside their region or their usual interests. News online Most of the nation’s newspapers and magazines operate websites. In addition, the major wire services, government news services, TV and radio broadcasters, and nontraditional publishers are operating thousands of web-based news sites. Through paid subscriptions, listing fees, advertising, or all three, epublishing is growing and profitable for many companies. Dow Jones & Co. Inc.’s Wall Street Journal Online is the largest paid-subscription news site on the web, with more than one million subscribers as of April 2010.

ADVERTISING FIRMS STRUGGLE One of the advertising industry’s major challenges is to keep up with the rapid development of new technologies that have given consumers an ever-growing source of entertainment and media. In their quest to reach consumers, ad agencies are increasing their service offerings and targeting new demographic groups, among other efforts. New media choices exploding Agencies’ traditional ways of reaching consumers are rapidly giving way to new ways of engaging a target audience. The proliferation of new technologies—digital video recorders, mobile phones, the Internet, portable media players such as iPods, wired and wireless games, and others—provides marketers with many additional opportunities to reach consumers. These changes also pose challenges, however, since agencies can no longer simply rely on traditional mass media. Overall, we believe advertising agencies have benefited from this trend. As the number of media advertising alternatives increases, advertisers find it more challenging to determine how best to allocate their advertising budgets. Because one of the main functions of an advertising agency is to advise clients on how to get the best return on investment for their advertising budget, the increased complexity creates an opportunity for agencies to add value by providing informed opinions to clients on how advertising dollars should be apportioned across various alternatives. Well aware of this trend, advertisers are shifting more of their spending to new media and technologies. ZenithOptimedia sees Internet advertising increasing its share of global advertising to 13.9% in 2010 and 15.4% in 2011, thereby more than doubling its market share from 6.4% in 2006. Internet advertising, with a 12.6% share, surpassed magazine advertising, with a 10.3% share, in 2009. Given current trends, Internet advertising will likely surpass newspaper advertising’s market share before 2015. New media also poses the risk that new competitors will emerge to challenge the holding companies and traditional agencies. In recent years, this has chiefly referred to Google, but also to Yahoo! and Microsoft. INDUSTRY SURVEYS

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Diversifying beyond advertising Agency networks have worked hard in recent years to round out their service portfolios to capture more of the much larger sum spent on overall marketing communications than on advertising alone. Moreover, media advertising is just one component of a broad range of marketing services. Among all channels, market research and direct and interactive marketing are growing at the fastest rates. Regardless of size, most advertising companies are focusing on higher-growth, non-advertising businesses, such as market research, media planning, interactive media, and customer relationship management, or CRM. Multinationals such as WPP Group plc, Publicis Groupe SA, Omnicom Group Inc., and Havas Group have evolved into all-encompassing marketing organizations that offer much more than just advertising. WPP, for example, derives 54% of its revenues from non-advertising sources. The company’s numerous acquisitions have spanned a wide range of marketing services categories. Within the next 10 years, WPP hopes to increase its non-advertising business to two-thirds of total revenue. Developing targeted multichannel marketing strategies Multichannel marketing involves the strategic planning and implementation of advertising via multiple channels to reach as many consumers as possible. Ideally, each channel’s advertising should complement the others’. For example, a web address in a print advertisement should generate traffic for a company’s website, which, in turn, should lead to a consumer’s e-mailed request for information, and, ultimately, an online sale. An online sale should generate future direct e-mail and traditional mail promotions, and so forth. The increasing availability of accurate consumer data from tracking and marketing research firms has enabled advertisers to better target their audiences. It is now possible to microtarget select segments of the population in the development of multichannel marketing campaigns, thus improving the effectiveness of those campaigns. Shifts in viewing habits threaten TV advertising The effectiveness of the classic 30-second TV commercial has come into question now that viewers have new ways to avoid watching TV ads. Subscriptions for video on demand (VoD) and digital video recording (DVR) services are growing fast. Such devices enable viewers to store TV programs and watch them at their leisure, skipping commercial breaks if they choose; according to Forrester Research, a technology research company, an estimated 70% of DVR users skip TV commercials during playback. DVR penetration in the US was estimated at 40% as of March 2009, up from 20% in December 2007, and could reach 50% by 2011. Although this poses a serious threat to traditional TV advertising, marketers are now looking for ways to create new opportunities within the medium. The completion of the switch to digital TV broadcasting and the continued rollout of digital cable services afford advertisers the opportunity to more effectively target and connect with viewers. In addition, Nielsen Media Research has launched new ratings services used to determine ad rates based on both live commercial viewing and DVR playback. The ad industry is testing methods of keeping viewers interested in commercials and preventing them from avoiding commercials altogether. As one way to address this issue, advertisers are taking a financial stake in programming. In the 1940s, consumer goods giant Procter & Gamble Co. (P&G) was the first to do this: it created radio and TV soap operas that targeted specific consumer segments. More recently, P&G has been an important partner with CBS Corp. in the production of the hit reality series Survivor. The Coca-Cola Co. has been a major partner in the production of another hit TV show, American Idol. Multiculturalism provides new opportunities Marketing to Hispanics is the most active multicultural effort among advertising agencies, and Hispanic agency revenue growth outpaces that of traditional agencies. Nielsen Media Plus, a provider of competitive advertising and marketing information, reported that Spanish-language ad spending rose 2.5% in 2008, versus a 4.1% decline for the total US ad market. Although ad spending in the Hispanic market fell 6.6% in the first half of 2009, the lesser rate of decline suggests the market still outperformed on a relative basis. The Hispanic population is the fastest growing group in the United States. According to figures released by the US Census Bureau, the total US Hispanic population represented 15% of the total population in 2008, and is projected to grow by 42% between 2008 and 2020, rising to 19.4% of the US population. 20

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According to Advertising Age, the top five spenders in 2008 for Hispanic advertising were Procter & Gamble, Lexicon Marketing Corp. (an education and training company), AT&T Inc., Verizon Communications, and McDonald’s Corp. Combined, they spent $628.0 million on Hispanic-targeted advertising in 2008. Television garners the majority of all ad outlays, representing 62.8% of spending in Hispanic media in 2008, according to Advertising Age’s Hispanic Fact Pack. Radio was in second place, at 18.8%, while newspaper advertising represented 7.7%. WPP believes it has the top Hispanic marketing firm in the United States with its Bravo Group unit. With a customer portfolio that includes Del Monte Foods Co., Nestlé SA, and Kraft Foods Inc., the Bravo Group has maintained its leadership position in Hispanic marketing. In the direct marketing category, ADVO Inc. has implemented a bilingual ad program that targets Hispanic consumers in select markets. Consolidation trend continues Advertisers are increasingly trying to concentrate their ad spending with fewer agencies; by doing so, they are better able to control ad spending by taking advantage of bulk media discounts. Two events causing companies to review their media accounts include mergers with other companies, and a focus on reducing the number of brands supported by advertising. Besides gaining from bulk discounts, cost savings are also generated internally, as advertisers devote fewer employees to managing external advertising agencies. Consumer goods company Unilever is an example of a company focused on maximizing its advertising outlays by reducing the number of brands it supports. Over the past decade, Unilever has reduced its total number of brands to about 400 from 1,400. The concentration of ad spending by advertisers on fewer brands both heightens ad agency competition and raises advertisers’ expectations. PepsiCo. Inc. and Anheuser-Busch Companies’ InBev offer an example of companies consolidating their marketing functions to save on costs. As an expansion to a purchasing agreement they signed in October 2009, the two companies in early 2010 began to make joint approaches to media concerns in an effort to save on media costs and marketing.

HOW THE INDUSTRY OPERATES Publishing companies and advertising agencies share some similar operating characteristics, including dependencies on labor and advertising. The industries also possess various unique operating drivers, however, so following the discussion of common features, we discuss each industry separately.

COMMON FEATURES OF PUBLISHERS Newspapers, magazines, and books are the print publishing industry’s three main products. Newspapers and magazines generate income from a mixture of advertising revenue and circulation revenue (from subscriptions and single-copy sales), while book publishing revenue is derived primarily from sales to readers. In addition, we see each of the print publishing industries being affected by migration of readers to digital or electronic media platforms. Meanwhile, for their traditional print products, we see distribution channels, paper costs, and other expenses varying from sector to sector. Labor intensity All three segments of the publishing business are labor intensive. Newspaper and magazine publishers employ reporters, editors, researchers, copyeditors, proofreaders, art directors, photographers, graphic artists, copywriters, and illustrators on a full-time, part-time, or freelance basis. In addition, some newspapers and magazines maintain correspondents or bureaus in news centers around the world or in major US cities outside their local markets. Book publishers employ some of these same categories of workers, particularly editors, copyeditors, graphic artists, proofreaders, illustrators, and researchers. Most book authors are under a publisher’s contract, not part of its salaried staff.

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Magazine and book publishers usually outsource their printing and distribution functions, whereas newspaper publishers usually print in-house. Magazine and book publishers also maintain advertising sales staffs, circulation sales staffs, production personnel, and subscriber services personnel. Circulation and advertising Books, magazines, and newspapers compete for readers and buyers based on content, service, and price. Newspapers may compete for readership with other metropolitan, suburban, 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 consumer’s 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). Paper: publishers’ raw material The major raw material essential to publishing is paper: coated and uncoated publication paper for magazines (body paper), newsprint for newspapers, and various book-grade papers for books. Publishers usually sign multiyear contractual agreements with major paper manufacturers to ensure adequate supplies of paper for their planned publishing requirements. Newspaper publishers also often centralize the purchase of newsprint for all of their properties. In addition, some newspaper holding companies have equity interests in newsprint suppliers. 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. (For more details on paper supplies and prices, see the Paper & Forest Products issue of Industry Surveys.) 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. Published books are typically manufactured by outside printers, but often on paper supplied by the publisher. Book manufacturing contracts are generally signed on a title-by-title basis. When the publisher does not supply paper to the printer, the printer buys in bulk from paper producers. 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 fleets of trucks. Book distribution uses all classes of mail or bulk shipments by freight carriers. Magazine publishers usually sign multiyear contracts with unrelated third parties for national, regional, or market-by-market newsstand distribution services. Subscription copies are mailed through the postal system.

NEWSPAPERS Newspaper revenues come largely from advertising (both from print and online editions) and circulation. Some newspaper publishers also derive some revenue from commercial printing electronic information and publishing, as well as from selling their news to others. Competing for the advertising dollar Newspaper advertising is sold in several ways. A full run of press (ROP) ad is printed on a newspaper page and included in all editions. In a zoned part-run, an ad is printed on a page and included in editions slated for a particular area, such as “eastern suburbs.” Preprints or inserts are advertisements that are printed separately and inserted in a newspaper.

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US newspapers compete for ad dollars with shoppers and direct mail. Shoppers (or “penny-savers”) are freedistribution publications delivered directly to consumers’ homes on a weekly, biweekly, or monthly basis. Direct-mail products include samples, magazines, catalogs, coupon packs, circulars, and so on; these are delivered by the US Postal Service or by private carriers. Shoppers and direct mail typically get 100% market penetration without duplication in targeted areas; they also provide guaranteed delivery and concentration in the area the advertiser wants to reach. The popularity of shoppers and printed direct mail has been aided by numerous factors. These include the drop in newspaper penetration rates over the years, rising advertising rates, relatively cheap third-class postage rates, the availability of demographic information keyed to postal zip codes, and relatively low production costs. The newspaper industry has responded to these challenges by pricing preprints 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 (total market coverage) or ADS (alternate distribution systems). They are designed to attract advertisers with a guarantee of 100% market coverage—significantly higher than the typical daily newspaper’s market reach of less than 60%. By adding a TMC or an ADS program, a newspaper publisher can get the advertiser’s message out 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, publishers often combine certain operations. In an effort to improve efficiencies and cut costs, for example, accounting or payroll functions may be consolidated. Where markets overlap, newsgathering and other activities also may be shared. Quarterly revenues of the newspaper industry vary with seasonal influences. Generally, advertising results in the second and fourth quarters are higher than in the first and third quarters due to heavy ad spending around Easter, Thanksgiving, and year-end holidays.

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 magazine’s average per-issue circulation, usually stated as cost per thousand (CPM). Readers’ response to advertisers’ products and services, the effectiveness of the magazine’s sales team, and the quality of customer service are factors affecting advertisers’ demand for ad space in a particular magazine. In addition to circulation statistics, advertisers always demand to know the readership of both freedistribution and paid-circulation magazines. Oftentimes, readership is highest among paid-circulation magazines. That makes sense because a person is more likely to read a magazine if he or she has paid for it. However, there are plenty of exceptions. For example, in-flight magazines in the seat-back pouches of airplanes have a huge readership.

