Recession separates the men from the boys

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We expect a fall in revenue but let's see who recovers fastest.

"So it's a recession. What you going to do? Lie down and die?"

So said Terry Volkwyn, CEO of Primedia's broadcasting division, to the company's sales staff when the economic gloom set in earlier this year. And ad spend for the division, whose stations range from Highveld and 702 in Gauteng to Kfm and Cape Talk in Cape Town, has in fact shown a small increase this year as it has slogged away to find new business and focused on direct-response ads (advertising that calls for a response such as phone call to make a purchase).

The point, says the canny Volkwyn, is that even when we come out of the recession, the big spenders aren't going to come rushing back with megabuck ad campaigns - that's going to take years.

There are indications that the worst is over for the media in this recession. American advertising agency Magna said recently, for instance, that ad spend in the US bottomed out in the first half of this year and it will slowly begin to pick up next year though it will remain in negative territory. In South Africa we also have the Soccer World Cup to look forward to, which should boost the coffers somewhat in the ad-spend department.

Even the beleaguered Irish owners of South Africa's Independent newspapers saw a rise in Independent News & Media's (INM) share price when it released its dismal interim results recently - because the drop in revenue wasn't as awful as the analysts expected.

In the first six months of this year the South African division that includes papers, such as The Star, Pretoria News, Cape Times and The Mercury reported a 3.5% increase in revenue to €102.5m compared with the previous comparable period.

Not half bad but then there's this little disclaimer in INM's report: "Revenue in the core operations declined by 8.0% on last year which was offset by the inclusion of INM Outdoor (Advertising) for the full six months as opposed to three months in the prior period. Operating profits of €20.8m increased by 1.5% in constant currency with very tight cost controls in the core business, where costs were reduced by 5.5% year-on-year despite consumer inflation of 8.1%."

If the Independent knows one thing, it's how to contain costs especially when it comes to the expensive newsroom staff. And indeed almost every major South African news organisation barring the country's biggest newspaper, the Sunday Times, has retrenched staff.

The smart ones got it finished and klaar before the start of their current financial years to get the costs of retrenchment off the books before 2009/2010. These are also probably the same smart Alecs who are finding new ways to sell advertising and finding new advertisers. Those that have responded to this torrid year by slashing advertising rates will feel the pain long term as what kind of message does discounting in bad times send out to advertisers? Frankly, that you ripping them off in the good times.

Caxton, which owns The Citizen and a load of magazines, community papers and printing presses, recently reported a drop in operating profit from R646.2m to R410.1m for the year to the end of June 2009 but then we expect revenue to take a knock. It's as the worm turns and we move into 2010 that we will get a really fascinating insight into which of our media houses know their stuff. Those that tightened their belts quickly, trimmed the fat from the staff and responded creatively to the drop in ad revenue will recover faster as ad spend slowly picks up.

A couple of businesses have actually scored out of the recession. Naspers, for instance, did very nicely out of pay TV in last annual results and its CEO, Koos Bekker, attributed it to people spending more time at home. I also discovered last week that Primedia's Ster Kinekor has had one of its best years in a long time as catching a flick is cheap these days.

Primedia is no longer a listed company so you can't scrutinise the figures but Ster Kinekor CEO Fiaz Mahomed told me that 400 000 more tickets were sold in the period July 2008 to end of June 2009 compared with the previous comparable period. That's pretty decent considering what a decline cinema has been in in the past decade and the fact that it is a largely fixed-cost business.

So if you happen upon a media boss puffing on a cigar over an expensive Scotch in a swanky restaurant, you have my permission to say: Go home to your wife and kids, why don't you. Watch some TV. Take them to a movie. Abusing your expense account is so 2008.

*Gill Moodie spent 14 years as a salaried hack in print media in South Africa and the UK before escaping to the blogosphere and freelance journalism. She is the publisher of Grubstreet http://grubstreet.co.za/ in between unpacking and packing the infernal dishwasher and bringing up a four-year-old with attitude.