Media Forum: Are newspaper rate rises fair?

Rumours of ratecard increases of up to 25 per cent abound, Alasdair Reid writes. Inflation is back on the agenda in the press market. Which means, basically, that the good times are back. Obviously you'll get a few people grumbling, especially the media controllers of the big multinationals, who will have to explain to the procurement people - or the board even - why they've seemingly lost control of this one.

So, granted, they might not be ecstatic. But you could argue that a small amount of inflation is a measure of prosperity. Inflation is created almost entirely by increased advertiser demand - and if advertisers want more ad space it's because business is booming.

You can, of course, point out that inflation is often exacerbated by slight declines in supply - smaller audiences because of falling newspaper and magazine sales. But nobody really minds about that. Except perhaps the publishers. And we can discount the odd bit of whingeing from media specialists.

All that will happen to them if their apparent buying performance seems to slip year on year is that they'll get a real wigging from a media auditor.

Last week there were all sorts of rumblings about rate increases, especially at the tabloid end of the market - with planned rate increases at the Daily Star said to be close to 25 per cent.

Ian Clark, the commercial director of News Group Newspapers, admits that a small amount of inflation may well be an inevitable consequence of economic recovery - but, he adds, it will be negligible and the pain will be a lot worse for those using television and radio.

He states: "A recent report from Initiative highlighted that newspaper inflation worldwide is expected to rise faster in 2005 than any other medium. If you advertise in Russia and China, this may be true. In the UK, however, it predicts the reverse. Newspaper inflation is estimated to be only 2.1 per cent. Television, however, is double this and radio inflation is expected to be triple."

But some advertisers are in the middle of sensitive negotiations with newspapers, setting terms for the whole of 2005. One major newspaper advertiser says that the company was now adopting a "zero-tolerance" attitude to rate increases. He says: "Our position is quite straightforward. If they try to increase their rates, we will remove them from the schedule." However, Alison Brolls, Nokia's global marketing and media planning manager, is slightly more measured. She says: "It is tempting to dismiss all ratecard increases, but some are warranted based on a whole host of factors - circulations and readership performance being just two.

"In such cases, most advertisers would be willing to have sensible discussions on rate increases. The big problem is where there is no real justification and the proposed percentage increases do not bear any relation to measurable improved performance."

But Mark Jarvis, the head of media at Carat, says there has been very little evidence to date that the newspaper market is starting to overheat dangerously - though he does concede that it's likely to turn in a very strong fourth quarter, with year-on-year ad revenue growth perhaps reaching 7 per cent. He adds: "It is true that some titles are doing better than others. For example, The Sun appears to have had a great year."

The bad news for the medium, according to the Initiative report, is that, because press inflation has been a big problem in many markets around the world, some big advertisers have been making bigger efforts to plan their way around the medium. That's surely a worrying context for the UK debate.

But Maureen Duffy, the chief executive of the Newspaper Marketing Agency, argues that you have to take a big-picture perspective here: "When people look at inflation figures they're not always using the right benchmarks.

For instance, look at newspaper cost per thousands and compare them with television. Newspapers costs per thousands are lower than they were three years ago and much lower than TV's. You must ask yourself: 'What is the cost of reaching a young adult audience?' And the fact is that newspapers represent incredibly good value.

"Even when you look at the whole issue of circulation declines, again, readership figures are holding up remarkably well - in comparison, the audience for the average peak spot on ITV continues to fall, and for a major brand using TV it's incredibly hard to have a schedule without ITV. The question shouldn't be about percentage increases but whether press is good for your business."

YES - Ian Clark, commercial director, News Group Newspapers

"Over the past six months, total advertising volume has grown by 21 per cent in The Sun and 14 per cent in the NoW. Like most businesses, this inevitably influences our rates."

MAYBE - Alison Brolls, global marketing and media planning manager, Nokia

"Rate increases are not acceptable when the (audience delivery) numbers don't add up. Worse is when proposals are based on subjective assertions about providing a better quality repro and editorial environment."

MAYBE - Mark Jarvis, head of media, Carat

"Our analysis shows press market revenue will grow by between 2 and 3 per cent across 2004. This suggests a revenue growth performance below that for the total media market."

YES - Maureen Duffy, chief executive, Newspaper Marketing Agency

"The question should be whether press is good for your business ... Because the media market is so fragmented, there are fewer people (in media agencies) who are able to have a complete perspective."

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