Old media will never be as profitable again, warns WPP's Sorrell

Speaking to more than 250 media and advertising professionals at an IAA event yesterday (January 21), the leader of the group behind some £15bn in revenue last year, warned the media sector continues to be "disintermediated" by low-cost business models.

"The painful thing for old media is it will never be the same again," Sorrell said. "It will never be as profitable as it has been."

To underline his point, Sorrell, drew on the UK's receding ad market, which WPP's GroupM forecast to fall 5.8% and 6% in 2008 and 2009 respectively: "ITV and Michael Grade continually say it (TV airtime) is as cheap as it's ever been and impacts are up, so why aren't they buying?"

Turning his attention to print, Sorrell warned that the "structural changes" - referring to the many job losses, falls in circulations and drops in print advertising across the sector - were set to continue.

He said the seeds of the problem were sown when the people who created the new-media industry in the early Nineties, decided to give it away for free.

While he admitted this was the right move from the consumer point of view, it has changed the nature of the print business model.

"It is impossible to take it back up," he said. "You can always start up here and take the pricing down, but you can't start there [free] and start moving it up."

He also drew on the fortunes of the British regional press, where revenues are set to plummet 19.1% in 2008 and a further 13.2% in 2009, according to GroupM.

Sorrell recalled a time not too long ago when Johnston Press was "the best run media company", noting that now its market cap has "gone from £1.2bn to virtually nothing in a very short space of time".

However, despite the fundamentally changes brought about by new media, Sorrell called the marketing and communications business a "vibrant" industry that remains "front and centre of importance".

"None of our clients will survive and prosper unless they continue to differentiate themselves in either tangible or intangible ways," he said, adding that this is where branding and innovation is required.

"Without innovation you can’t have branding. But the two go together. Differentiation, which is at the heart of everything we do at WPP, is critical."