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Building readership Subscriptions are usually a magazine’s largest source of circulation revenues. They may be generated through direct-mail solicitation, agencies, insert cards, and other means. Newsstand sales, including singlecopy sales at supermarkets, drugstores, and other retail outlets, are another important source of circulation revenues for most magazines. (Sweepstakes promotions, which used to account for around one-third of new subscriptions, have virtually disappeared after allegations of deceptive marketing.) Magazine publishers are increasingly using specialized titles and local and regional editions to boost circulation and readership.  Subscriptions. Publishers often entice subscribers with discounts from the stated cover price or with premiums. While discounts and giveaways do attract subscribers, they do not necessarily provide readers— people who read the publication after buying, borrowing, or obtaining it through other means—and 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 valuable and worth the investment of their time and money.  Newsstand sales. For magazine publishers, newsstand sales are lucrative. The average subscription price per copy of a typical consumer magazine is generally only 40% of the newsstand cover price. Thus, a subscriber typically pays about $1.60 per copy for the same magazine that sells for $3.95 on the newsstand. Brand extensions: money trees for magazines For decades, magazines have created brand extensions by producing goods or services that complement and expand the franchise of an existing product, or by licensing their name to manufacturers. For instance, a consumer magazine may create related publications or merchandise (such as books or online products) bearing the magazine’s name. A magazine publisher might generate additional revenues from other ventures, such as contract (or custom) publishing. A business magazine or newspaper might offer trade shows, books, or business information services.

CONSUMER BOOKS General (or consumer) book publishing is a broad category that includes all kinds of books, whether hardcover or softcover, with the exception of educational (elementary through high school, or el-hi, and college). Included in the consumer book category are adult and juvenile fiction and nonfiction (or trade books), religious books, professional books, and mass-market paperbacks. Consumer books represent roughly 70% of publishers’ net sales in any given year. Fundamental factors In the realm of consumer 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 large—often 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 and thus use less paper and material. A specialized professional book printed in a small quantity might incur the same plant costs as a generalinterest 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. Materials costs vary with the level of output, thus the price of materials such as paper and ink are influenced by product demand. Today, noneducational publishers typically limit the first print run of a hardcover book to 5,000 to 75,000 copies, although a new book by a best-selling author or on a popular topic can be given a first run of two million or more copies.

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 Author advances and acquiring rights. Costs to cover author advances and to acquire rights affect a publisher’s 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 dollars. 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 dollars to ship unsold books back and forth. On average, retailers return roughly 30% of all publishers’ book shipments in any given year, although the actual percentage varies widely by category. Publishers of massmarket paperbacks incur a higher rate of returned books than any other segment. A major determinant of return rates is the relative size of a publisher’s backlist and frontlist (discussed below). A publisher with many backlist titles usually has much lower returns than does a publisher that emphasizes new fiction, because a frontlist title, by definition, is new to the market, and the demand for it has not been tested. Meanwhile, publishers have a prior selling history—a yardstick—with books on the backlist; for this reason, backlist titles, such as The Adventures of Huckleberry Finn, see far fewer returns than new titles. While backlist sales (more often than not) are not large, they are steady and predictable.  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 often are shredded and recycled. Publishing catalogs A book publisher’s catalog falls into two major categories: the frontlist and the backlist.  The frontlist. This is a publishing company’s catalog of new books. In trade publishing, it is estimated that only one of every five new books succeeds. Therefore, a small number of bestsellers typically subsidize a large number of less profitable (or unprofitable) titles. In addition, subsidiary rights from the frontlist (such as royalties from paperback reprints) can make a significant contribution to a publisher’s profits.  The backlist. The backlist comprises a publishing company’s catalog of books that have already appeared in a first edition and have been, or will be, issued in subsequent editions. It is the industry’s bread and butter, in that its unit sales and revenues are usually predictable. Thus, no matter what frontlist sales are like, the backlist gives publishers a measure of economic security. On average, about 25% to 30% of a publisher’s sales come from backlist titles. For some publishers, however, the backlist consistently provides more than 70% of sales. 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. Thus, while there are no hard statistics, the backlist provides a wider profit margin than the frontlist as a rule of thumb. However, a publisher should not be discouraged from investing in new frontlist titles, as today’s frontlist is the fodder for tomorrow’s backlist. Distribution channels Retailers and other distributors buy books directly from publishers or from book wholesalers. Retail outlets typically account for 35% or more of publishers’ domestic sales of general consumer books. Direct sales to consumers, through mail order and book clubs, account for about 20%. These channels are followed by sales to college bookstores (17%), schools (15%), libraries and other institutions (excluding elementary and high school libraries; 10%), and all others (3%).

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EDUCATIONAL PUBLISHING Educational publishing comprises elementary through high school and college texts. It excludes medical, nursing, and other health sciences textbooks published by medical publishers, which are generally considered professional books. High capital stakes restrict el-hi competition The process of developing instructional materials for elementary and secondary schools is complex, time consuming, and expensive. A full-scale instructional program in any given subject area, such as history or mathematics, usually consists of a series of textbooks and ancillary materials in various formats, such as workbooks and study aids. A publisher whose textbooks do not make the grade among buyers can lose many millions of dollars in upfront spending. Moreover, after a school text is purchased it may not be replaced for several years. However, when textbook orders do come, the quantities are large. Heavy capital demands and erratic income flow serve as barriers to entry that have tended to keep the educational book publishing industry concentrated, as only well-financed firms can afford both the upfront costs and the periodic big losses. El-hi sales run in cycles Elementary and secondary school textbooks and materials are usually sold to school systems on a contract basis, with the majority of deliveries made during the contract’s first few years. School systems acquire their books through one of two means. Under the open territory method, both the choice and the actual purchase of textbooks are made entirely by the local school districts or individual schools. There are no statewide purchasing schedules or state-selected lists of textbooks. Under the state adoption method, local school districts select textbooks from a menu approved by the state adoption agency. The state board issues curriculum guidelines in each subject area and schedules the purchase of new books and materials. Twenty-one states use the adoption process to buy elementary and high school textbooks. California adopts textbooks through the eighth grade, but grades nine to 12 are open territory. The other states are open territory states (plus the District of Columbia, which is also an open territory region). Over an adoption cycle, adoption states—including such major purchasers as Texas, Florida, and California—account for the bulk of textbook purchases. In any given year, however, adoption sales may fall below open territory sales. School districts in adoption states buy all their books by subject matter and grade level essentially at the same time and according to a schedule, although they rarely lump purchasing for every subject in one year. The adoption cycle is significant to publishers because it tends to concentrate spending. After states purchase their books, spending falls sharply until the next cycle begins. While the el-hi market has always depended on enrollment growth, textbook adoption cycles, and government funding levels to generate sales, oftentimes it is the funding levels that are the most volatile and the most difficult to predict. For example, notwithstanding the renewed federal government commitment to education in the form of the No Child Left Behind Act of 2001, spending on school materials was hampered in ensuing years by shortfalls in state and local budgets across the country. Since fixed-cost items (such as contracted teacher and support staff salaries, administration, transportation, and building maintenance) account for the bulk of school budgets, any budget shortfalls are likely to be felt most in discretionary spending areas, such as materials, which includes textbooks. College publishing has high profit margins College texts are the most profitable line in the book publishing industry. Production costs are comparatively low, and cover prices are relatively high. Unit sales are far smaller than in the elementary or secondary school textbook markets. For this reason, college texts typically are more expensive than consumer-oriented books. El-hi instructional programs, which are usually organized in series and sold to a number of states, must meet specific pedagogical and governmental guidelines requiring numerous reviews and revisions. College textbooks are not subject to such scrutiny. 26

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ADVERTISING AGENCY FUNDAMENTALS Ad agencies work with advertisers (their clients) and the media (their suppliers) to design and implement marketing campaigns. Advertisers usually sell goods or services, although they may be government organizations or public service advertisers. Ad agencies analyze the market for a particular product or service, create the appropriate communications strategy to convey the agreed-upon message, and choose the most effective media for reaching the desired market. Agencies also negotiate and place orders with the media in accordance with their clients’ budgets. Types of agencies The principal firms in this industry are general ad agencies and boutique firms. However, individual agencies and boutiques often operate under the umbrella of a larger holding company, forming a full-service agency network.  Full-service agency groups. Under a holding company structure, a full-service agency group offers a complete range of ad services, from creative work, production work, and account handling, to media planning, buying, and post-buy analysis. Frequently, certain agencies in the group concentrate on media planning and buying (media independents), while other agencies handle account services, creative work, and production. At the larger holding companies, the parent company provides strategic direction as well as centralized services, such as finance and acquisitions support, real estate expertise, legal counsel, and investor relations. With this structure, the separate agencies and operating companies can focus on their clients’ marketing and advertising challenges. The parent company usually does not get involved in ad campaigns or other client marketing programs, which are planned, developed, and executed independently and confidentially within each agency.  General advertising agencies. Whether independent or part of an agency group, general ad agencies plan and create marketing campaigns and place ads in various media. Planning consists of identifying and analyzing the market for a particular product or service, evaluating alternative methods of reaching the target market, and choosing the media or promotional efforts that will most effectively reach that particular market. Media include broadcast television, cable TV, magazines, newspapers, direct mail, radio, yellow pages (or directories), the Internet, outdoor displays (billboards, public transportation, bus shelters, etc.), and others. After the campaign is created, the agency places orders for time or space in the selected media. The functions of a general ad agency include interacting with clients (i.e., account services), designing ad campaigns (creative), making the actual ads (production), advising on placement (media planning), and booking and coordinating the appearance of the ad (media buying).  Boutiques. A full marketing program includes not only traditional advertising, but also other efforts to boost product awareness, and, ultimately, sales. Although most boutiques operate independently, many are owned by large holding companies, and their activities are often coordinated with those of affiliated ad agencies. Boutiques often specialize in particular marketing services. The various kinds of boutiques are detailed below. Direct marketing/direct response agencies provide strategic planning, creative services, database design and management, media buying, fulfillment services, and list buying/management. Direct marketing is any direct communication to a consumer or business that is designed to elicit a response. Responses can include an order, a request for further information, and/or a visit to a store or business to purchase a specific product or service. Direct marketing may use one or more advertising media, such as telephone marketing, direct mail, or the Internet. Because advertisers are able to track customers’ responses, they gain valuable information on purchasing preferences, demographics, and spending patterns. Public relations (PR) agencies provide services that include media relations, marketing support, corporate communications, crisis management, advertising and marketing communications, and internal INDUSTRY SURVEYS

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communications. The goal is to build a favorable image of a corporation, its brands, and its products. Similarly, when the reputation of a company’s major brand is threatened, PR attempts to control the severity or extent of the damage. Branding/logo/identity consultants are agencies that provide the following services: brand strategies, name development, corporate identity, package design, retail design, and brand valuation, among others. Sales promotion companies provide services that include promotional marketing, premium design and production, and marketing communications. Sales promotion companies usually concentrate on developing ideas for product promotion separate from media advertising or direct marketing. Examples include centsoff coupons and/or rebates, and the production of items with company logos (e.g., toys, shirts, hats, golf balls, or pens). Field marketing agencies provide many services, from product manufacturing to its delivery. They are directly involved in putting the product in the consumer’s hands. This can include any of the following services: merchandising, point-of-sale product demonstration and coupon distribution, telemarketing, and warehouse distribution, among others. Interactive agencies are the newest in the ad industry, having emerged in response to the rapid growth of online interaction. Interactive agencies design and monitor websites for their clients, as well as produce a multitude of Internet marketing services. Interactive agencies also produce freestanding kiosks (commonly seen in the cosmetics and automotive industries), where consumers can design their own products online or find information about a particular product. Specialty agencies concentrate on one product area (such as financial, health, or medical) and provide numerous services to their clients. These include financial services advertising, financial notices (tombstone) placement, financial printing, medical/pharmaceutical advertising, pharmaceutical print items and/or videos, placement of recruitment ads in various media, and the like. Sports marketing companies provide sponsorship and sports marketing consultancy; event management and ownership; athlete representation; sports TV programming; the production, sale, and distribution of sports TV rights globally; and the management of global sports circuits and events. New products a plus Product introductions are good news for ad agencies and advertising media, for a number of reasons. First, the absolute number is very high: thousands of new products (including brand extensions) are introduced annually. Second, new products typically require larger promotional budgets than do established brandname products or extensions of existing brands. In many instances, new products differ little from existing products, so heavy promotion is especially important. Finally, with 10% to 20% of new product introductions succeeding, the universe of established products vying for consumer attention continues to grow, despite the demise of many once-familiar products each year. Client relationships crucial Developing and maintaining client relationships is essential in the ad industry. In some cases, smaller agencies exist solely because of one or two big accounts—thus, maintaining good client relationships is vital to their continued operations. An ad agency’s indirect customers are the consuming public. Ultimately, an advertisement’s success or failure depends on whether it reaches the target market and encourages consumers to buy more products. Therefore, not only does the agency have to sell its services to the direct client, but it must also persuade the consumer to accept the client’s product or cause. Contracts between agencies and their clients customarily provide for termination by either party on relatively short notice, typically 90 days. Clients are thus able to move from one agency to another with relative ease. This arrangement puts unyielding pressure on the agency to find and keep the best creative talent. 28

