The Internet and newspapersWhat future for the printed format?

AEDE10th March 2006

2006-11 2

Enders Analysis

Leading UK independent research company*

Authoritative and original research to support buy-side activity combining financial analysis with regulatory insight, consumer research and informed by high-level contacts with leading industry players

Research agenda covers mobile and fixed telecommunications, media and technology

UK focus with coverage of US, Japan and major European markets

* Financial News survey of independent research, February 2005

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Funds:Aberdeen Asset ManagementABP (Netherlands state pension fund)Baillie GiffordBrookside Fund ManagersCapital ResearchFidelityGartmoreHunter Hall Investment ManagementJP Morgan Kensico Capital ManagementLiverpool Victoria Asset ManagementLoch Capital ManagementMarshall WaceMoore CapitalMorgan Stanley Asset ManagementMorley Fund ManagementOch-Ziff Capital ManagementPutnam InvestmentsROBECOThreadneedle InvestmentsUSSWalter Capital Management

Advertising/Marketing:OMD InternationalWieden & KennedyWPP

Fixed Line: BTCable & WirelessCegetelKingston CommunicationsNTLOnetelTelewestThus

Government: Conseil Supérieur de l'Audiovisuel (France)Department for Culture, Media & SportDepartment of Trade and IndustryEuropean CommissionHM TreasuryOfcom

Internet:AOL EuropeIliadTiscaliUK BroadbandWanadooYahoo!

Press/Radio: D C ThomsonDMGTEmap

Film/Television/Music: ArqivaBBCBSkyBCanal +Channel 4Digital UKEMIFiveHIT EntertainmentITV plcMIH AsiaMTV Networks EuropeSony BMGSony Pictures EntertainmentThe Walt Disney CompanyTime WarnerTop Up TVTurner BroadcastingVideo NetworksVivendi UniversalWarner Chappell

Mobile: O2OrangeSFRTesco TelecomsT-MobileVirgin MobileVodafoneVodafone Japan

GcapJohnston PressLagardere MediaUBC Media Group

Private Equity: Apax PartnersCinvenIngenious MediaPermira Advisors Professional Services: AccentureBooz Allen HamiltonCapgeminiDeloitte ConsultingMcKinsey & CoMediatiqueplanning-incPricewaterhouseCoopersServista Retail: HMV William Hill

Client base

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UK media consumption

Note: Proportion who watch TV, listen to the radio or read printed media in any given day (weekdays and weekend).[Source: ONS Time Use Survey]

Printed media, radio, TV and Internet penetration of demos (% of cohort)

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Reading newspapers and using the Internet

Base: UK adult Internet users.[Source: BMRB Internet Monitor Wave 34 November 2005]

“I read the newspapers less now that I use the Internet”

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Internet usage is not affecting all formats equally – Saturday and Sunday editions appear toBe especially vulnerable in relation to newspapers delivered during the week If current trends continue, by 2010, when Internet penetration will have reached 65% of UK

adults (33 million), about 13 million will not read the weekend newspapers

Reading newspapers and using the Internet

2002 2003 2004 2005

Internet users (m) 20.4 21.9 23.4 26.5

Do not read newspaper on weekdays (%)

28 28 31 28

Do not read Saturday newspaper (%) 32 35 36 36

Do not read Sunday newspaper (%) 32 34 39 40

[Source: BMRB]

UK Internet users and newspaper readership, 2002-2004

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Weekday media consumption will become more concentrated than today

Base: All respondents in EU & Norway using each type of media.[Source: EIAA Mediascope]

24%

38%

22%

31%

53%

73%

12%

50%

6%

15%

44%47%

11%

61% 56%

16%

31%

63%

15%

0

10

20

30

40

50

60

70

80

'When you wake up' (6am - 10am) 'During the day' (10am-5.30pm) 'During the evening' (5.30pm-9pm)

'During the night' (9pm-6am)

Watch TV Read newspapers Read magazines Listen to radio Use the Internet

Media consumption trends

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Media-meshing

21%3%

3%

29%

11%

24%

28%

6%

Media-meshing is already present and could accelerate due to young demoQ. When you’re mainly watching TV, reading a newspaper, reading a magazine, listening to radio, using the Internet, which other media do you sometimes use?

[Source: EIAA Mediascope]

When mainly using the InternetWhen mainly watching television

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More pronounced amongst 16-24s

Very high levels of meshing between online and TV and online and radio

[Source: EIAA Mediascope]

INTERNET

32%

40%

4%

6%

Media-meshing is very significant in young demoQ. When you’re mainly watching TV, reading a newspaper, reading a magazine, listening to radio, using the Internet, which other media do you sometimes use?

