The brass at Wal-Mart is probably salivating at this. Darwin is smiling in his grave.
2008 was a doozy, but don’t expect 2009 to get any better:
“At the end of the day, people are buying far less stuff. They are buying what they need as opposed to what they want,” she said.
This spending slump, which started in early 2008, has already claimed a number of retail casualties. Prominent national chains such as Linens ‘n Things, Steve & Barry’s, KB Toys, Whitehall Jewelers and Shoe Pavilion have gone out of business.
Still others such as No. 2 electronics seller Circuit City are barely surviving, hoping to find a lifeline while in bankruptcy protection.
But after suffering one of the worst year-end shopping seasons in decades - November and December combined can account for half of merchants’ annual profits and sales - experts predict that many more chains will disappear.
Read more. How bad was the retail figures? Check the chart:
‘I don’t see any reason for retailers to be rejoicing at all,” said Britt Beemer, chairman and founder of America’s Research Group.
Among the early sales tallies, new estimates from MasterCard Inc.’s SpendingPulse Data service indicated that total store sales fell about 3% in November and December combined.
That would be significantly worse than the original forecast from the National Retail Federation (NRF), which anticipated a 2.2% gain for the period.
That line about consumers buying what they need versus buying what they want is probably the most accurate observation and captures the shifting sentiment as American consumers start the process of moving from a debt-fueled spending mode to one of savings and manufacturing.
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WatchMojo NewsletterWashington Post recaps the year in the markets:
- Wall Street rang out its worst year since the Great Depression yesterday, leaving shareholders $6.9 trillion the poorer.
- In Germany, stocks were down 40 percent, in Japan, 42 percent, in Brazil, 41 percent. Taken together, all of the world’s stocks lost 48% last year.
- The Dow Jones industrial average, an index of 30 blue-chip stocks, and the S&P, a broader index watched by market professionals, were down 34 percent and 38 percent, respectively, their deepest losses since the 1930s.
- The tech-heavy Nasdaq composite index was down 41 percent, its worst year since the exchange was created in 1971.
- The Dow closed yesterday at 8776.39, while the S&P closed at 903.25.
- The Nasdaq closed at 1577.03.
- The market for crude oil was simply unlike anything we’ve ever seen: after surging to $147 a barrel in the summer, prices tumbled to $44.60 a barrel on the New York Mercantile Exchange yesterday, falling 70% from its peak and finishing down about 50% for the year. Had Israel not bombed Gaza in its latest misadventure, I am fairly certain the price would be even lower. While long term demand for oil remains bullish (not that you could tell given the 2008 chart), some are fearing that it could slide all the way down to $25 if the economy gets worse.
What more can we say? Apart from very conservative and wildly diversified investment funds (that I cannot sell anyway), I sold my last stock in May and boy-oh-boy do I count my blessings.
It feels like it was just yesterday that we launched (it was actually about 1,000 days ago, in late January 2006) and that we crossed 33,333,333 streams (actually, that was about 50 days ago)… but we have now crossed 40M streams. Here’s the cumulative chart:
Once again, I’d like to stress, the total count is much higher, but these are audited stats on parties where we track the figures. Plus, this excludes out out-of-home digital signage network, which reaches 15M consumers each month.
Those who don’t learn from history are doomed to repeat it, goes the adage… and listening to print media managers, I would almost think we were in 2001-2003 again. Let’s flash back to that era, or the February 2001 issue of Maxim, to be precise, where the lad mag’s editor Keith Blanchard proclaimed in his Editor’s Letter (!):
“The Internet Bites: What are you doing on the Internet today? (…) I can’t believe Al Gore invented this crap.”
Sure… at that time, I understood his frustration. I was running Maxim counterpart AskMen’s ad sales strategy as we ate away at their market share. Largely due to their digital apathy, we became the largest in the men’s space. To this day, I ask: why did Maxim not buy AskMen? Or for that matter, Conde Nast, Playboy, Rodale, etc.?
The truth is they were afraid of acquiring a disruptor, I think. That understanding explains how I’ve crafted WatchMojo.com’s strategy as we essentially seek to disrupt the television media space through the online video content sector. Mind you, due to Hollywood’s fear of cannibalization, I see online video as a salvation for print (because it is all incremental) but as I like to say: when it comes to traditional media and online video: those who want, can’t; and those who can, won’t. But that is a separate post.
To stay on the topic of print media: if you need any further explanation of why Maxim’s parent Alpha Media Group’s EBITDA plummeted from $28M to $8M in the one year since the company went private, look no further than that management philosophy.
Admittedly, the truth is: print media’s dilemma is rather complicated, as
- women-oriented publications will continue to do quite well,
- the outlook for newspapers and magazines will probably be rather different.
