Tuesday, May 1, 2007

BoSacks Speaks Out: On Paper, Advertising and, Oh yes... Commodities

BoSacks Speaks Out: On Paper, Advertising and, Oh yes... Commodities

I just want to take a time out here to point out, no suggest, that the paper people reading this newsletter read the following article twice. Why, you may ask? Because reading and not understanding what you are reading can be dangerous, and I think that there has been a misunderstanding of the current advertising climate and a confusion of economic facts by the paper community. After all, as the Japanese proverb goes, "If you believe everything you read, you better not read."

What the heck is Bo talking about this time? It is this - the belief and actions of the paper companies that, with all the predictions and prognostications of increased advertising spending, it is a good time for paper price increases. In my humble opinion it is not, and will not, indeed cannot, be supported. It is among other things, the simple dynamic of supply and demand. Magazine circulations and the paper they draw upon are on the decrease. Paper supply is on the increase. All this "talk" that I freely distribute to you about the advertising recovery can be very misleading. Yes, advertising spending is on the rise from the worst business climate in several generations. So what? Increased advertising across the "board" does not necessarily equate to increased magazine pages. The "board" has changed; it has grown, and has become an uncontrollable and annoying monster. Ads are everywhere, from the Internet, to taxi cabs, to the public toilets we frequent. All these new format ads cost money and that money is coming from and being siphoned from more traditional vehicles, such as magazines and newspapers.

Let's get real here. With a few exceptions, magazines are still hurting, laying off people, and decreasing ad rate bases. And that means less paper, not more. Less paper by publishers means, more paper in inventory. And that means, by the law of commodities denied by most paper companies, not a good time for an increase.


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