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Clients prefer not to be represented by an agency that handles competing products or services for other advertisers. Consequently, an agency must be careful not to enter into a new client agreement that conflicts with any existing clients. However, some client overlap will occur in specialty agencies that focus on advertising for a specific industry (e.g., financial or medical recruitment agencies). These agencies hone their industry experience, and their clients capitalize on the agency’s knowledge of the industry. To minimize conflicts, agencies often seek clients in “open categories of business”—that is, in industries where the agency does not already have a presence. When pitching to a client in an open category of business, the agency must develop the skills and knowledge necessary to service the client. Investing in the resources to gain this knowledge can be costly, so the agency must evaluate the financial impact of pitching in an open category of business before taking on such an endeavor. Compensation arrangements Clients are increasingly requiring that their agencies provide return on advertising investment metrics. Thus, after resisting for many years, agencies have finally agreed to replace a traditional commission-based fee structure with fee-based remuneration for their creative work. Clients also are clamping down on markups for third-party work, once a profitable industry practice. Other drains on profits are low interest rates and stricter invoicing arrangements, which are making the placement of media payments on short-term deposits less profitable.  Cost-plus fee. This kind of contract is negotiated for an overall flat fee based on the annual cost of servicing an account, in addition to out-of-pocket production expenses that are billed at cost plus an agreedupon markup percentage.  Sliding scale fee. Contracts negotiated for a sliding scale fee are based on the volume of services provided to the client. Sliding scale arrangements generally include an initial fee, with decreasing rates for services as predetermined thresholds are met.  Fixed-rate commission. In a fixed-rate arrangement, if the agreed-upon rate is 10%, then the agency’s fee will be 10% of all monies spent. Seasonality Seasonality is a factor in the timing and level of advertising spending, and therefore agency revenues. Advertising spending tends to be higher during the second and fourth quarters of the calendar year. Fourthquarter spending is usually highest, as advertising ramps up during the holiday season. Competitive environment Ad agencies face competitive pressures from two directions: broad-based global companies and regional niche companies. Frequently, they must also compete with clients’ in-house ad and marketing departments. Competition among large agencies presents a challenging situation because most clients prefer not to be represented by an agency that handles products or services for competing advertisers. The ad industry has sidestepped this difficulty by forming agency groups, in which the agencies remain independent and may compete with one another, even though they are owned by the same parent company. As a result, these larger agencies gain advantages of scale relative to their smaller peers, including greater media buying power, a broader creative pool, deeper managerial bench strength, and increased financial stability. Regionally focused agencies often position themselves as more closely attuned to local and regional markets, at lower costs and with better customer service. Some have adopted the integrated marketing concept, in which traditional ad services are supplemented by sales, marketing, and promotional services not traditionally offered by ad agencies. There are also numerous small, privately held advertising firms. Barriers to entry are low for the industry, since ad and marketing businesses generally do not require significant capital for start-up. The industry is labor intensive, so employee compensation and related occupancy costs are the major cost categories.

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KEY INDUSTRY RATIOS AND STATISTICS We see various types of macroeconomic data, demographic, and industry-specific data being helpful for measuring and forecasting the shape and trends of the publishing and advertising industries. We outline some of these tools below.  Advertising spending. Historic and projected advertising sales can serve as an indicator of general health for various media, including newspapers and magazines. It is also important to look into the health of the various categories to which various media outlets are exposed. For example, newspapers may receive a sizable amount of their advertising from local retailers, while specialized magazines may be more dependent on manufacturers of products (e.g., recreational products) who are looking to sell to the publication’s target audience. Historic and projected data are reported by various trade magazines and at the websites of industry associations and research providers. The health of media ad spending contributes to the pace and direction of revenues at RELATIONSHIP BETWEEN ECONOMIC FACTORS AND ADVERTISING EXPENDITURES various ad agencies. PERSONAL CONSUMPTION CORPORATE PRETAX ADVERTISING EXPENDITURES PROFITS EXPENDITURES† BIL. $ INDEX* BIL. $ INDEX* BIL. $ INDEX*

 Consumer confidence. The most widely followed YEAR consumer confidence survey Table B07: 2009 14,256.3 181.9 10,089.1 191.3 1,308.9 163.3 NA NA is conducted by the RELATIONSHIP 2008 14,441.4 184.2 10,129.9 192.1 1,360.4 169.7 171.9 164.0 Conference Board, a BETWEEN 2007 14,077.6 179.6 ECONOMIC 9,826.4 186.3 1,541.7 192.4 179.3 171.0 private, nonprofit, research FACTORS 2006 13,398.9 170.9 AND 9,322.7 176.8 1,608.3 200.7 175.1 167.0 organization, which polls ADVERTISING 2005 12,638.4 161.2 8,819.0 167.2 1,456.1 181.7 166.2 158.5 5,000 representative US EXPENDITURES 2004 11,867.8 151.4 8,285.1 157.1 1,246.9 155.6 161.5 154.0 households to gauge 2003 11,142.1 142.1 7,804.0 148.0 977.8 122.0 152.3 145.2 consumer sentiment. A high 2002 10,642.3 135.8 7,439.2 141.1 872.2 108.8 149.8 142.8 level of consumer 2001 10,286.2 131.2 7,148.8 135.6 784.2 97.8 147.2 140.4 confidence generally signals 2000 9,951.5 127.0 6,830.4 129.5 819.2 102.2 156.7 149.4 that people feel good about 1999 9,353.5 119.3 6,342.8 120.3 856.3 106.8 139.9 133.5 the economy, their job 1998 8,793.5 112.2 5,918.5 112.2 812.4 101.4 120.7 115.2 1997 8,332.4 106.3 5,570.6 105.6 884.8 110.4 112.0 106.9 prospects, and their future 1996 7,838.5 100.0 5,273.6 100.0 801.5 100.0 104.9 100.0 earnings ability. Rising *1996=100. †Measured media. NA-Not available. index levels may indicate Source: US Department of Commerce; †ZenithOptimedia, as reported in Advertising Age . that consumers expect further economic growth in the months ahead, which should generally bode well for publishers’ advertising and circulation sales. Even when confidence levels are relatively low, we think that the comparatively low cost of print publications versus other forms of entertainment should bolster their appeal to consumers. GROSS DOMESTIC PRODUCT BIL. $ INDEX*

 Cost-per-thousand (CPM). This refers to the price of reaching 1,000 households or readers with an advertisement. It can be used as a measure of cost efficiency, enabling advertisers to compare opportunities in various media. In addition, changes in CPM pricing may be used as a gauge of pricing power for a particular medium or publication.  Currency exchange rates. Revenues and earnings from international operations, which are generally denominated in local currencies, are subject to the risks of currency exchange rate fluctuations. For US companies, financial results from international markets would be translated back into dollars, with a weaker dollar generally being favorable. In our view, among major publishing and advertising categories, we see major ad agencies as the most likely to be affected by currency fluctuations, due to their broad geographic scope. Various US magazine publishers have extended their brands into foreign markets, which also could cause them to have some currency exposure. In general, we see US newspaper publishers as being much less likely to be affected by exchange rates, since the bulk of their operations are in the US.  Demographics. Measuring the size and growth rates for various parts of the population should be useful in projecting changes in book, newspaper, and magazine readership, including the manner in which reading material is accessed. For example, we believe that consumers under the age of 35 are more likely than their 30

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older counterparts to seek and consume reading material on computers and other digital platforms. Older consumers are likely to have more appreciation for traditional printed products. Demographic data can be particularly helpful in getting a general idea of the long-range growth prospects for various segments of the economy and in understanding certain target markets. Sources of population data include the US Census Bureau (http://www.census.gov) and American Demographics magazine (http://www.demographics.com). These statistics play central roles in both television and radio advertising, particularly when a market is highly segmented. 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. Statistics on key groups are available from the US Census Bureau and magazines such as American Demographics.  Gross versus net revenues. For the publishing industry, advertising and subscription revenues can be reported in a number of ways. In general, we see gross revenues being based on rate cards (i.e., posted prices), while net revenue is a better reflection of what a publisher actually receives after discounts have been applied. Following negotiations over price, we think that a publisher’s net ad revenue is often much less than gross revenue. However, we expect that gross revenue may often be easier to compute, especially for individual publications, since it would not require disclosure or estimates of price discounting.  Local and regional economies. For publications whose target audience is largely within a particular locality or region, the economic health of that geographic area is likely to affect advertising trends within that market. We would expect factors such as employment levels, consumer income, retail sales, and store openings to have an impact on advertising demand.  Measured media. These are the various advertising platforms for which audience or distribution data is compiled. Major examples include television, radio, newspapers, magazines, and the Internet. Other forms of marketing, such direct mail and promotional activity, are considered to be unmeasured media.  Paper inventories. Although we see published material and readership increasingly moving to digital platforms, paper is still an important cost component for many publishers. Monthly statistics and other information on newsprint, coated paper, and uncoated paper pricing trends, manufacturing capacity, and exports and imports are provided by the US Department of Commerce, Pulp & Paper Week magazine, and the American Forest & Paper Association.  Real growth in gross domestic product (GDP). Reported quarterly by the US Department of Commerce, real GDP measures the change in the nation’s output of goods and services, adjusted for inflation. It thus indicates the overall health of the country’s economy. We see advertising as both a stimulus and reflection of consumer spending, which accounts for roughly 70% of US GDP.  School/college enrollment trends. Trends in elementary, high school, and college enrollment are essential for projecting textbook sales. Enrollment levels influence demand for textbooks, particularly for college textbook sales. A primary source of enrollment data is the National Center for Education Statistics (http://nces.ed.gov), an agency within the US Department of Education that collects and analyzes data related to education. According to estimates from the Census Bureau and the Department of Education, school enrollments are being boosted by two developments. The first of these is rising immigration—the immigrant population nearly tripled between 1970 and 2000, and, by 2003, more than one of every five students had at least one parent who was foreign born. The second factor is the “echo boom,” the 25% increase in the birth rate that occurred between the mid-1970s and 1990. Student enrollments (both public and private, from elementary through high school) were projected to reach a record 55.6 million in the fall of 2009. At 53.4 million in 2000, enrollments were up only slightly from the 51.3 million level reached in 1970. However, enrollments are projected to reach about 60.5 million in 2017. Enrollment in degree-granting institutions has steadily risen from 8.6 million in 1970 to a projected 18.4 million in 2009, and this figure is forecast to grow to approximately 20.1 million in 2017. INDUSTRY SURVEYS

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HOW TO ANALYZE A PUBLISHING OR ADVERTISING COMPANY While each industry has unique aspects to analyze, there are also a number of significant common factors among publishers, ad agencies, and holding companies.

THE ECONOMY INFLUENCES ADVERTISING DEMAND Newspapers, magazines, 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 get 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. For many publishers, we think that economic conditions at the local or regional level can exert a greater force on advertising health than do those of the nation at large. This would be particularly true for newspapers, many of which have a much narrower geographic focus than magazines. In addition, we view some industries as being more economically sensitive than others, which is likely to cause relatively large swings in related ad spending. Examples include the housing and auto industries. In addition to economic factors, we see newspaper and magazine publishers being vulnerable to changes in technology and reading patterns. We think that time spent retrieving information on the Internet is often at the expense of traditional print publications. Where readers go, advertisers are likely to follow. For ad agencies, a diversified client base should help to provide some protection from economic declines or downturns in specific industries. We also note that the world’s largest agencies derive a substantial portion of revenues from many regions outside their home country; thus, the effect of a weak US economy may be offset by strength in overseas economies, for example. Circulation and book purchases It is harder to quantify the impact of the economy on newspaper and magazine circulation or on general book purchases. On the one hand, periods of recession or high unemployment may force some consumers to cut back on discretionary purchases of newspapers, magazines, and books. On the other hand, during such hard times, consumers may view these relatively inexpensive purchases as even more important, while they reduce what they spend on theater tickets, restaurants, or other expensive items. College book-buying trends are also strongly affected by economic conditions, because a growing proportion of the student population is nontraditional (i.e., older than age 25). Inasmuch as this trend benefits trade schools and two-year colleges, it also bolsters sales of professional and vocational books. During difficult economic times, school enrollment rises as unemployed workers return to acquire new skills or to hone current abilities. Because a slow economy often means fewer job prospects, more graduating high school seniors may consider entering college or trade school. At the same time, however, students generally have fewer dollars to spend on textbooks and related literature. Thus, many will buy fewer books, if possible, or they will purchase used books. With respect to elementary through high school (el-hi) textbooks, more than 90% of the funding for these purchases comes from state and local governments. Thus, economic conditions at the state and local levels play a large part in el-hi school spending. Competitive environment The level and type of competition in a market can affect competing advertising media unevenly. Therefore, in addition to considering overall advertising health, it is important to consider competitive factors. We see newer digital media, such as the Internet, providing both new distribution opportunities and increased competition for print publishers. We see growing penetration of broadband Internet access opening the way for further fragmentation of the media and advertising pie. 32

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For publishers, other parts of the competitive landscape include cable companies, local TV and radio stations, and national TV and radio networks. Also, in some markets, paid circulation publications faces challenges from other print media such as free newspapers, who look to bolster advertising demand through the circulation they generate.

