Mirror, mirror on the wall... What s the future for newspapers?

The Newspaper of the Future? 2

US Germany Holmen Newsprint demand fell dramatically during the last decade Less severely in Western Europe than in North America Source: PPPC 3

US Germany Holmen The deterioration of traditional print media metrics is a key story line since 2000 And has impacted newsprint demand considerably Source: WAN; Zenith Optimedia; PIB, PZ-Online; PWC 4

Pagination continues to decline Decreasing more severely in Western Europe -17% Source: PPPC 5

Global newspaper circulation will suffer its third consecutive annual decline in 2011 Circulation grew only in China, India, Indonesia and Brasil Source: WAN-IFRA; PWC 6

The financial crisis led to double-digit declines in newspaper advertising spending No growth expected in the coming years Financial crisis Source: Zenith Optimedia 7

In just 5 yrs, mobile BB users grew ten times Facebook users from nothing to 800 MM Source: ITU Source: Facebook; socialbakers.com 8

US Canada UK Germany France Japan Australia Brazil Russia India Holmen Indonesia China Is there a link between paid circulation decline and social media usage? 60 Paid daily newspaper circulation and Facebook penetration 50 40 30 20 10 0-10 -20 % Change in Paid Newspaper Circ. 2006-2010 % Population Using Facebook Q1 2012 Source: WAN; socialbakers.com 9

The rapid growth of BB Internet has had an impact on WE newspaper circulation 1990-2000: -0,6% CAGR 2000-2010: -2% CAGR Source: WAN; OECD 10

Smart phones and tablets revolutionized social media consumption Smart phones and tablets revolutionized social media consumption 12

In less than two years, Apple has sold more than 50 million ipad tablets ipad 2 ipad Source: Apple 13

The ipad 2 is the fastest growing new consumer computing device released * 2001 * 2002 * Oct 2007 1990-2000: 2000-2010: -2,4% CAGR -1,1% CAGR * June 2007 * April 2010 * Nov 2006 * March 2011 * Release date Source: Morgan Stanley Research; press reports 14

Mobile device sales grew 82% in Q1-Q3 2011 Expected to treble to 1.2 billion USD by 2015 Source: PWC 15

Consumer spending on mobile apps is expected to reach $35B by 2015 Global consumer spending on newspapers in 2010 = $72.5B Source: PWC 16

Tablets offer a lean back experience unlike laptops or desktop computers Similar to print newspapers and magazines Source: Nielsen Q1 2011 Mobile Connected Device Report (12,000 U.S. consumers surveyed) 17

Different forms of reading already among top 10 activities for tablet users Base: 3673 ipad users in six European countries, September 2011 Source: Sanoma Media study of consumers in Netherlands, Finland, Russia, Hungary, Belgium and Germany 18

Western European newspaper revenues are expected to continue its decline -17% Source: PWC; AMEC 19

Schibsted s print ad revenues declined 1.5% in 2011 While digital ad revenues grew 18% Source: Schibsted 20

Axel Springer s digital ad revenues are higher than print ad revenues For the first time in 2011 Source: Axel Springer 21

Axel Springer s profitability for digital business is lower than for print media In spite of the higher digital advertising revenues Source: Axel Springer 22

Facing declining revenues, publishers will take actions to protect margins Reduction of fixed costs (e.g. journalists) Changes to physical products Fewer pages, reduced frequency, format changes Development of appropriate digital business models including pay-for digital content. Many publishers are struggling Source: ITU 23

Mirror, mirror on the wall... What s the future for newspapers? Broadband internet is a threat to print media Competition for people s time is increasing and is probably the biggest threat of them all A new business model must be developed for publishers to survive The app does not seem to be the solution Very few are succeeding in charging for digital content 24