Growth in Digital Advertising and Declining Advertising Spending on Print Media and Free Magazines

「The Group's core business, regional free magazines, consists of free magazines distributed to individual households through door-to-door delivery (posting) as print media. To meet rapidly growing demand for digital media, the Company has adopted “AI Driven” as the theme for the next fiscal year, the 49th fiscal year, and is working to enhance the value of its own media by aiming to become a group that creates advertising that generates responses using practical data and AI.」

「世界的なITプラットフォーマーへのデジタル情報の集約・蓄積が急速に進んでおります。」

「In the advertising business, as the market shifts from outdated mass media to so-called internet platforms, issues concerning various rights, including copyright, arising from the use of generative AI, content issues such as fakes and hallucinations, and media responsibility for malicious advertising are being reconsidered.」

「In the advertising business, as the market shifts from outdated mass media to so-called internet platforms and the weighting of network (NW) media increases with the advance of the digital society, some malicious digital advertising on such media has become a social issue. In addition, in impulsive digital advertising, the degree to which content attracts interest and measures to achieve a high position in search results are often prioritised over the importance and accuracy of the content. Such advertising is increasingly unsuitable for the strategies of regional private-sector businesses seeking to focus on their trading areas and acquire repeat customers.」

「In the advertising industry, as digital advertising expands, reaching ¥3.1 trillion in 2022 according to the 2023 White Paper on Information and Communications in Japan, determining how to strengthen coordination between digital advertising and traditional mass-media and sales-promotion advertising to maximise advertising effectiveness has become a key factor in clients' advertising and promotional activities and media selection.」

「As the advertising industry continues to shift toward low-cost internet advertising, the so-called digital shift, magazines and newspapers in traditional print advertising media have continued their long-term decline, and advertising placements in the Company's core free magazine business have also continued to decrease.」

「In Japan, the trend toward digitalisation is gaining momentum. According to Dentsu, internet advertising expenditure in 2021, at approximately ¥2.7 trillion, exceeded advertising expenditure for the four traditional mass media for the first time, while digital advertising expenditure derived from the four traditional mass media, representing part of internet advertising media expenditure, exceeded ¥100 billion for the first time.」

「As the advertising industry continues to shift toward low-cost internet advertising, the so-called digital shift, magazines and newspapers in traditional print advertising media have continued their long-term decline, and advertising placements in the Company's core free magazine business have also continued to decrease.」

「While expanding its own Happy Media(R) media portfolio and working to limit the decline in revenue caused by the COVID-19 pandemic, the Company saw revenue from its own media, which accounts for approximately 70% of its standalone revenue, decline approximately 27% year on year in April, approximately 41% in May and approximately 12% in June, resulting in an approximately 26% year-on-year decline for the quarter on a standalone basis.」

「As the advertising industry continues to shift toward low-cost internet advertising, the so-called digital shift, magazines and newspapers in traditional print advertising media have continued their long-term decline, and advertising placements in the Company's core free magazine business have also continued to decrease.」

「The Company's operating environment remains challenging. In addition to the partial decline in regional advertising demand resulting from growing uncertainty in regional economies amid unstable international and domestic conditions and the shift toward low-cost online advertising, factors driving higher costs for the Company's own media, including soaring printing paper prices and upward pressure on distribution costs due to labour shortages, have intensified.」

「During the cumulative second quarter period, the Company's operating environment became increasingly challenging due to the continued shift toward low-cost online advertising, difficulties securing human resources and soaring printing paper prices, among other factors.」

「During the cumulative first quarter, the company's operating environment became even more challenging as the shift toward lower-cost online advertising and the difficulty of securing human resources continued from the previous fiscal year, while the company also faced upward pressure on printing paper prices amid supply shortages.」

「At the Company, sales at some major locations, as well as at recently launched magazines, fell below the same period of the previous year, forcing downward revisions to both the first-half and full-year forecasts in the first-half results.」

「The cautious stance of regional advertisers toward traditional promotional advertising, together with the shift in advertising spend to low-cost online advertising and platforms, particularly in central urban areas, reduced the Company's overall earnings power, including through Media business revenue at its major regional offices falling below the same period of the previous year.」

「Revenue from the Media business, the Company's main business, increased only slightly year on year, while orders for advertising in the advertising SP business continued to decline as in the previous fiscal year. As a result, revenue was ¥3,486,264 thousand, down 1.3% year on year.」

「As a result of lower orders for traditional non-owned advertising media and other factors, revenue was ¥459,566 thousand, down 1.8% year on year.」

「Although orders for free magazine advertising, the core of the Media business, grew steadily, orders for traditional advertising media such as newspapers, television, radio and flyers in the advertising SP business declined throughout the fiscal year. As a result, revenue was ¥7,400,292 thousand, down 0.3% year on year.」

「As a result, orders for traditional advertising media were on a declining trend, and revenue was ¥1,427,073 thousand, down 16.4% year on year.」

「Digital media is growing rapidly in the advertising market, giving advertisers access to a more diverse range of advertising methods than before. If digital media grows beyond the Company's assumptions and the Company is unable to respond appropriately, this could affect its results through a decline in advertising revenue and other effects.」

「Internet advertising led the overall market, and domestic advertising expenditure in 2015 increased 0.3% year on year to ¥6.171 trillion, marking growth for the fourth consecutive year. Meanwhile, advertising expenditure for free magazines and free newspapers fell 0.6% year on year to ¥230.3 billion.」