ANALYSIS OF MANAGEMENT Making an assessment about the quality and experience of a management team can give an analyst important insight into the direction of a company. An analyst should consider the following factors when assessing the quality of a company’s management.  Long-term or short-term focus. Do managers have a long-term focus on the overall health of the business, or do they seem preoccupied with meeting short-term results? For example, a long-term view might be attributed to a company that focuses on customer satisfaction ratings or reader engagement and reach statistics regardless of the cyclical status of the environment.  Executive pay. Is the executive pay structure aligned to shareholder interests? Executives that receive significant compensation regardless of their performance would be an indicator that pay incentives are not properly aligned.  Management results. What is the management team’s track record for guiding the company? Does it have a long-term vision for the company and strategic plans to reach that vision, or does the company’s direction often change?  Management structure. Does the company’s management structure make sense for its business? Ad agencies, for example, are structured differently than other companies. Most corporations are structured around product lines, brands, services, or other business units; ad agencies, in contrast, are structured around client accounts. Because clients come and go, and account needs change, openness and flexibility are important aspects of an ad agency’s culture. Financial indicators A thorough review should be done that compares a company’s performance on various financial indicators versus its peers, including revenue growth, cash flow yield, the operating margin, and balance sheet data. However, it is not sufficient to simply analyze the relative position of a company versus its peer group; the health of the overall industry must also be considered. The newspaper industry, for example, generally boasts strong operating margins and cash flow yields compared with other industries. Over the past few years, however, these ratios have generally declined, and newspaper stock prices have fallen in tandem. Thus, it is vitally important to understand both the direction that financial indicators are moving in and their overall positioning relative to a company’s peers.

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. 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. 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 revenue and circulation breakdowns. On average, magazines receive about 60% to 65% of their revenues INDUSTRY SURVEYS

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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 company’s major advertisers? Is the mix diversified, or is it weighted heavily toward one product or industry? In general, the more diverse a publication’s advertisers, the greater its ability to weather the ad market’s vagaries. 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. 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 such sources as Advertising Age magazine, ZenithOptimedia’s Advertising Expenditure Forecasts, the Newspaper Association of America, and the Magazine Publishers of America. However, we caution that definitions may vary on what is included in various categories and in how such data as advertising revenue is measured (for more on this, see the “Key Industry Ratios and Statistics” section of this Survey). 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 publisher’s 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 company’s 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 publication’s audience demographics helps the analyst understand trends in the publisher’s 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 publishers For book publishers, revenue from unit sales is the main source of income. Beyond that, it is important to analyze a company’s sales mix.

34

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INDUSTRY SURVEYS


 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 strong— boosted by, for example, a new installment 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 publisher’s 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. As explained in the “How the Industry Operates” section of this Survey, state adoption cycles play key roles in el-hi publishing. Demographics, economic conditions, recruitment efforts, and other factors affect college enrollments and college textbook sales. Demographic trends and economic cycles can affect trade, general, professional, and other noneducational book segments in various ways. For example, demographic trends now favor 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 labor, paper, production, and distribution.  Labor costs. 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.  Paper costs. Paper is the second largest cost item for a typical publisher; as such, its pricing trends are critical to the publisher’s profit margin. As paper is a cyclical commodity, its prices can change rapidly. The analyst should find out what each company is paying on average for paper, and compare these amounts to list prices and peer averages. Many paper users are able to negotiate discounts on quoted list prices from manufacturers, a practice that is particularly common during soft paper cycles. More often than not, the size of these discounts is significant. Although publishers may keep only one or two months’ paper inventory on hand, many negotiate longer-term contracts at set prices. Thus, paper price increases and decreases will not affect such publishers until their contracts expire and come up for renegotiation. Look at paper-consumption patterns on both an industrywide basis and a company-by-company basis. If one publisher cuts pages or frequency, trims page size, or closes publications, its paper usage will decrease and so will its costs. The launch of a new magazine obviously will raise a publisher’s paper usage and thus its paper costs. Strong advertising requires more pages per issue, also boosting usage.  Production and distribution costs. In addition to paper, production costs include such items as ink and machinery, or—if printing and production are farmed out—printers’ fees. Postage and other distribution costs are also key factors affecting profits for all sectors, although the impact of these cost items varies by company. For example, a magazine publisher with a large subscription base will be more affected by a hike in postage than a publisher largely dependent on newsstand sales.

INDUSTRY SURVEYS

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35


The analyst should take note of capital spending plans. Is the publisher planning (or in the midst of) plant expansion or modernization? Is it playing catch-up with its peers, or is it in step with or ahead of the crowd in terms of its physical operations? What industrywide upgrades are publishers preparing for or talking about?

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. As a result 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 company’s hiring practices can be gleaned from how many industry awards a company wins versus its peers. Industry awards include the Gold Lion, Palme d’Or, and Grand Prix (Cannes Lions International Advertising Festival); the ECHO (Direct Marketing Association, for direct marketing); the O’Toole (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 agency’s 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 agency’s 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 outperform its peers. Another important consideration is product diversity. Many of the largest agencies today generate significant portions of revenue from nontraditional 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 analyzing revenues, it is important to determine what percentage of a company’s business is based on billings, as opposed to other fee arrangements. Under the billings-based arrangement, an agency’s compensation is calculated as a fixed percentage of the client’s 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. 36

PUBLISHING & ADVERTISING / MAY 27, 2010

INDUSTRY SURVEYS


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, are highly visible and may be used as benchmarks. In addition to the performance indicators mentioned in the financial indicators section, analysts may also consider the following: occupancy trends, comparisons of square footage to headcount, payroll as a percentage of revenue, liquidity/cash management, pretax 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. ď Ž

INDUSTRY SURVEYS

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37


INDUSTRY REFERENCES PERIODICALS

TRADE ASSOCIATIONS

Advertising Age http://www.adage.com Biweekly; marketing and advertising news.

The American Advertising Federation http://www.aaf.org Trade group that promotes advertising.

Adweek http://www.adweek.com Daily; covers news and information about advertising, marketing, and media.

American Association of Advertising Agencies (AAAA) http://www.aaaa.org Represents US agencies; offers broad range of services, information, and expertise regarding the ad agency business.

Book Industry Trends http://www.bisg.org/publications/index.html Annual study; provides analysis and predicts developments in the book publishing industry. Broadcasting & Cable http://www.broadcastingcable.com Weekly; covers news in the television, radio, and cable industries. Editor & Publisher http://www.editorandpublisher.com Weekly; coverage of developments in newspapers. Publishers Weekly http://www.publishersweekly.com Weekly; covers book publishing and marketing. The Wall Street Journal http://www.wsj.com Daily business newspaper; covers industry news and features in “Media & Marketing� section. ONLINE RESOURCES The Conference Board http://www.conference-board.org Disseminates statistics and makes forecasts on consumer sentiment and business trends globally. Internet World Stats http://www.internetworldstats.com Internet data consolidator. NewsVoyager.com http://www.newsvoyager.com Provides links to newspapers in the United States and around the world.

38

American Booksellers Association http://www.bookweb.org Association of independently owned retail book stores; provides members with advocacy, information, research, and education services. American Business Media (ABM) http://www.americanbusinessmedia.com Association of business information providers; provides monthly and quarterly data on advertising revenues for business-to-business magazines. Association of American Publishers Inc. (AAP) http://www.publishers.org Trade group; lobbies on behalf of members and industry, sets standards, gives awards, and provides book publishing statistics. Association of National Advertisers (ANA) http://www.ana.net Dedicated to marketing and brand building. Provides research, training, legislative assistance, and networking opportunities to more than 300 companies representing 8,000 brands. Publishes Trends in Agency Compensation, a triennial survey, and Advertiser, a magazine written by and for advertisers. Cabletelevision Advertising Bureau (CAB) http://www.thecab.tv Represents cable system operators and programmers; provides advertising and marketing assistance to members and advertisers, compiles statistics, and promotes cable advertising.

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INDUSTRY SURVEYS


The Direct Marketing Association (DMA) http://www.the-dma.org Represents more than 4,700 members worldwide, including users and suppliers in the direct, database, and interactive marketing fields. The Interactive Advertising Bureau (IAB) http://www.iab.net Represents online, wireless, interactive television, and other emerging platform media; provides information and expertise to members and advertisers. Magazine Publishers of America (MPA) http://www.magazine.org Industry association for consumer magazines; lobbies on behalf of members and industry, compiles statistics, and conducts research. Its Publishers Information Bureau (PIB) division measures magazine advertising spending and advertising pages by category and title. National Association of College Stores http://www.nacs.org Association of college stores; provides many member services, including advocacy, lobbying, research, information, education, and professional development services. Newspaper Association of America (NAA) http://www.naa.org Trade association for newspapers; lobbies on behalf of members and industry, sets standards, gives awards, and compiles statistics. Conducts research and public relations for the industry; publishes Facts About Newspapers annually.

RESEARCH FIRMS Audit Bureau of Circulations (ABC) http://www.accessabc.com Not-for-profit auditing organization supported jointly by publishers, ad agencies, and advertisers; its purpose is to verify the circulation statements of member newspaper and magazine publishers. Most daily newspapers are ABCaudited. Kantar Media http://www.tns-mi.com Part of the Kantar Group, Kantar provides marketing communication and advertising expenditure information to ad agencies, advertisers, broadcasters, and publishers. Previously known as TNS Media Intelligence. Mediamark Research Inc. (MRI) http://www.mediamark.com Provider of multimedia audience research. SRDS Media Solutions http://www.srds.com A leading provider of media rates and data. ZenithOptimedia http://www.zenithoptimedia.com Media services group that is owned by communications and advertising company Publicis Groupe. Research includes data on advertising industry revenues.

Radio Advertising Bureau (RAB) http://www.rab.com Represents radio broadcasters; provides advertising and marketing statistics, promotes favorable advertising climate, and assists stations in their marketing efforts. Television Bureau of Advertising (TVB) http://www.tvb.org Represents television broadcasters; provides advertising statistics, and promotes a favorable advertising climate in the TV industry.

INDUSTRY SURVEYS

PUBLISHING & ADVERTISING / MAY 27, 2010

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COMPARATIVE COMPANY ANALYSIS — PUBLISHING & ADVERTISING Operating Revenues Million $ Ticker

Company

PUBLISHING & PRINTING‡ DM § DOLAN MEDIA CO GCI [] GANNETT CO MHP [] MCGRAW-HILL COMPANIES MDP [] MEREDITH CORP NYT [] NEW YORK TIMES CO -CL A

Yr. End

2009

2008

2007

2006

DEC DEC DEC JUN DEC

262.9 A 5,613.0 5,951.8 1,408.8 D 2,440.4 D

189.9 A 6,767.6 A,C 6,355.1 1,595.2 D 2,948.9

152.0 A 7,439.5 A,C 6,772.3 1,616.0 D 3,195.1

111.6 8,033.4 6,255.1 1,597.6 3,289.9

# MAY DEC DEC # APR

NA 802.4 D 4,569.7 NA

1,849.3 1,001.8 D 4,461.6 A 1,611.4

2,205.6 D 2,517.1 4,180.4 1,673.7

2,179.1 2,498.1 A,C 3,904.9 1,234.9 A

ADVERTISING‡ ARB § ARBITRON INC HHS † HARTE HANKS INC IPG [] INTERPUBLIC GROUP OF COS LAMR † LAMAR ADVERTISING CO -CL A OMC [] OMNICOM GROUP

DEC DEC DEC DEC DEC

385.0 860.1 6,027.6 1,056.1 A 11,720.7 C

368.8 1,082.8 A 6,962.7 1,198.4 A 13,359.9

338.5 D 1,162.9 6,554.2 1,209.6 A 12,694.0

OTHER MAJOR PUBLISHERS MSO MARTHA STEWART LIVING OMNIMD MNI MCCLATCHY CO -CL A PSO PEARSON PLC -ADR PRM PRIMEDIA INC ENL REED ELSEVIER NV -ADR

DEC DEC DEC DEC DEC

244.8 1,471.6 9,092.3 A 257.9 282.3

284.3 A 1,900.5 7,033.2 A 304.1 332.7

327.9 2,260.4 8,258.7 A,C 314.8 D 1,172.6

285.8 1,675.2 A,C 8,102.7 A,C 849.3 D 600.5

RUK TRI

DEC DEC

377.2 11,707.0 A,C

1,305.7 7,296.0 A,C

671.8 6,641.0 A,C

SCHL SSP WPO JW.A

† § [] †

SCHOLASTIC CORP EW SCRIPPS -CL A WASHINGTON POST -CL B WILEY (JOHN) & SONS -CL A

REED ELSEVIER PLC -ADR THOMSON-REUTERS CORP

344.4 12,997.0

OTHER COMPANIES WITH SIGNIFICANT PUBLISHING OPERATIONS DIS [] DISNEY (WALT) CO SEP 36,149.0 DNB [] DUN & BRADSTREET CORP DEC 1,687.0 TV GRUPO TELEVISA SAB -ADR DEC NA NWSA [] NEWS CORP JUN 30,423.0 A TWX [] TIME WARNER INC DEC 25,785.0 D

37,843.0 1,726.3 3,468.2 32,996.0 A 46,984.0

35,510.0 1,599.2 3,807.1 28,655.0 46,482.0

VIA.B

[] VIACOM INC

BOOK RETAILERS AMZN [] AMAZON.COM INC BKS BGP

† BARNES & NOBLE INC BORDERS GROUP INC

A A A D

329.3 1,184.7 6,190.8 1,120.1 A 11,376.9

34,285.0 A 1,531.3 3,512.4 25,327.0 A,C 44,224.0 A,C

2004

1999

10-Yr.

