Friday, July 15, 2011

Morning Brief: Rebekah Brooks resigns as chief executive of News International; Future PLC reports 5% decline in profits as ad and circulation revenues dip; Argentina bans prostitution ads in newspapers and other media

The resignation today of Rebekah Brooks was inevitable, but is it too late to have any meaningful impact on the growing scandal? It all depends on whether the politicians who say they want to look into the business practices of News Corp. are being truthful. or whether they will now look for a way to bury the whole episode under the rug.
"At along last Rebekah Brooks has made the right decision, but it is far too late," said Liberal MP Don Foster, according to The Guardian. "It was disgraceful that Rupert Murdoch, when he arrived in the UK, said that his top priority was Rebekah Brooks rather than the people who had been affected by the alleged illegal activity of a small number of his staff."

“No one in this country should exercise power without responsibility,” Labour Party leader Ed Miliband said in a statement, according to Bloomberg's report on the resignation.

Marketers looking for signs of what awaits the country economically can look no further than events occurring in Minnesota and Connecticut.

Yesterday the governor of Minnesota announced that lawmakers had reached an agreement that would end the state government's shutdown. In the end, the governor gave up on his demands that some tax hikes occur for upper income taxpayers. He blinked, and the result is that while the state government will reopen, layoffs and major spending cuts will occur in the middle of a recession.

In Connecticut another Democratic governor, Dannel Malloy, announced that public employees would start receiving layoff notices after union members failed to sign onto the governor's plan for $1.6 billion in concessions and savings. The governor is looking to add 6,500 more to the unemployment rolls.

In the case of Connecticut, the approved plan did call for some revenue enhancements including a raise in the level of income taxes paid by those making more than $100,000 a year. But the majority of revenue enhancements will come in the form of state sales taxes.

Is this what we can expect from the federal budget negotiations, as well? If so, the unemployment picture could get even worse, just in time for next year's presidential election.

Bath, England based Future PLC reported a five percent decline in profits today, stating that circulation revenues declined three percent, while ad revenues continued weak.

The US division said it need to adjust its forecast for ad sales down, while stating that it would delay the launch of a new digital product.

In its investor statement Future PLC said "the Board has decided to accelerate transition of Future US into a primarily digital business. This process may take 12 to 15 months, to allow time for existing subscriptions and other contractual obligations to be fulfilled."

Argentina's president, Cristina Fernandez, has instituted a ban on prostitution ads in newspapers and other mass media which starts today.

The decree has drawn praise from women's groups, as well as the U.S. ambassador who said "many countries will appreciate seeing the effects that this decree will bring in the fight against this crime," according to the AP.

But others say that the move will adversely effect newspapers aligned with the opposition, including Grupo Clarín, the largest media company in Argentina, though the company themselves declined to comment.