Still the Most Profitable Media Business Around

BAPCO showed stronger revenues in both the first and second quarters than it had in 2004. Verizon's earnings increased even as its revenues declined. As a result, Verizon's operating margins climbed from 45.9% to 47.3%. While SBC's margins declined, they remain the highest among major incumbent publishers. Year-to-date revenues for the big three have declined less than The Kelsey Group anticipated incumbents would fall for the year (-0.7% vs. -1.2%).

We do not anticipate much change in the remainder of 2005. IYP/local search sales by these companies are gaining traction and the Bells are able to make price-ups stick. We might change our tune when and if we see a major decline in revenues, but that doesn't seem to be on the near-term horizon.

This Post Has 5 Comments

  1. Fred

    Mike is correct, sort of. Everything he says is right on, except for the impact date. In the longer term the printed books are dead meat, but how long will that take? Three years you say…no way.
    Hey, Mike, who do you think dies first…Yellow Pages or newspapers? Do some homework and look at the trends before you answer.

  2. Mike Hogan

    The printed yellow pages are in "strategic" peril. It will take some time for this to impact their financial results because: (a) much of the IYP/Local search services are new and just starting to gain consumers; (b) as consumer usage grows, cannibalization of Printed YP vendors will follow; (c) Printed YP contracts run for a year, creating a further rolling 1-year impact, as old contracts expire and new contracts are evaluated against alternatives like IYP/local search. So, it will take time to see the real impact, probably about 3 years.

  3. Greg

    Revenues are okay. Usage is an issue. That's where the vulnerability is today and, more importantly, tomorrow.


  4. Mike Hogan

    Fred, Because your question required a lenghty answer, and because I'm long-winded, I posted my answer on my blog at:

  5. Terry

    Let's see… Verizon print revenues are really down ~ 10%, Bellsouth ~ 7%, SBC is anyone's guess. Poke around, look at print rev year over year in established markets.
    Then look at product changes.
    Count every section in a book.
    Call the print vendors, get affadavits on book counts.
    Ask the telcos if they are now distributing less to low income zip codes, if at all,
    look at font sizes…Please…
    Look at "hung paper" in established markets.
    Stockholders are the ones losing. 50% of the existing US sales forces can show you the shell game going on in an effort to shore bottom line margins versus top line losses.

    Independent publishers gains are coming directly out of the US RBOC's tentative situation. I'd love to see an outside audit.

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