** 141 170 156 102

** 153 157 154 105

NA 144 150 118 108

2,283.8 2,513.9 A,C 3,553.9 1,044.2 A

2,079.9 2,167.5 3,300.1 974.0

1,402.5 1,571.3 2,215.6 594.8 A

NA NA NA (6.5) (18.0) (19.9) 7.5 6.7 2.4 NA NA NA

NA 51 206 NA

132 64 201 271

157 160 189 281

155 159 176 208

163 160 160 176

296.6 1,030.5 6,387.0 883.5 A 9,747.2 A

190.1 829.8 4,427.3 444.1 5,130.5

4.4 (20.6) (13.4) (11.9) (12.3)

202 104 136 238 228

194 130 157 270 260

178 140 148 272 247

173 143 140 252 222

163 137 142 230 204

209.5 1,186.1 7,040.2 A,C 990.6 A,C 401.4

187.4 A 1,163.4 7,596.9 A 1,307.1 D 1,157.5

232.3 1,087.9 5,381.2 A 1,716.1 612.3

0.5 5.5 (13.9) 3.1 4.8 (22.6) 5.4 3.7 29.3 (17.3) (27.7) (15.2) (7.4) (24.6) (15.1)

105 135 169 15 46

122 175 131 18 54

141 208 153 18 192

123 154 151 49 98

90 109 131 58 66

433.1 8,703.0 A,C

1,163.0 8,098.0 A,C

668.6 5,752.0 A,C

52 226

56 204

195 127

100 115

65 151

154 86 NA 211 540

162 88 183 229 984

152 81 201 199 973

147 78 185 176 926

137 73 161 166 914

310.0 1,135.0 6,274.3 1,021.7 A 10,481.1 A

31,944.0 C 1,443.6 3,056.2 C 23,859.0 A 43,652.0

23,402.0 1,971.8 1,895.7 D 14,394.8 A 4,777.0 A

14,835.0

10,711.0

8,490.0

6,921.1

1,639.8 A

5,261.3 4,113.5

5,103.0 4,079.2

4,873.6 A,C 3,903.0

3,486.0 A 2,999.2 A

2,666.1 C 9,236.3 A

2,447.0 8,237.8 A

NA 3,514.8

MARKETING SERVICES APAC APAC CUSTOMER SERVICES INC ECGI ENVOY CAPITAL GROUP INC HPOL HARRIS INTERACTIVE INC INOC INNOTRAC CORP SGRP SPAR GROUP INC

DEC SEP JUN DEC DEC

VCI

DEC

293.2 10.9 F 184.3 NA NA 2,244.2

248.8 16.4 F 238.7 131.4 69.6 2,381.9

3,281.8 A 12,274.7

224.7 12.5 F 211.8 A,C 121.8 60.7 2,242.2 A

2,897.7 A 11,571.0

224.3 8.7 D,F 216.0 82.3 A 56.5 1,043.5

9,609.6

30,752.0 1,414.0 2,628.1 20,458.3 42,089.0

A A A A

19,166.0

3,289.3 10,930.5

2005

** 129 159 154 94

24,509.0 A

2,698.0 14,039.9

2006

** 107 149 136 78

DEC

DEC DEC

2007

NA 38.4 (5.3) (17.1) 2.5 (6.3) 3.9 (11.7) (5.9) (17.2)

11,466.5 A,C

5,410.8 3,820.9 D

2008

NA 0.7 4.1 3.1 (2.5)

13,423.1 D

5,121.8 D 3,275.4 D

2009

NA 5,260.2 A,C 3,992.0 A 1,036.1 3,130.6

14,625.0

NA 2,823.9

Index Basis (1999 = 100) 1-Yr.

NA 7,381.3 A,F 5,250.5 A,C 1,161.7 3,303.6

13,619.0

# JAN # JAN

5-Yr.

77.9 A,C 7,598.9 A,C 6,003.6 1,221.3 3,372.8

DEC

OTHER ADVERTISING AGENCIES CCO CLEAR CHANNEL OUTDOOR HLDGS WPPGY WPP PLC -ADR

VALASSIS COMMUNICATIONS INC

A,C D A A D

CAGR (%) 2005

239.8 37.2 A,C 197.0 A,C 73.9 51.6 1,131.0

8,132.2 A,C

273.2 32.3 D,F 146.0 A 78.3 51.4 1,044.1 A

NA

427.6 94.1 A 29.0 227.0 116.5 A 793.9

7.3 0.4 3.1 9.0 8.6

5.4 (3.5) (1.2) 3.6 3.8

(6.4) (21.6) 8.5 9.9

4.4 (1.5) NA 7.8 18.4 NA

(8.7) 11.0

3.3 (4.5) 3.6 (2.3) NA NA 8.3 (7.8) (9.3) (45.1) 10.9

(6.9)

31.1

28.8

27.9

NA (0.6)

NA NA (6.3) (13.8)

NA 14.9

2.0 11.3

**

**

**

NA

1,169

905

653

518

NA 94

147 109

155 127

151 137

146 136

(18.0) 28.4

** 399

** 311

** 349

** 329

NA 263

(3.7) 1.4 17.8 (19.4) (19.4) (33.4) 20.3 4.8 (22.8) NA NA NA NA NA NA

69 12 636 NA NA

58 17 824 58 60

53 13 731 54 52

52 9 746 36 49

56 39 680 33 44

283

300

282

131

142

11.0

16.5

(5.8)

1,495

**

Note: Data as originally reported. CAGR-Compound annual growth rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the following calendar year. **Not calculated; data for base year or end year not available. A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.

PUBLISHING & ADVERTISING INDUSTRY SURVEY

Data by Standard & Poor's Compustat — A Division of The McGraw-Hill Companies


Net Income Million $ Ticker

Company

CAGR (%)

Index Basis (1999 = 100)

Yr. End

2009

2008

2007

2006

2005

2004

1999

10-Yr.

5-Yr.

1-Yr.

2009

2008

2007

2006

2005

DEC DEC DEC JUN DEC

30.8 355.3 730.5 (102.5) 1.6

14.3 (6,647.6) 799.5 134.1 (66.1)

(54.0) 975.6 1,013.6 168.8 108.9

(20.3) 1,160.8 882.2 144.8 (568.2)

(5.7) 1,211.3 844.3 128.1 265.6

NA 1,317.2 756.4 110.7 292.6

NA 919.4 425.8 89.7 310.2

NA (9.1) 5.5 NM (41.1)

NA (23.1) (0.7) NM (64.9)

115.4 NM (8.6) NM NM

** 39 172 (114) 1

** (723) 188 150 (21)

** 106 238 188 35

** 126 207 161 (183)

NA 132 198 143 86

# MAY DEC DEC # APR

NA (192.0) 92.8 NA

13.2 (632.3) 65.7 128.3

110.6 (5.6) 288.6 147.5

60.9 397.2 329.5 99.6

68.6 222.6 314.3 110.3

64.3 303.8 332.7 83.8

51.4 146.9 225.8 52.4

NA NM (8.5) NA

NA NM (22.5) NA

NA NM 41.2 NA

** (131) 41 **

26 (430) 29 245

215 (4) 128 282

118 270 146 190

133 152 139 211

ADVERTISING‡ ARB § ARBITRON INC HHS † HARTE HANKS INC IPG [] INTERPUBLIC GROUP OF COS LAMR † LAMAR ADVERTISING CO -CL A OMC [] OMNICOM GROUP

DEC DEC DEC DEC DEC

42.2 47.7 121.3 (58.0) 793.0

40.5 92.6 167.6 46.2 975.7

50.7 111.8 (36.7) 43.9 864.0

67.3 114.5 (271.9) 41.8 790.7

60.6 97.6 (544.9) 13.2 723.5

39.7 72.9 321.9 (43.6) 362.9

0.6 (4.2) (9.3) NM 8.1

(7.0) (13.3) NM NM 1.9

13.3 (23.9) (58.9) NM (20.7)

106 65 38 NM 219

94 86 92 NM 276

102 127 52 NM 269

127 153 (11) NM 238

169 157 (84) NM 218

OTHER MAJOR PUBLISHERS MSO MARTHA STEWART LIVING OMNIMD MNI MCCLATCHY CO -CL A PSO PEARSON PLC -ADR PRM PRIMEDIA INC ENL REED ELSEVIER NV -ADR

DEC DEC DEC DEC DEC

(14.6) 60.3 687.1 4.5 313.9

10.3 (2,726.6) 617.1 (55.7) 1,248.6

(16.3) 183.5 846.1 (27.7) 604.4

(75.3) 160.5 553.5 (63.0) 400.3

(59.1) 155.9 168.6 6.4 301.9

25.6 82.5 474.8 (120.1) (48.3)

NM (3.1) 3.8 NM NM

NM NM (17.3) 2,046.9 32.4 23.0 (6.6) (90.7) 0.8 (23.3)

(57) 73 145 NM NM

(61) 3 118 NM NM

40 (3,304) 130 NM NM

(64) 222 178 NM NM

(294) 194 117 NM NM

RUK TRI

DEC DEC

315.3 821.0

352.3 1,405.0

1,238.2 1,096.0

626.8 919.0

403.9 926.0

291.2 863.0

(63.0) 437.0

NM 6.5

1.6 (1.0)

(10.5) (41.6)

NM 188

NM 322

NM 251

NM 210

NM 212

4,427.0 309.5 564.2 5,387.0 (13,402.0)

4,674.0 292.7 740.4 3,426.0 4,051.0

3,374.0 240.7 795.1 2,812.0 5,114.0

2,569.0 221.2 624.0 2,128.0 2,921.0

2,345.0 211.8 478.6 1,607.3 3,209.0

9.8 2.2 NA NM 10.6

7.1 8.6 NA NM (8.3)

(25.3) 3.2 NA NM NM

254 125 ** (347) 273

341 121 457 554 (1,759)

360 114 600 352 532

260 94 644 289 671

198 86 506 219 383

1,233.0

1,630.2

1,570.3

1,303.9

1,392.9

NA

NA

2.7

29.0

**

**

**

**

NA

PUBLISHING & PRINTING‡ DM § DOLAN MEDIA CO GCI [] GANNETT CO MHP [] MCGRAW-HILL COMPANIES MDP [] MEREDITH CORP NYT [] NEW YORK TIMES CO -CL A SCHL SSP WPO JW.A

† § [] †

SCHOLASTIC CORP EW SCRIPPS -CL A WASHINGTON POST -CL B WILEY (JOHN) & SONS -CL A

REED ELSEVIER PLC -ADR THOMSON-REUTERS CORP

OTHER COMPANIES WITH SIGNIFICANT PUBLISHING OPERATIONS DIS [] DISNEY (WALT) CO SEP 3,307.0 DNB [] DUN & BRADSTREET CORP DEC 319.4 TV GRUPO TELEVISA SAB -ADR DEC NA NWSA [] NEWS CORP JUN (3,378.0) TWX [] TIME WARNER INC DEC 2,079.0 VIA.B

[] VIACOM INC

BOOK RETAILERS AMZN [] AMAZON.COM INC BKS † BARNES & NOBLE INC BGP BORDERS GROUP INC

DEC

1,591.0

37.2 62.7 295.0 9.7 1,000.3

(15.7) 2.8 558.4 49.0 409.2

DEC # JAN # JAN

902.0 NA (110.2)

645.0 85.4 (184.7)

OTHER ADVERTISING AGENCIES CCO CLEAR CHANNEL OUTDOOR HLDGS WPPGY WPP PLC -ADR

DEC DEC

(868.2) 707.6

(2,851.1) 641.9

MARKETING SERVICES APAC APAC CUSTOMER SERVICES INC ECGI ENVOY CAPITAL GROUP INC HPOL HARRIS INTERACTIVE INC INOC INNOTRAC CORP SGRP SPAR GROUP INC

DEC SEP JUN DEC DEC

58.1 (9.8) (75.3) NA NA

3.0 (10.8) (84.7) 3.3 0.1

VCI

DEC

66.8

(207.5)

VALASSIS COMMUNICATIONS INC

1,300.0 256.0 123.4 972.5 762.0

476.0 135.8 (18.5)

190.0 150.5 (151.3)

333.0 146.7 101.0

588.5 123.4 131.9

(720.0) 129.0 90.3

NM NA NM

8.9 NA NM

39.8 NA NM

NM ** (122)

NM 66 (205)

NM 105 (20)

NM 117 (168)

NM 114 112

246.0 924.5

153.1 853.6

61.6 625.5

7.5 560.0

NA 279.6

NA 9.7

NM 4.8

NM 10.2

** 253

** 230

** 331

** 305

NA 224

5.1 2.7 9.0 0.7 (2.5)

(30.5) (4.8) 9.5 (5.3) (0.6)

(22.4) 3.6 4.5 (4.7) 0.9

(6.5) (2.1) 29.9 0.1 (12.3)

5.7 2.0 (8.8) 9.8 (0.5)

26.2 NM NM NA NA

NM 1,822.9 NM NM NM NM NA NA NA NA

1,027 (499) NM ** **

53 (550) NM 33 NM

90 135 NM 7 NM

(541) (247) NM (54) NM

(396) 182 NM (47) NM

58.0

51.3

95.4

100.7

(171)

48

42

79

121.1

(5.8)

(7.9)

NM

55

Note: Data as originally reported. CAGR-Compound annual growth rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the following calendar year. **Not calculated; data for base year or end year not available.

