Newspapers and the Valassis NSA

1. Newspapers and the Valassis NSA An NTMC Webinar 10/10/12 Protecting and Growing Sunday Preprint Business

2. Organizer Philip Brown Executive Director Newspaper Target Marketing Coalition • Only panelists audible today • Type questions into the right-hand panel • indicate who your question is for • Brief survey following webinar • Recording will be posted on NTMC website

3. Moderator Duff Heyl TMC Sales and Operations Manager Arizona Republic • Four 10-minute segments followed by Q&A: • Valassis NSA motivations and weaknesses • Newspaper strengths and strategies • What newspapers are doing protect their Sunday insert business

4. Today’s Panelists Jim Hart, President Integrated Advertising Solutions Keith Gilpin, Direct Marketing Consultant Silvia Schencker, G. M. - Direct Marketing Miami Herald Steve Templeton, Managing Director Los Angeles Times

5. The Valassis NSAmotivations and weaknesses NTMC Webinar 10/10/2012

6. Agenda • Financial Overview- What’s driving this? • How Markets will likely be selected • What will the program look like • The Bigger Threat • Tactics

7. Motivation

8. USPS

9. Valassis • Four components to their business; • Shared Mail • FSI Coupon Book • Neighborhood Targeted • Other (International, digital, etc.)

10. Shared Mail Revenue/Profit

11. From 2006 (ADVO) to 2011 (Valassis) • Revenue down 7% • Profits up 506% • Margin up 540%

12. Neighborhood Targeted • An agency/placement service that uses: • Newspaper ROP • Newspaper Polybag and Sampling • Newspaper Inserts • This segment of their business is the conduit to moving advertisers to shared mail • They establish their analytics can improve ROI • Then move the retailer to Shared Mail

13. Neighborhood Targeted Rev/Profit

14. Implications • This segment is a strong predictor of future Shared Mail revenue growth • After a revenue jump in 2007, it had been relatively flat, dropped 22% in 2011 • Margins reflect significant pressure from other agency/analyst/placement firms • Other agencies will not place pure shared mail at anywhere near the same rate as Valassis

15. FSI- Coupon Book • Was Valassis core product prior to ADVO acquisition • Was inserted 100% into Sunday newspapers prior to acquisition • Have shifted 8MM insertion to Red Plum Shared Mail • Newspapers relationships with Valassis are often framed by fear of losing the FSI

16. FSI Revenue and Profit

17. Implications • Revenue has fallen steadily since 2005 • Down 36.4% from 2005-2011 • Margins are off 70% during same period • These compound to a drop in profit of 81%

18. Valassis Q2 Profit ($millions) Shared Mail $52.3 NT -$2.4 FSI $7.3 Other $2.3 Total Segment Profit $59.5

19. This is the strategy that created the current shared mail cash flow

20. SM CB NT

21. SM CB NT

22. SM CB NT

23. This is the strategy could enable Valassis to establish a second package

24. SM NSA CB NT

25. Change your perception • Disconnect the three main components of Valassis • They leverage CB and NT to gain shared mail advantage • Treat NT no differently than Vertis, Novus, ACG, etc. • Treat the CB like an insert, certainly no differently than News America

26. Market Selection • HH penetration below 40% • Rates above ??? • Mid-sized markets • Poor zoning • PIA Factor • Is your FSI rate an outlier? • Isolated broadcast markets

27. What will the program look like? • Saturation mail in select zips and CR’s • 50 to 60% HH penetration • Demographic profile • Women 35 to 54 • HH income above 50 to 75K • More vertical than horizontal • Must get 5 or 6 per market to work

28. 4.1 Ounces • Kmart • Sears • Walmart • Target • Bedmart • Michaels • ……and it’s limited to 10 pieces

29. The BIGGER threat • Rate brokering using the NSA as leverage • Can make a lot of money by leveraging the CB, NT and the NSA without ever mailing a thing.

30. Tactics Communicate with the NAA and NTMC: • Monitor late-week RedPlum packages • Who is in them? Do they qualify for discount? • Are you converting from postal to alternate delivery to reduce delivery expense? • Is USPS giving preferential treatment in your market to Valassis deliveries?

31. Defending Sunday Insert Business Leveraging and Building on Newspaper Strengths to be the Best Distribution Solution for our Customers

32. 5 Newspaper Strengths the NSA Doesn’t Solve for Valassis Subscribers • Still drives a special connection with readers and a higher value with advertisers Opt-ins • As valuable as subscribers to many advertisers • A commitment without a required reader investment Sunday delivery • For decades the preferred day to receive inserts • Advertisers marketing plans built around Sunday Product and solution diversity • Red Plum remains essentially a one dimensional solution Content

33. As an Insert Distributor, Newspapers May Still Hold the Upper Hand Delivery costs • Subscriber / opt-in delivery should still trump NSA costs for Valassis Compete by lowering TMC costs • Replace or reduce USPS deliveries • Alternate delivery advantages Valassissaturation might require more inserts • Most Sunday inserters don’t want saturation • Even ATZ’s may not solve the problem • Newspapers focus on quality and accuracy vs. quantity

34. How to Ensure You Remain the Best Insert Distribution Solution Develop strategies to maintain or grow Sunday paid delivery Review and improve your opt-in program • Consider expanding the distribution footprint or penetration target as warranted Evaluate your insert program rates • Many papers may not have adjusted rates or structures in months or years • Are page count rates still relevant? • How do your rates stack up against Valassis?

35. Improving Our Relevance and Value Proposition with Clients Expand integrated product solutions • Digital, ROP, Community Newspapers • Improved performance and value for clients Ensure insert distribution meets client’s needs • Zips not zones for home delivery and single copy • Sub-zip code targeting options on Sunday Talk to your Sunday insert clients and agencies • What is their read on the Valassis NSA? Would they consider a move? • What can your paper do to enhance your relationship with these clients?

36. Making it Easier to do Business With Newspapers Valassis still makes it simpler to buy multiple markets Possible ways to get newspapers on the same page: • Standardized distribution units, zips/subzips • Standardized rate structures, volume vs frequency based • Centralized data warehouse • Regional or national insert networks

37. “Control your own destiny -- or someone else Will!” -- Jack Welch

38. Miami Herald At-Risk Assessment: • Established at-risk account list • sorted by high risk, medium risk and low risk • Most high risk are McClatchy corporate accounts • target accounts must operate in at least 30 states • Working with McClatchy on ways to prevent these accounts from going to Valassis

39. Miami Herald Locally, what Miami is doing: • Grow Sunday Select Opt-In Product • increases planned in 2013  • Re-analyzing current TMC product • do we move more out of mail and into alternate? • should we add more content? • light news? • and shopper-type advertising? • build more local engagement? • Focus on local P&D growth • build better marketplace for TMC and Sunday Select products

40. Los Angeles Times Perform client-centered risk assessment • real vs. perceived threats Adopt “insight selling” as new approach • rebuilding value proposition Shift focus from distribution to attention management • play offense not defense

41. audience questions? panelist comments?

42. You will receive very brief survey following the webinar Your feedback is useful and appreciated!

43. THANKS to all attendees and panelists!!