This archive report was first published on 7 July 2020.
Lay-offs in Media Mirror Reality of Corporate Profitability Crisis ¶
Published on July 7, 2020
Journalists and journalism have faced unprecedented job insecurity in the past three weeks, with massive layoffs and firings. This phenomenon is a reflection of the broader corporate profitability crisis that has been unfolding for years.
According to data analyzed by a friend, listed companies, including media outlets, experienced steady growth in revenues immediately after the 2007/2008 post-election violence. However, this trend peaked in 2010 and began to decline, with six years of plummeting revenues from June 2014.
Despite this decline, corporate executives failed to re-engineer their operations to adapt to the reality of low revenues. Annual accounts of listed companies from the past six years reveal that the phrase 'a difficult operating environment' appears frequently in chairman's statements.
The economy has been suffering from a crisis of corporate profitability, with growth in profits not coming from increased lending to the private sector but rather to the sovereign. Telcos were an exception, benefiting from technology and demographics to turn a profit.
Media companies, however, did not sufficiently respond to the challenge from the internet, with statistics showing insufficient capital deployment in the transition to the digital world.
Reducing staff costs was in tandem with reduced revenues, with the share of labor costs as a percentage of revenues remaining unchanged. Covid-19 has exposed companies as entities run by directors who prioritize shipping earnings to shareholders over building inbuilt resistance to pandemics.
According to the data, the trend of low growth coincided with a two-year record distribution of dividends to shareholders, leaving companies with little to deal with systemic shocks like the pandemic.
Some big banks have been regularly shipping nearly 100% profits to parent companies in London, New York, and Johannesburg.
As a journalist, I remain committed to the old priorities of publishing: the reader or viewer first, employees second, and owners third. Who will protect the newsroom from bean counters?