PUBLISHING & ADVERTISING INDUSTRY SURVEY

Data by Standard & Poor's Compustat — A Division of The McGraw-Hill Companies


Return on Revenues (%) Ticker

Company

Return on Assets (%)

Return on Equity (%)

Yr. End

2009

2008

2007

2006

2005

2009

2008

2007

2006

2005

2009

2008

2007

2006

2005

DEC DEC DEC JUN DEC

11.7 6.3 12.3 NM 0.1

7.5 NM 12.6 8.4 NM

NM 13.1 15.0 10.4 3.4

NM 14.4 14.1 9.1 NM

NM 15.9 14.1 10.5 7.9

6.2 4.8 11.6 NM 0.0

4.1 NM 12.9 6.5 NM

NM 6.1 16.3 8.2 3.0

NM 7.3 14.2 8.2 NM

NA 7.8 13.8 8.7 6.3

13.1 26.7 46.7 NM 0.3

8.1 NM 55.3 16.5 NM

NM 11.2 47.3 22.1 12.1

NA 14.6 30.5 21.5 NM

NA 15.4 27.7 20.7 18.2

# MAY DEC DEC # APR

NA NM 2.0 NA

0.7 NM 1.5 8.0

5.0 NM 6.9 8.8

2.8 15.9 8.4 8.1

3.0 8.9 8.8 10.6

NA NM 1.8 NA

0.8 NM 1.2 5.3

6.1 NM 5.1 5.8

3.1 9.5 6.6 5.6

3.4 6.0 7.0 10.7

NA NM 3.2 NA

1.6 NM 2.1 21.3

11.0 NM 8.7 24.2

5.6 16.3 11.3 21.4

6.9 10.2 12.4 27.6

ADVERTISING‡ ARB § ARBITRON INC HHS † HARTE HANKS INC IPG [] INTERPUBLIC GROUP OF COS LAMR † LAMAR ADVERTISING CO -CL A OMC [] OMNICOM GROUP

DEC DEC DEC DEC DEC

11.0 5.5 2.0 NM 6.8

10.1 5.8 4.2 0.8 7.5

12.0 8.0 2.6 3.8 7.7

15.4 9.4 NM 3.9 7.6

21.7 10.1 NM 4.1 7.5

20.9 5.2 0.8 NM 4.5

19.6 6.7 2.2 0.2 5.5

20.7 9.6 1.2 1.1 5.2

22.0 12.0 NM 1.1 5.1

30.1 13.3 NM 1.1 5.0

524.4 12.6 4.8 NM 20.6

220.9 16.4 14.2 1.0 26.3

58.9 20.5 8.7 3.7 24.5

55.8 21.2 NM 2.6 22.1

97.7 20.2 NM 2.3 19.7

OTHER MAJOR PUBLISHERS MSO MARTHA STEWART LIVING OMNIMD MNI MCCLATCHY CO -CL A PSO PEARSON PLC -ADR PRM PRIMEDIA INC ENL REED ELSEVIER NV -ADR

DEC DEC DEC DEC DEC

NM 4.1 7.6 1.8 111.2

NM 0.1 7.9 16.1 123.0

3.1 NM 7.5 NM 106.5

NM 11.0 10.4 NM 100.7

NM 13.5 7.9 NM 99.7

NM 1.8 4.6 1.7 27.6

NM 0.1 3.9 18.1 21.3

4.3 NM 4.3 NM 49.2

NM 3.6 6.2 NM 31.7

NM 7.8 4.5 NM 18.7

NM 54.1 9.8 NA 30.3

NM 1.2 7.8 NA 22.6

7.2 NM 8.7 NA 51.2

NM 7.9 13.1 NA 33.2

NM 10.7 10.0 NA 20.7

RUK TRI

DEC DEC

91.5 6.3

93.4 12.0

94.8 15.0

93.3 13.8

93.3 10.6

28.0 2.3

18.1 4.8

46.9 5.1

31.3 4.6

18.0 4.7

28.4 4.2

18.3 8.4

48.1 9.1

32.7 9.0

19.8 9.4

OTHER COMPANIES WITH SIGNIFICANT PUBLISHING OPERATIONS DIS [] DISNEY (WALT) CO SEP 9.1 DNB [] DUN & BRADSTREET CORP DEC 18.9 TV GRUPO TELEVISA SAB -ADR DEC NA NWSA [] NEWS CORP JUN NM TWX [] TIME WARNER INC DEC 8.1

11.7 17.9 16.3 16.3 NM

13.2 18.3 19.4 12.0 8.7

9.8 15.7 22.6 11.1 11.6

8.0 15.3 20.4 8.9 6.7

5.3 19.2 NA NM 2.3

7.2 19.1 6.3 8.6 NM

7.7 19.4 8.9 5.8 3.1

6.0 16.2 10.8 5.1 4.0

4.8 13.6 9.1 4.0 2.4

10.0 NA NA NM 5.5

14.0 NA 17.5 17.5 NM

14.9 NA 22.3 10.9 6.8

11.6 NA 26.6 9.5 8.3

9.8 335.7 23.9 7.5 4.7

8.4

12.1

13.7

13.6

7.2

5.4

7.3

7.7

6.9

20.2

17.4

22.8

21.0

12.3

3,544.6

PUBLISHING & PRINTING‡ DM § DOLAN MEDIA CO GCI [] GANNETT CO MHP [] MCGRAW-HILL COMPANIES MDP [] MEREDITH CORP NYT [] NEW YORK TIMES CO -CL A SCHL SSP WPO JW.A

VIA.B

† § [] †

SCHOLASTIC CORP EW SCRIPPS -CL A WASHINGTON POST -CL B WILEY (JOHN) & SONS -CL A

REED ELSEVIER PLC -ADR THOMSON-REUTERS CORP

[] VIACOM INC

BOOK RETAILERS AMZN [] AMAZON.COM INC

DEC

11.7

DEC

3.7

3.4

3.2

1.8

3.9

8.2

8.7

8.8

4.7

9.6

22.8

33.3

58.5

56.1

BKS

† BARNES & NOBLE INC

# JAN

NA

1.7

2.5

2.9

2.9

NA

2.7

4.2

4.7

4.5

NA

8.6

12.1

13.2

12.9

BGP

BORDERS GROUP INC

# JAN

NM

NM

NM

NM

2.5

NM

NM

NM

NM

3.9

NM

NM

NM

NM

10.0

OTHER ADVERTISING AGENCIES CCO CLEAR CHANNEL OUTDOOR HLDGS WPPGY WPP PLC -ADR

DEC DEC

NM 5.0

NM 5.9

7.5 7.5

5.3 7.4

2.3 6.8

NM 2.0

NM 1.8

4.3 2.9

3.0 3.2

1.2 2.7

NM 7.9

NM 7.9

13.8 12.0

11.0 12.0

3.1 8.8

MARKETING SERVICES APAC APAC CUSTOMER SERVICES INC ECGI ENVOY CAPITAL GROUP INC HPOL HARRIS INTERACTIVE INC INOC INNOTRAC CORP SGRP SPAR GROUP INC

DEC SEP JUN DEC DEC

19.8 NM NM NA NA

1.2 NM NM 2.5 0.1

2.3 21.3 4.2 0.6 NM

NM NM 4.4 NM NM

NM 9.6 2.3 NM 1.7

54.0 NM NM NA NA

3.6 NM NM 4.5 0.5

5.6 4.3 3.6 1.0 NM

NM NM 3.8 NM NM

NM 5.0 2.1 NM 5.6

85.9 NM NM NA NA

8.8 NM NM 7.3 3.6

18.0 4.7 4.8 1.7 NM

NM NM 4.8 NM NM

NM 5.7 2.5 NM 20.5

VCI

DEC

3.0

NM

2.6

4.9

8.4

3.7

NM

3.9

6.8

13.3

129.3

NM

29.9

37.8

78.2

VALASSIS COMMUNICATIONS INC

Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the following calendar year.

PUBLISHING & ADVERTISING INDUSTRY SURVEY

Data by Standard & Poor's Compustat — A Division of The McGraw-Hill Companies


Current Ratio Ticker

Company

Debt as a % of Net Working Capital

Debt / Capital Ratio (%)

Yr. End

2009

2008

2007

2006

2005

2009

2008

2007

2006

2005

2009

2008

2007

2006

2005

DEC DEC DEC JUN DEC

0.8 1.2 1.2 1.0 1.0

0.8 1.1 0.9 0.9 0.6

0.8 1.4 0.9 0.9 0.7

0.7 1.4 0.9 0.9 0.9

0.7 1.3 1.2 0.7 0.6

32.7 62.6 38.2 36.1 55.9

35.9 75.1 46.9 30.7 53.4

29.3 29.6 40.7 27.3 40.8

93.3 36.4 0.0 38.5 49.1

75.1 39.1 0.0 14.4 33.5

NM NM 247.3 NM NM

NM NM NM NM NM

NM NM NM NM NM

NM NM NM NM NM

NM NM 0.1 NM NM

# MAY DEC DEC # APR

NA 1.9 1.4 NA

2.0 1.5 1.2 0.7

2.1 2.7 1.0 0.6

2.2 2.2 1.2 0.7

1.6 2.3 1.2 0.9

NA 7.7 10.5 NA

27.9 9.3 11.0 52.2

28.7 14.6 8.7 46.5

16.9 20.1 9.6 55.0

18.0 23.2 11.6 28.0

NA 29.2 99.4 NA

73.8 62.4 155.5 NM

73.9 87.0 NM NM

47.5 161.0 305.1 NM

60.2 184.3 326.6 NM

ADVERTISING‡ ARB § ARBITRON INC HHS † HARTE HANKS INC IPG [] INTERPUBLIC GROUP OF COS LAMR † LAMAR ADVERTISING CO -CL A OMC [] OMNICOM GROUP

DEC DEC DEC DEC DEC

0.9 1.5 1.1 1.4 0.9

0.7 1.3 1.1 1.5 0.9

0.6 1.5 1.1 2.1 0.9

1.0 1.6 1.1 2.1 0.9

1.6 1.4 1.1 2.0 0.9

69.0 28.8 36.8 72.9 30.3

120.6 36.2 41.9 73.8 43.1

12.7 35.3 46.7 71.6 40.4

0.0 26.8 53.1 54.1 40.4

35.1 9.2 52.3 45.0 34.1

NM 232.9 223.7 NM NM

NM 448.3 292.6 NM NM

NM 302.8 361.7 NM NM

NM 188.5 412.0 NM NM

85.1 79.1 340.6 NM NM

OTHER MAJOR PUBLISHERS MSO MARTHA STEWART LIVING OMNIMD MNI MCCLATCHY CO -CL A PSO PEARSON PLC -ADR PRM PRIMEDIA INC ENL REED ELSEVIER NV -ADR