When mainly using the Internet

Media-meshing

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21%

29%

25%

20%

14% 14%

0%

5%

10%

15%

20%

25%

30%

35%

15-19 20-24 25-34 35-44 45-54 55+

10%

23%

35%

26%

18%15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

15-19 20-24 25-34 35-44 45-54 55+

Internet use and gathering info

To look for jobs

To house-huntTo check TV listings

Base: UK adult Internet users.[Source: BMRB Internet Monitor Wave 35 November 2005]

Online info collection activities are supplanting those delivered by regional newspapers

To view classified adverts

40%

65%

52%46%

40%

13%

0%

10%

20%

30%

40%

50%

60%

70%

15-19 20-24 25-34 35-44 45-54 55+

8%

25%22% 22%

18%

13%

0%

5%

10%

15%

20%

25%

30%

15-19 20-24 25-34 35-44 45-54 55+

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The level of threat to newspaper readership depends on whether newspaper readership habits can be formed and/or preserved in later lifestages Evidence is that aging does not increase readership - to the contrary, between 1974 and 2004,

daily national newspaper readership declined in all cohorts, by 30 percentage points in 15-24 demo But this hypothesis needs further testing for regional newspapers and in focus groups

Threat to newspaper readership

1974 1984 1994 2004

15-24 81 72 58 44

25-34 79 68 56 44

35-44 78 71 58 46

45-54 81 73 63 51

55-64 78 72 64 58

65+ 69 62 62 58

Base: Share of UK adults who read at least one national daily newspaper in the day prior to the interview.[Source: National Readership Survey]

UK daily newspaper readership, 1994-2004

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The Internet is a core medium for news and will soon be a mainstream method of accessing regional/local information More than 40% of all UK adults now access news websites every month Demand for online news and regional/local information is growing amongst Internet users:

In October 2005, almost 70% of Internet users accessed news/weather websites, up 17% in the previous 12 months Over the same period, the share of internet users accessing regional/local websites grew 70% to just under half of all internet users

Online news consumption will continue to grow driven by increasing access to the Internet and increasing time online Usage of regional/local websites is likely to grow even more rapidly, albeit from a lower base

Threat to newspaper readership

Base: UK Internet users.[Source: Comscore, ONS]

Category % reach Y-on-Y growth Unique users Y-on-Y growth

All sites 100.0 n/a 28,883,000 3%

News/weather websites 68.5 17% 19,792,000 21%

Regional/local websites 47.2 70% 13,642,000 75%

Audience reach and unique users, October 2005

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Although ‘national’ websites dominate online news, consumption of local news and information is growing fast

‘National’ websites are the main source of news on the Internet Although direct comparison is difficult, available data suggests that Internet users rely primarily on nationally-based

services/websites, rather than local networks, for news and information Key reasons include

The success of the publicly-funded BBC News website Development of news websites by leading ISPs and portals Relatively early entry into online by national newspapers such as The Guardian

Usage of leading local newspaper networks is now increasing rapidly, but from a far smaller base

Online news consumption

Top 5 national news websites vs. top 5 local newspaper networks – unique users, October 2005

Rank

National news websites Local newspaper networks

Unique users

Y-on-Y growth

Unique users

Y-on-Y growth

1 BBC News 6,279,000 n/a Trinity Mirror icnetwork 1,193,000 63%

2 Yahoo! News 3,499,000 71% Johnston Press PLC 981,000 155%

3 AOL News 2,863,000 15% Scotsman.com network* 834,000 69%

4 The Guardian 2,512,000 78% Manchesteronline.co.uk 811,000 172%

5 MSN News & Weather 2,230,000 n/a Northcliffe this is network 776,000 65%

* The Scotsman Publishing Group bought by Johnston Press in December 2005.[Source: Comscore]

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Reading local newspapers

Base: Local newspaper readers.[Source: Echo Box]

“Top reason for reading the local newspaper”

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0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Pri

nte

d m

edia

rea

der

s (0

00)

Age dependent inclination Increasing inclination

Scenarios for readership

Newspaper readership trends under inclination scenarios, 2003-2028

Note: Figures are indicative only.

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Online advertising

Total advertising market growth = 3.0%

Growth in online advertising far outstripping growth in other advertising sectors All formats of online advertising are growing rapidly, but those that have been the mainstay of regional

newspapers are rising especially quickly, i.e. paid-for search listings (up 73% in first half of 2005), recruitment classifieds (up 75%), and other classified advertising (up 160%)

Year-on-year growth in ad spend in first half of 2005

[Source: PwC]

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Search is the critical piece in any online advertising based strategy Search is highly consolidated and the combination of keyword search and the pay-per-click

auction model is extremely efficient In Q2, search accounted for 40% of US internet ad revenues, but only 5% of time online Outside of search website owners face challenges in delivering a critical mass of targeted

Internet users

Online advertising

Time spent online, US Q2 2005 Internet ad revenues, US Q2 2005

[Source: OPA/Nielsen//NetRatings Internet Activity Index, IAB/PwC Internet Advertising Revenue Report]

Classifieds/ lead generation

24%

Email 2%

Display/sponsorship 34%

Search 40%

Communications 40%

Content 37%

Search 5% Commerce

18%

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Conclusions for the Spanish market