There are moves afoot at the Johannesburg Stock Exchange to kill off an advertising cash cow that has long helped sustain South Africa’s financial print media titles. The deal dates back to 1967 when a regulation came into effect that JSE-listed companies had to publish what was called “price-sensitive information”, and that included financial results, in one English and one “other than English” daily national newspaper.
Moneyweb’s Alec Hogg, unpacking the subject in his Boardroom Talk blog, calls the regulation an “enforced R200-million subsidy for the print media” and says it’s about time the archaic regulation was abolished. “Technology, or more specifically the internet, long ago made this redundant. Exchanges in the rest of the world abandoned this archaic rule before the turn of the century. We South Africans sometimes take a little longer,” Hogg says.
Nicky Newton-King, the new-broom CEO of the JSE, is determined to do away with this rule, says Hogg. “She knows, as does everyone in the financial world, that price sensitive information is discovered through the day on the JSE’s own SENS service or the internet at large. Nobody waits, nor even reads those expensive financial adverts in newspapers.”
The JSE’s John Burke, talking to Hogg, says short form highlights would be published, if the proposal is set in place by 1 January. “Our clients, listed companies, have asked us to do away with the rule. The rule in London, for instance, was changed in 1985.” Burke says the JSE tried to do away with the rules in 2003, but there was such a “backlash from the guys ” that they abandoned the attempt.
Ainsley Moos, editor and publisher of Sake24 at Media 24, says it’s difficult to say what the impact will be as “it is unclear how companies will react to the current proposed changes. The JSE is proposing a minimum requirement, but companies can still do more. It is expected though that any decline in advertising income could put business reporting in newspapers on listed companies under pressure. Should there be any significant risk for Sake24, it will not affect the main titles such Beeld, Die Burger or Volksblad,” he says.
“Advertising income not only finances the space and distribution of our content, but also the input cost associated with generating the content. And to merely say that shortened news articles on a website is the solution, offers no value to a company’s shareholders and thus not to the company. Certainly there is useful information in a SENS announcement, but more information in a coherent, well-written news article is important for shareholders, especially potentially future shareholders.”
It’s a view that MediaTenor’s Wadim Schreiner agrees with. “Look, I agree with Alec that financial media has had 12 years (in 2003 there were moves to do away with the regulations) to prepare for this, and that the JSE is under pressure that listed companies aren’t forced to spend on things they don’t need, but print media survives on two things: annual reports and government’s job advertising.
“But the companies who featured in the business press got a BIG boost to their reputations from that advertising. It exposed them to institutional and other investors. It worked to raise their share prices. And yes, perhaps it subsidises the salaries of financial journalists. But this kind of advertising puts information out there, and who would do that if the regulations are changed?” Schreiner asks.
Richard Lord, associate media director at agency The MediaShop, says he agrees with Hogg’s contention that the estimated R200-million ad spend amounted to a ‘subsidy’. “For years major corporations have had to spend millions of Rands per annum on publishing their annual and interim results. The winners were the newspapers. Advertisers were only doing it out of obligation, because the information already existed online and that is where investors and shareholders would have gone to in the first place,” he says.
“The press advertisements were kind of redundant. Yes these press advertisements would obviously reach a broader audience than just shareholders and investors and would have an impact on brand awareness and people’s perception of the brand, but there are better (and frankly, more cost effective) ways of doing this.”
Moos says while he can only speak for Sake24 – which appears daily in Beeld, Die Burger and Volksblad, the “value of the advertising represents a significant amount of our annual advertising income”.
Lord says because existing regulations stipulate that financial results have to be published in the national press, companies spend millions on this every year and newspapers have therefore made money from the regulation. “Now they won’t. I suspect companies will do the minimum of what the regulations say. I don’t believe that financial results advertising was critical or necessary. Companies did it because they had to. Investors and shareholders could get the information from other sources, so whether the results are in the national press or not, it doesn’t matter,” he says.
“There is no data that tells me what readers of a newspaper do or don’t read, but as I said above – the serious investor and shareholders would glean this information from other sources before the actual results are published in the newspapers. Typically, results are published in newspapers the day after the actual announcement, so yes; it is probably old news by then for many readers,” Lord says.
Schreiner suspects loss of the JSE advertising will have a profound effect not only on the quality of financial journalism, but also on job security within the sector. “When media houses lose money, where do they first look at cutting costs? The salary bill. Retrenchments could follow,” he warns.
“We need a strong business media for our democracy. Without this income, journalists will have less capacity to report effectively as newspapers will then use contract people who don’t necessarily have the luxury of time to verify sources and pin down stories. It would be bad for the quality of financial journalism,” Schreiner says.
Moos says the business model of the financial press “is of such a nature that these advertisements cover the production and distribution costs to some extent. This is the model that news organisations employ globally. So we cannot debate the decline in advertising income and not debate the quality of journalism we expect. There is a direct correlation between the two”.
But Lord disagrees. “I don’t believe there will be any impact on financial journalism. Journalists will still discuss a company’s results as this is of interest to readers of financial and business publications. The publications themselves will, however, lose out on a major revenue stream, which means that they will have to find alternative means of bringing in money.”
Schreiner says he hopes a compromise will be made, and that the JSE will “come to its senses”.
“Even if they see the advertising as Corporate Social Investment on their part, and not expect a financial return, I don’t see that as a problem in terms of the big picture. I hope the players can come to some kind of compromise, for the good of the sector. Because I really don’t know how some papers will survive the loss.”
At the same time, Schreiner says this is a wake up call for print media to “scrutinise their business models”. “Having an app doesn’t mean you’re digital,” he says.
In the meantime, Moos says Sake 24 has met with the JSE as it is consulting on the issue at the moment. “We have met with the JSE when they made the proposed changes public. We will participate in the process to submit comment.”
In the meantime, Hogg writes that he’s not “dancing” at the announced end of this ‘subsidy” for his rivals. “No we aren’t. But we’re sad. Like you feel when the heart of an overweight friend eventually gives in. They knew better than those of us chiding them, that the rich food was killing them. But refused to accept reality. Defended with every fibre in their misguided bodies, that they had a right to do wrong.
“The media industry in South Africa is under threat from all over. It can ill afford any more body blows. And right now it certainly doesn’t need any internecine fighting. We appreciate this so won’t add fat to the flames. But rather advise, gently, that these overweight, heavily subsidised members of the family accept the reality of the internet age. Cut their cloth according to their means. Come to understand that analogue advertising rands will be replaced by digital cents. And rather than their shrill squawks, take a deep breath and adapt like dozens of other industries, from telecoms to travel, have done.”
Note: Avusa and Independent Newspapers were approached for comment on this story, but failed to respond by deadline.