DEC DEC DEC DEC DEC

1.9 1.2 1.9 0.9 0.1

1.9 1.6 1.7 1.1 0.2

2.3 2.2 1.4 1.0 0.2

2.0 1.4 1.4 1.1 10.8

2.4 1.3 2.0 0.9 1.6

8.4 82.1 27.3 185.0 0.0

11.3 88.9 26.8 165.6 0.0

0.0 71.6 20.0 213.4 0.0

0.0 41.9 22.6 152.1 0.0

0.0 8.2 30.2 149.8 0.0

26.0 NM 131.0 NM NM

32.1 974.4 153.2 NM NM

0.0 546.0 157.1 NM NM

0.0 592.9 165.6 NM 0.0

0.0 325.7 124.4 NM 0.0

RUK TRI

DEC DEC

0.0 0.8

0.0 0.8

0.0 3.0

18.7 0.9

50.0 1.0

0.0 24.4

0.0 23.0

0.0 22.7

0.0 24.3

0.0 25.7

NM NM

NM NM

NM 66.2

0.0 NM

0.0 NM

OTHER COMPANIES WITH SIGNIFICANT PUBLISHING OPERATIONS DIS [] DISNEY (WALT) CO SEP 1.3 DNB [] DUN & BRADSTREET CORP DEC 0.9 TV GRUPO TELEVISA SAB -ADR DEC NA NWSA [] NEWS CORP JUN 1.5 TWX [] TIME WARNER INC DEC 1.5

1.0 0.8 2.2 1.6 1.2

1.0 0.8 2.0 2.1 1.0

0.9 0.8 1.9 2.1 0.8

1.0 0.7 1.5 1.9 1.1

23.9 422.2 NA 30.9 30.3

24.0 1,684.0 43.3 27.4 41.0

26.0 251.4 37.8 23.6 32.8

23.7 735.4 33.2 24.4 31.2

26.1 0.1 39.2 22.7 19.5

396.6 NM NA 234.8 362.0

NM NM 100.0 255.4 NM

NM NM 95.9 144.4 NM

NM NM 83.9 168.7 NM

NM NM 171.8 164.6 NM

VIA.B

0.9

0.9

0.9

1.1

42.7

52.7

52.6

50.8

42.1

979.4

NM

NM

NM

NM

PUBLISHING & PRINTING‡ DM § DOLAN MEDIA CO GCI [] GANNETT CO MHP [] MCGRAW-HILL COMPANIES MDP [] MEREDITH CORP NYT [] NEW YORK TIMES CO -CL A SCHL SSP WPO JW.A

† § [] †

SCHOLASTIC CORP EW SCRIPPS -CL A WASHINGTON POST -CL B WILEY (JOHN) & SONS -CL A

REED ELSEVIER PLC -ADR THOMSON-REUTERS CORP

[] VIACOM INC

BOOK RETAILERS AMZN [] AMAZON.COM INC

DEC

1.2

DEC

1.3

1.3

1.4

1.3

1.5

4.6

16.6

52.9

74.6

86.1

10.4

37.8

92.7

150.7

152.1

BKS

† BARNES & NOBLE INC

# JAN

NA

1.2

1.2

1.3

1.2

NA

0.0

0.0

0.0

0.0

NA

0.0

0.0

0.0

0.0

BGP

BORDERS GROUP INC

# JAN

1.1

1.1

1.0

1.1

1.2

4.0

2.8

1.1

0.8

0.6

10.9

9.9

14.1

4.1

1.7

OTHER ADVERTISING AGENCIES CCO CLEAR CHANNEL OUTDOOR HLDGS WPPGY WPP PLC -ADR

DEC DEC

2.1 0.9

2.0 0.9

1.7 0.9

1.4 0.9

1.1 0.8

41.6 34.2

35.8 36.8

54.1 27.6

59.5 21.7

65.3 24.4

294.6 NM

332.0 NM

378.4 NM

745.6 NM

NM NM

MARKETING SERVICES APAC APAC CUSTOMER SERVICES INC ECGI ENVOY CAPITAL GROUP INC HPOL HARRIS INTERACTIVE INC INOC INNOTRAC CORP SGRP SPAR GROUP INC

DEC SEP JUN DEC DEC

2.5 11.0 1.2 NA NA

1.0 6.7 1.5 1.2 1.0

0.9 7.0 1.3 1.0 1.0

0.7 11.3 2.2 1.0 1.1

0.9 5.1 2.0 2.1 1.3

0.7 0.0 42.3 NA NA

0.0 0.0 18.0 0.0 3.0

25.8 0.2 0.0 0.0 0.0

15.9 0.2 0.0 0.0 0.0

0.0 0.3 0.0 0.0 0.0

1.3 0.0 144.6 NA NA

NM 0.0 69.3 0.0 NM

NM 0.2 0.0 NM NM

NM 0.3 0.0 NM 0.0

NM 0.7 0.0 0.0 0.0

VCI

DEC

1.3

1.2

1.3

1.5

1.4

84.4

91.8

79.0

60.3

71.0

739.0

872.0

757.8

144.2

203.9

VALASSIS COMMUNICATIONS INC

Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the following calendar year.

PUBLISHING & ADVERTISING INDUSTRY SURVEY

Data by Standard & Poor's Compustat — A Division of The McGraw-Hill Companies


Price / Earnings Ratio (High-Low)

Dividend Payout Ratio (%)

2009

2008

2007

2006

2005

DEC DEC DEC JUN DEC

21 5 11 1 15 7 NM - NM NM - NM

57 5 NM - NM 19 7 19 4 NM - NM

NM - NM 15 8 24 - 14 18 - 14 35 - 21

NA - NA 13 - 11 28 - 19 19 - 15 NM - NM

# MAY DEC DEC # APR

NA - NA NM - NM 51 - 31 NA - NA

NM - 34 NM - NM NM - 46 25 9

14 - 10 NM - NM 29 - 24 20 - 14

ADVERTISING‡ ARB § ARBITRON INC HHS † HARTE HANKS INC IPG [] INTERPUBLIC GROUP OF COS LAMR † LAMAR ADVERTISING CO -CL A OMC [] OMNICOM GROUP

DEC DEC DEC DEC DEC

16 7 19 6 39 - 15 NM - NM 16 8

38 18 18 NM 16 -

7 5 5 87 7

40 - 25 22 - 12 48 - 27 NM - NM 19 - 15

OTHER MAJOR PUBLISHERS MSO MARTHA STEWART LIVING OMNIMD MNI MCCLATCHY CO -CL A PSO PEARSON PLC -ADR PRM PRIMEDIA INC ENL REED ELSEVIER NV -ADR

DEC DEC DEC DEC DEC

NM - NM 60 17 - 10 43 - 16 28 - 22

NM - NM NM - 21 21 - 12 81 37 - 17

NM - 44 NM - NM 24 - 18 NM - NM 13 - 10

RUK TRI

DEC DEC

Ticker

Company

PUBLISHING & PRINTING‡ DM § DOLAN MEDIA CO GCI [] GANNETT CO MHP [] MCGRAW-HILL COMPANIES MDP [] MEREDITH CORP NYT [] NEW YORK TIMES CO -CL A SCHL SSP WPO JW.A

† § [] †

SCHOLASTIC CORP EW SCRIPPS -CL A WASHINGTON POST -CL B WILEY (JOHN) & SONS -CL A

REED ELSEVIER PLC -ADR THOMSON-REUTERS CORP

Yr. End

30 36 -

23 22

OTHER COMPANIES WITH SIGNIFICANT PUBLISHING OPERATIONS DIS [] DISNEY (WALT) CO SEP 18 9 DNB [] DUN & BRADSTREET CORP DEC 14 - 11 TV GRUPO TELEVISA SAB -ADR DEC NA - NA NWSA [] NEWS CORP JUN NM - NM TWX [] TIME WARNER INC DEC 19 - 10 VIA.B

[] VIACOM INC

BOOK RETAILERS AMZN [] AMAZON.COM INC BKS † BARNES & NOBLE INC BGP BORDERS GROUP INC

DEC

12 -

5

48 23 -

2008

2007

2006

2005

NA - NA 17 - 12 24 - 18 21 - 17 22 - 14

0 11 38 NM 0

0 NM 35 28 NM

NM 34 27 20 114

NA 24 29 20 NM

NA 23 29 20 36

0.0 8.6 5.2 8.3 0.0 -

0.0 1.0 2.6 2.7 0.0

0.0 32.0 5.1 6.6 15.2 -

0.0 4.1 1.9 1.5 3.5

0.0 4.1 1.9 1.4 5.4 -

0.0 2.2 1.1 1.1 3.2

NA 2.3 1.6 1.3 3.2 -

NA 1.8 1.0 1.0 2.4

NA 1.9 1.6 1.2 2.5 -

NA 1.4 1.2 1.0 1.6

24 39 30 24 -

17 33 22 17

NA NM 88 NA

86 NM 125 24

0 NM 27 17

0 19 23 23

0 32 23 19

NA 0.0 2.9 NA -

NA 0.0 1.7 NA

2.6 60.0 2.7 2.8 -

0.8 0.7 1.0 0.9

0.0 1.4 1.1 1.2 -

0.0 1.0 0.9 0.9

0.0 1.2 1.1 1.3 -

0.0 0.9 1.0 1.0

0.0 1.0 1.0 1.1 -

0.0 0.8 0.8 0.8

27 - 19 22 - 16 NM - NM NM - NM 21 - 16

21 - 17 23 - 18 NM - NM NM - 94 21 - 17

25 40 0 NM 24

29 31 0 0 19

29 22 0 691 19

24 17 NM 0 20

19 15 NM 0 21

3.8 6.7 0.0 0.0 3.0 -

1.6 2.1 0.0 0.0 1.5

4.0 6.8 0.0 0.0 2.7 -

0.8 1.7 0.0 0.0 1.2

1.1 1.8 0.0 7.0 1.3 -

0.7 1.0 0.0 4.5 1.0

1.2 1.1 0.0 0.0 1.3 -

0.9 0.8 0.0 0.0 0.9

1.1 0.8 0.0 0.0 1.2 -

0.9 0.6 0.0 0.0 1.0

NM - NM 21 - 14 15 - 11 NM - NM 23 - 17

NM - NM 22 - 16 19 - 16 NM - NM 31 - 26

NM 13 61 280 122

NM NM 87 25 600

0 NM 77 NM 35

NM 25 48 NM 60

NM 19 69 NM 81

0.0 25.7 6.3 17.5 5.7 -

0.0 2.2 3.6 6.5 4.4

0.0 - 0.0 87.1 - 4.2 7.5 - 4.2 40.6 - 3.1 36.0 - 16.1

0.0 - 0.0 5.9 - 1.7 4.3 - 3.2 30.7 - 10.5 3.4 - 2.8

3.4 1.9 4.3 0.0 3.6 -

2.2 1.2 3.3 0.0 2.7

0.0 1.2 4.4 0.0 3.2 -

0.0 0.9 3.7 0.0 2.6

33.4 - 14.4 5.5 - 2.6

25 21 24 24 -

17 17 20 18

2009

2008

21 11

14 28 -

11 22

23 31 -

18 24

33 27 -

27 22

116 113

692 59

33 58

56 62

76 56

5.0 5.1 -

3.9 3.1

15 8 17 - 11 24 - 11 11 3 NM - NM

16 22 20 23 21 -

13 16 14 17 15

21 22 18 25 18 -

14 17 10 17 13

24 21 17 27 31 -

18 17 10 20 26

20 22 NA NM 43

15 21 30 7 NM

13 20 44 11 22

16 0 10 15 17

19 0 49 9 16

2.3 2.0 10.9 2.4 4.2 -

1.1 1.6 5.4 0.9 2.2

1.9 1.9 2.8 2.2 3.6 -

19 -

14

20 -

15

NA - NA

0

0

0

0

NA

0.0 -

0.0

22 -

6

DEC # JAN # JAN

70 - 23 NA - NA NM - NM

64 - 23 23 7 NM - NM

OTHER ADVERTISING AGENCIES CCO CLEAR CHANNEL OUTDOOR HLDGS WPP PLC -ADR WPPGY

DEC DEC

NM - NM 17 8

NM - NM 23 8

MARKETING SERVICES APAC APAC CUSTOMER SERVICES INC ECGI ENVOY CAPITAL GROUP INC HPOL HARRIS INTERACTIVE INC INOC INNOTRAC CORP SGRP SPAR GROUP INC

DEC SEP JUN DEC DEC

6NM NM NA NA -

1 NM NM NA NA

40 - 11 NM - NM NM - NM 16 6 NM - 22

VCI

DEC

15 -

1

NM - NM

VALASSIS COMMUNICATIONS INC

Dividend Yield (High-Low, %)

2009

88 - 32 21 - 14 NM - NM

45 20 -

NM - 56 21 - 14 NM - NM

33 15

65 19 -

43 15

52 - 10 20 - 12 41 - 23 72 - 22 NM - NM

NM NM 46 NM NM -

NM NM 28 NM NM

29 -

13

16 -

6

2007

2006

2005

2.9 2.7 -

2.3 2.1

3.1 2.6 -

2.4 2.0

2.8 2.5 -

2.3 2.0

1.0 1.2 1.3 0.6 1.5

1.0 1.2 3.1 0.6 1.5 -

0.8 0.9 2.2 0.5 1.0

1.1 0.0 1.0 0.9 1.3 -

0.8 0.0 0.5 0.6 0.9

1.0 0.0 4.8 0.4 0.6 -

0.8 0.0 2.9 0.3 0.5

0.0 -

0.0

0.0 -

0.0

0.0 -

0.0

NA -

NA

62 20 19 -

38 14 13

0 NA NM

0 58 NM

0 28 NM

0 26 NM

0 14 26

0.0 6.8 0.0 -

0.0 3.5 0.0

0.0 8.4 0.0 -

0.0 2.6 0.0

0.0 2.0 4.2 -

0.0 1.4 1.8

0.0 1.9 2.5 -

0.0 1.2 1.6

0.0 1.0 2.0 -

0.0 0.7 1.3

NM 23 -

93 18

NM 43

NM 46

0 31

0 26

0 28

0.0 5.1 -

0.0 2.5

0.0 5.7 -

0.0 2.0

0.0 2.0 -

0.0 1.5

0.0 1.7 -

0.0 1.3

0.0 1.5 -

0.0 1.2

NM - NM 20 9 NM - 43 NM - NM 58 - 16

0 NM NM NA NA

0 NM NM 0 0

0 0 0 0 NM

NM NM 0 NM NM

NM 0 0 NM 0

0.0 0.0 0.0 0.0 0.0 -

0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 -

0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 -

0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 -

0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 -

0.0 0.0 0.0 0.0 0.0

0

NM

0

0

0

0.0 -

0.0

0.0 -

0.0

0.0 -

0.0

0.0 -

0.0

0.0 -

0.0

21 -

15

Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the following calendar year.

