The UK consumer magazines business has shown steady growth and stable profitability, though some individual participants have suffered from failed attempts at international expansion. The industry has overcome the advertising recession very successfully so far. This is partly because only 30% of revenue is derived from advertising, but also because page rates have continued to be firm. Though profit margins are currently lower than regional newspapers, the sector shows considerable scope for improved returns.
Several factors lie behind this assessment. The first is that growth of Internet households will slow, possibly to 10%, although expansion will be faster than in the UK or Germany. The second is that Wanadoo, as the ISP arm of France Télécom, continues to benefit in our view from advantages that other ISPs cannot match, significantly reducing customer acquisition and retention costs, whether on narrowband or on broadband. Actions taken by the regulator have largely been too little, too late.