But first, let’s fast forward to 2008, where the slowdown in advertising revenue is making the 2001-03 era look like a boom.
Now, I read that magazines will react to the decrease in advertising revenue and circulation numbers by cutting online headcount:
The operating policy now, particularly at Condé Nast, basically reads: Revenue first! Future later.
And the printed page, the luxury object, is still where you find the money these days.
“The print reader’s worth a whole lot more [than the online reader],” said publisher Jann Wenner in an interview with Advertising Age last week.
Mr. Wenner is no slouch, he founded Rolling Stone magazine. But that mindset is not limited to the B2B space:
[Business-focused] Portfolio, a magazine that had one of the boldest Web sites in the Condé Nast empire, let that experiment go two months ago when it dismissed 25 of the 30 people who worked full time and as freelancers for the magazine’s Web site.
And why? Partially to save the magazine.
The magazine lost close to $20 million this year, and with the magazine’s Web site losses also totaling in the millions, Condé Nast group president David Carey, along with Condé Nast editorial director Tom Wallace, played a large part in convincing Condé Nast chairman Si Newhouse and CEO Chuck Townsend to keep the magazine afloat at a reduced publishing schedule. But to essentially gut the Web site.
Across Condé Nast, publishers are making a calculation about the revenue of the present versus the promises of the future.
“We work in the high-end market,” said our Condé Nast source. “We’re going to stick to it and we might be the last one standing, but that’s our philosophy. The Web isn’t really a priority.”
The result is little - if any - original and fresh web content:
“It’s nothing now,” said one recently laid-off staffer. “There won’t be any more fortune.com original content in the near future.”
While the perception remains that the “higher-up’s” (ie. editors, publishers, management, owners) seem to put their heads in the sand, the journalists - bloodied by rounds after rounds of layoffs - seem to be reading the writing on the wall.
The New York Times’ Joe Nocera burst out of his seat during a question-and-answer session and strongly disagreed with the editors and wondered how they could be so sanguine about the future of print.
Of course, the philosophical, theoretically correct answer is that there should be no distinction made between an online and offline writer or for that matter, content… but the truth is, Mr. Wenner is right: right now, an offline reader is worth much more, but this has more to do with the fact that print dates back two centuries whereas online dates back two decades.
Moreover, while Mr. Blanchard’s philosophy might have worked in 2001 when marketers were still trying out online advertising. Today, marketers’ mind is made up: tracked and targeted media beats out traditional channels. The only problem is that new media remains embryonic and the transfer of wealth from traditional media to new media won’t happen overnight. As such, being so sanguine and stoic might prove foolish before long.
After all, this time around, it’s not online advertising budgets that are being savagely slashed, it’s print. Case in point: Dell’s $50M back-cover print ads.
Is print going to zero? Probably not, but there is no doubt that online will be the biggest media after television, and might even surpass television within one decade.
- Venerable private equity bank Veronis Suhler Stevenson (VSS) projects that to occur by 2011.
- Our estimates forecast online advertising to surpass TV advertising by 2021.
Ultimately,
- newspapers really have no business being distributed via print media and the Web medium suits their content rather well (timely news, short articles, etc.) whereas
- magazine content, dare I say, works better in glossy print packaging. The problem with magazines, frankly, is that the only viable magazines are women-oriented publications as men have flocked to the Web. As such, despite the aesthetic merit to publish in print… the ultimate conclusion is that any company (forget media or print company, we’re stressting any in all industries) that does not have a thorough digital and interactive strategy is doomed.
All I know is that TV executives better be following the storyline in print media, because within a decade, if not sooner, their media’s day of reckoning will be here, too.
There’s a rumor out there that MSFT is looking at shedding some headcount, too. From Fudzilla (via ArsTechnica and via SAI):
Currently Microsoft employs about 90,000 people across the world and from what we’re hearing, some 15,000 of those are expected to be giving marching orders come January 15th. That’s almost 17 percent of Microsoft’s total work force, not exactly a small number.
I would agree with MSFT using this downturn as an opportunity to lay off, say, 1,500 people, for example, but 15,000?
MSFT is already burdened with the image of a mature stock, whose shareholders have endured a “lost decade”.
So while I am all for increased efficiency, layoffs of this magnitude would make MSFT fall in the “stock in decline” category, which will basically ensure a second decade of doom.
In today’s climate, flat is the new growth. I doubt if even 2000’s darlings Google or Apple are growth stocks.
So far, we haven’t managed to confirm what departments or regions will be hit the worst, but we’re hearing that MSN might be carrying the brunt of the layoffs. We’re also hearing rumors about the possibility of somewhat larger staff cuts at Microsoft EMEA (Europe, Middle East and Africa).
But by cutting in growth areas, MSFT is either throwing in the towel or contenting itself to move from the monopoly category to the utility category.
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