Bloomberg News

News of the World Ad Losses Are Mirror’s Gain as Shares Rise

July 06, 2011

(Updates with analyst comment in 15th paragraph.)

July 6 (Bloomberg) -- News Corp.’s News of the World, the tabloid accused of hacking into a murder victim’s voicemail, is losing advertisers that may put Trinity Mirror Plc in a position to gain marketing dollars. Trinity Mirror shares surged the most in a year.

Trinity, which publishes Britain’s Daily Mirror newspaper, may as much as double annual ad revenue for its Sunday paper as companies avoid associating their brands with Rupert Murdoch’s News of the World, said Alex De Groote, an analyst at Panmure Gordon & Co. The Sunday Mirror has a circulation of about 1.09 million per issue while the News of the World has an average of 2.66 million, according to media researcher ABC.

General Motors Co.’s Vauxhall brand and Lloyds Banking Group Plc became the latest advertisers to pull ads off the News of the World, following Ford Motor Co.’s exit yesterday. The Sunday newspaper, already accused of hacking into the phones of celebrities and politicians, now faces allegations that a private detective deleted messages from the voicemail of murdered schoolgirl Milly Dowler in 2002.

“Ford is a bellwether advertiser,” said London-based De Groote, who advises investors to buy Trinity shares and doesn’t own any. “If they go, others may follow suit.” Advertisers “don’t want a channel that is seen as tarnished.”

He estimates that the News of the World has annual ad sales of about 40 million pounds ($64 million). The Sunday Mirror could increase its ad revenue to 30 million pounds from a range of 15 million pounds to 20 million pounds currently, he said.

Shares Jump

Trinity rose 7 pence, or 17 percent, to 42.25 pence at the 4:30 p.m. close of trading in London, its biggest jump since July 2010, giving the company a market value of 126.9 million pounds. The stock declined 39 percent this year before today.

News Corp., whose brands include the Fox TV networks and film studios, the Wall Street Journal newspaper and book publisher HarperCollins, dropped 85 cents, or 4.7 percent, to $17.28 in Nasdaq Stock Market trading, the biggest fall since February.

Trinity, based in London, reported 761.5 million pounds in revenue last year.

News International is in “dialogue with advertisers about the steps we have been taking and those conversations will continue,” News Corp. spokeswoman Daisy Dunlop said in an e- mail. Nick Fullagar, a spokesman for Trinity Mirror, didn’t return a call seeking comment.

Shares Jump

British media published further allegations today that the tabloid tapped the voicemails of murder victims and their families and paid police officers for stories.

U.K. Prime Minister David Cameron today promised at least one inquiry into phone-hacking at the News of the World newspaper and failures by the police to investigate it.

Opening a debate into phone-hacking in Parliament today, Labour lawmaker Chris Bryant cited a 2006 report by the Information Commissioner that had identified illegal transactions in private information the country’s newspapers. The report identified 143 instances at the Sunday Mirror and 182 at the News of the World.

Lloyds, Britain’s biggest mortgage lender, said today it pulled a planned advertisement for its Halifax unit. “This was a tactical decision in the short term whilst we carefully consider our longer-term position and its implications,” the London-based company said in a statement.

Disappearing Money

While the two Sunday tabloids, which each cost 1 pound, target similar audiences, not all of the lost marketing money and customers will go to Trinity, analysts said.

“I don’t think Ford pulling an advert out of the News of the World means Ford will place more advertisements inside of the Sunday Mirror or whatever else,” said Doug McCabe, an analyst at Enders Analysis Ltd. “It is perfectly plausible that that money simply disappears for a period of time.”

Ford said yesterday that it will use “alternative media within and outside News International,” the News Corp. U.K. unit that also publishes the Sun, the London-based Times and Sunday Times.

Vauxhall, the sister brand of GM’s Opel unit in Europe, suspended ads placed with the News of the World and will “reconsider its position pending the outcome of investigations into allegations of phone hacking,” said spokesman Denis Chick. The carmaker has no immediate plan to shift the spending to another publication, he added.

Shrinking Readership

The readers may vanish, too, according to George Brock, professor of journalism at City University of London. Subscribers are disappearing across the board and a customer who loses interest in their favorite publication might not choose a new one, Brock said.

“Nowadays when readers leave a title, they don’t necessarily go to another one,” Brock said. “They might just leave the Sunday reading market altogether.”

Rebekah Brooks, chief executive officer of News International, will remain in her position, News Corp. CEO Rupert Murdoch said in a statement today.

“Recent allegations of phone hacking and making payments to police with respect to the News of the World are deplorable and unacceptable,” Murdoch said. “We are committed to addressing these issues fully and have taken a number of important steps to prevent them from happening again.”

--With assistance from Robert Hutton and Gavin Finch in London and Chris Reiter in Berlin. Editors: Kenneth Wong, Rob Valpuesta.

To contact the reporter on this story: Amy Thomson in London at Athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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