PUBLISHING & ADVERTISING INDUSTRY SURVEY

Data by Standard & Poor's Compustat — A Division of The McGraw-Hill Companies


Earnings per Share ($) Ticker

Company

Yr. End

Tangible Book Value per Share ($)

Share Price (High-Low, $)

2008

2007

2006

2005

2009

2008

2007

2006

2005

DEC DEC DEC JUN DEC

0.72 0.53 1.52 (29.11) 2.34 2.53 (2.28) 2.86 0.01 (0.46)

(2.15) 4.18 3.01 3.51 0.76

(0.81) 4.91 2.47 2.94 (3.93)

(0.23) 4.94 2.25 2.57 1.83

(5.52) (7.66) (1.21) (9.20) (0.63)

(5.06) (10.52) (3.22) (11.56) (1.45)

(1.55) (7.62) (2.26) (8.73) 1.16

(14.53) (10.71) 1.00 (11.35) 0.25

(11.49) (10.76) 2.04 (5.10) (2.31)

# MAY DEC DEC # APR

NA 0.35 (3.56) (11.69) 9.78 6.89 NA 2.20

2.86 (0.09) 30.31 2.55

1.43 7.29 34.34 1.75

1.65 4.08 32.66 1.90

NA 7.43 97.63 NA

15.97 6.50 89.89 (17.06)

17.15 10.97 144.13 (19.44)

18.21 5.71 143.64 (23.30)

17.12 4.55 103.66 (1.73)

1.38 1.28 0.29 0.47 2.99

1.69 1.41 (0.20) 0.42 2.52

2.16 1.37 (0.70) 0.39 2.19

(0.33) (2.63) (3.01) (13.73) (11.69)

(2.01) (3.38) (2.92) (14.52) (12.55)

0.34 (2.30) (3.17) (13.34) (10.40)

1.64 (1.00) (3.59) (6.82) (9.10)

1.67 0.51 (4.70) (3.55) (7.31)

25.36 14.48 7.77 32.23 39.99 -

10.57 4.50 3.08 5.35 20.09

51.50 17.96 10.47 48.48 50.16 -

9.90 4.43 2.57 8.69 22.02

55.63 28.78 13.94 71.54 55.45 -

34.81 15.50 7.91 46.67 45.82

45.80 31.00 12.83 66.42 53.03 -

32.68 22.35 7.79 44.99 39.38

44.76 31.47 13.80 48.15 45.74 -

36.62 24.96 9.08 36.63 37.88

(0.32) 2.85 1.06 (0.60) 1.80

(1.48) 3.44 0.69 (1.44) 1.18

0.94 (18.32) (1.33) (5.71) 3.79

1.05 (20.89) (0.90) (5.66) 2.05

1.91 (18.37) (0.11) (6.78) 8.81

1.46 (5.57) (0.09) (31.43) 5.78

2.07 5.82 (0.47) (35.64) 5.04

8.84 4.04 14.50 4.29 25.30 -

1.60 0.35 8.40 1.60 19.59

9.99 12.83 14.69 9.18 45.52 -

2.51 0.62 8.17 0.69 20.35

22.50 43.55 18.31 20.40 47.18 -

8.75 12.24 13.87 7.01 37.95

23.21 59.64 15.37 14.40 40.80 -

14.76 38.80 11.87 7.20 30.67

37.45 76.05 12.80 28.50 36.10 -

16.28 56.30 10.75 8.88 30.06

4.56 1.70

2.31 1.41

1.48 1.41

4.95 (9.24)

2.72 (9.58)

11.49 4.83

7.53 0.56

6.54 (5.62)

33.56 35.88 -

26.09 21.89

62.00 41.16 -

26.69 19.30

64.07 47.26 -

50.76 36.93

53.38 43.41 -

41.33 34.01

49.50 38.55 -

40.50 31.09

OTHER COMPANIES WITH SIGNIFICANT PUBLISHING OPERATIONS DIS [] DISNEY (WALT) CO SEP 1.78 2.34 DNB [] DUN & BRADSTREET CORP DEC 6.06 5.69 TV GRUPO TELEVISA SAB -ADR DEC NA 1.19 NWSA [] NEWS CORP JUN (1.29) 1.82 TWX [] TIME WARNER INC DEC 1.75 (11.22)

2.33 5.03 1.54 1.09 3.27

1.68 3.81 1.62 0.88 3.66

1.27 3.31 1.27 0.70 1.89

5.39 (24.96) NA (0.03) (6.32)

4.25 (24.75) 4.60 (1.71) (23.51)

3.15 (14.86) 5.50 2.37 (29.72)

3.10 (10.69) 5.39 1.86 (25.05)

3.24 (2.29) 3.87 1.81 (13.81)

32.75 84.95 22.16 14.00 33.45 -

15.14 68.97 10.87 4.95 17.81

35.02 98.90 28.12 20.55 50.70 -

18.60 64.00 12.99 5.43 21.00

36.79 108.45 31.33 25.40 69.45 -

30.68 81.50 22.04 19.00 48.51

34.89 84.98 28.51 21.94 66.75 -

23.77 65.03 16.13 15.17 47.10

29.99 68.00 20.98 18.88 58.92 -

22.89 54.90 12.99 13.94 48.30

VIA.B

PUBLISHING & PRINTING‡ DM § DOLAN MEDIA CO GCI [] GANNETT CO MHP [] MCGRAW-HILL COMPANIES MDP [] MEREDITH CORP NYT [] NEW YORK TIMES CO -CL A SCHL SSP WPO JW.A

† § [] †

SCHOLASTIC CORP EW SCRIPPS -CL A WASHINGTON POST -CL B WILEY (JOHN) & SONS -CL A

2009

ADVERTISING‡ ARB § ARBITRON INC HHS † HARTE HANKS INC IPG [] INTERPUBLIC GROUP OF COS LAMR † LAMAR ADVERTISING CO -CL A OMC [] OMNICOM GROUP

DEC DEC DEC DEC DEC

1.59 0.75 0.20 (0.64) 2.54

OTHER MAJOR PUBLISHERS MSO MARTHA STEWART LIVING OMNIMD MNI MCCLATCHY CO -CL A PSO PEARSON PLC -ADR PRM PRIMEDIA INC ENL REED ELSEVIER NV -ADR

DEC DEC DEC DEC DEC

(0.27) 0.72 0.86 0.10 0.91

RUK TRI

DEC DEC

1.12 0.99

REED ELSEVIER PLC -ADR THOMSON-REUTERS CORP

[] VIACOM INC

DEC

1.37 0.98 0.57 0.10 3.20

(0.29) 0.20 0.03 (33.26) 0.70 0.77 1.11 (1.26) 1.22 3.71 1.29 1.82

2009 15.00 15.99 35.24 33.17 12.75 -

2008 3.68 1.85 17.22 10.60 3.44

30.87 9.28 9.00 0.67 495.60 - 300.16 43.56 26.19

30.32 39.00 47.13 55.08 21.14 -

2007 2.45 5.00 17.15 12.06 4.95

37.57 - 11.73 147.78 1.65 823.25 - 320.00 54.75 - 18.74

31.15 63.50 72.50 63.41 26.90 -

2006 16.00 34.34 43.46 48.15 16.02

40.00 - 29.78 160.17 - 113.67 885.23 - 726.93 49.79 - 36.34

NA 64.97 69.25 57.29 28.98 -

2005 NA 51.65 46.37 45.04 21.54

36.18 - 24.99 153.27 - 122.58 815.00 - 690.00 41.80 - 31.60

NA 82.41 53.97 54.33 40.90 -

NA 58.37 40.51 44.51 26.09

40.04 - 28.19 158.73 - 134.55 982.03 - 716.00 45.23 - 33.10

2.62

1.97

2.42

2.20

1.65

(5.38)

(8.42)

(7.67)

(7.02)

(3.92)

31.56 -

13.25

44.19 -

11.60

45.40 -

33.74

43.90 -

32.42

NA -

NA

DEC # JAN # JAN

2.08 NA (1.83)

1.52 1.55 (3.07)

1.15 2.13 (0.31)

0.46 2.31 (2.44)

0.81 2.17 1.45

7.78 NA 2.64

4.85 10.95 4.38

2.21 12.13 7.42

0.52 12.51 10.29

0.18 11.37 12.52

145.91 28.78 4.48 -

47.63 14.81 0.37

97.43 34.89 11.60 -

34.68 10.77 0.34

101.09 43.80 24.15 -

36.30 30.01 10.40

48.58 48.41 25.49 -

25.76 32.33 16.20

50.00 43.98 27.47 -

30.60 30.41 18.65

OTHER ADVERTISING AGENCIES CCO CLEAR CHANNEL OUTDOOR HLDGS WPP PLC -ADR WPPGY

DEC DEC

(2.46) 2.91

(8.03) 2.81

0.69 3.93

0.43 3.56

0.19 2.61

(0.63) (30.48)

(1.06) (32.76)

0.88 (27.08)

(0.17) (21.49)

0.00 (20.79)

11.29 50.32 -

2.14 24.51

27.82 64.34 -

3.35 22.35

31.14 78.62 -

22.81 59.01

28.13 69.00 -

18.49 53.53

20.40 60.55 -

17.75 47.05

MARKETING SERVICES APAC APAC CUSTOMER SERVICES INC ECGI ENVOY CAPITAL GROUP INC HPOL HARRIS INTERACTIVE INC INOC INNOTRAC CORP SGRP SPAR GROUP INC

DEC SEP JUN DEC DEC

1.13 (1.14) (1.41) NA NA

0.06 (1.18) (1.60) 0.27 0.01

0.10 0.20 0.16 0.06 (0.13)

(0.62) (0.24) 0.15 (0.43) (0.03)

(0.45) 0.16 0.08 (0.38) 0.05

1.63 2.36 (0.01) NA NA

0.37 3.43 0.60 1.73 0.12

0.57 2.48 1.28 1.79 0.21

7.02 2.09 1.26 3.74 1.10 -

0.94 1.02 0.15 0.51 0.36

2.39 3.22 4.33 4.35 1.50 -

0.68 0.82 0.45 1.53 0.22

5.18 4.07 6.50 4.33 1.50 -

1.00 2.50 3.67 1.34 0.54

3.84 2.69 6.85 5.72 2.20 -

1.42 1.31 4.25 1.79 0.87

2.00 3.15 8.02 9.00 2.89 -

0.65 1.40 3.43 3.57 0.81

VCI

DEC

1.39

(4.32)

1.21

1.07

1.93

(16.02)

(18.46)

(0.64)

21.01 -

1.10

16.80 -

1.05

19.73 -

7.67

30.80 -

14.22

40.80 -

28.72

BOOK RETAILERS AMZN [] AMAZON.COM INC BKS † BARNES & NOBLE INC BGP BORDERS GROUP INC

VALASSIS COMMUNICATIONS INC

0.28 4.71 J 0.85 1.45 0.09 (19.32)

0.04 3.47 J 1.42 1.37 0.20 0.71

Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the following calendar year. J-This amount includes intangibles that cannot be identified.

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

PUBLISHING & ADVERTISING INDUSTRY SURVEY

Data by Standard & Poor's Compustat — A Division of The McGraw-Hill Companies


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