Thursday, August 07, 2014

Are newspapers doomed? It depends.

Now that every major media company has dumped or soon will jettison its print division, the question I hear every day is: Are newspapers doomed?

The answer is neither simple nor universal. But the dramatic and traumatic contraction of the newspaper industry in the last decade suggests that the business models, publishing platforms and journalistic conventions that seemed so stable and certain a few short years ago will not carry forward into the future. 

So, yes, some newspapers will fail, as they run out of relevance, readers and revenues. Since the Great Recession, we have lost such titles as the Rocky Mountain News, the Seattle Post-Intelligencer, the Tucson Citizen and the Manassas (VA) News & Messenger. But newspaper failures, as demonstrated by the demise in 1978 of the estimable Chicago Daily News, are not new news. 

So, where does that leave us? Hopeful but worried. Here’s why: 

The future of newspapers – or, more precisely, local news ventures that may or may not involve putting ink to paper – will depend on whether the people running them are up to the considerable challenge of creatively disrupting their businesses before an ever-growing phalanx of digital competitors destroy what’s left of the still-enviable commercial might and journalistic value of their enterprises. 

Unfortunately, the industry’s track record is not good. In the two decades since the Internet burst into common consciousness, the leaders of the newspaper industry have failed to recognize the need for profound change, much less manifested the grit to go for it. Rearranging the deck chairs by shuffling newspapers into free-standing entities won’t, in and of itself, change the troubling trajectory of the newly liberated publishing units of News Corp., Tribune, Scripps, Journal Communications or Gannett.  

If the executives entrusted with the new newspaper companies rise to the task, however, refreshed businesses can be built on the brand power, content-creating power, sales power and marketing power enjoyed by all but the weakest newspaper. But these exceptional attributes, like the value of the businesses themselves, have been wasting at a frightening pace.  

For the record, the average 16% pre-tax profits of the publicly held newspaper companies surpass those of both Walmart and Amazon.Com. But revenues, profits and newsroom staffing ain’t what they used to be. 

As painstakingly (and painfully) detailed here, the weekday circulation of newspapers fell by 47% in the last 10 years to the point that only a quarter of the nation’s households take a daily newspaper. Print and digital advertising sales fell by 55% in a decade. In spite of aggressive efforts by most publishers to increase the fees they collect from print and digital readers to offset the ad decline, the industry’s total revenues slid 35% in the last 10 years, dropping the average pre-tax profits of publicly held publishers by 37%. 

The outlook for print is daunting, given that three-quarters of the print audience at the typical newspaper is 45-plus years old. The print format, as discussed here, largely fails to resonate with Millenials, Gen Xers and even many Boomers. The advanced age of the print audience not only is undesirable to many advertisers but also represents an unavoidable demographic cliff as readers age to perfection – and beyond. 

The reason the newspaper industry is shrinking, of course, is that the digital media have changed everything about the way we get – and increasingly give – the news. This not only has unhinged the traditional relationships between reporters and readers but also the long-time dependence of many advertisers on newspapers. 

Notwithstanding the vague “digital first” sound bite voiced at most newspapers, the industry’s share of the national digital advertising pie shrank by 52% in the last decade. The gap continues to grow, with  the collective digital advertising revenues of the nation’s newspapers rising a puny 1.5% in 2013 at the same time over-all nationwide digital ad sales surged by 17%

The conundrum facing newspaper publishers is that 80% or more of their revenues (and, arguably 100% of their profits) still come from the advertising and subscription fees sold in connection with their print products. Because print quite literally pays the bills, publishers obsessively, and understandably, focused on fixing the print business as ad sales fell from a record $49 billion in 2005 to less than $21 billion in 2013 (revenues continued tumbling this year, too).  

Owing to the relentless focus on print, most newspapers have not invested in developing the content formats, publishing platforms and advertising vehicles that appeal to digital consumers in an age where the average consumer is said to spend 34 hours a month on her smartphone. Consider: 

:: Most newspapers are content to shovel yesterday’s print stories into tomorrow’s website and then port the same material into yards of gray type on mobile apps. Compare the thumb-numbing presentation of this typical 2,925-word newspaper yarn with the thoughtfully deconstructed coverage at Vox.Com, the eclectic aggregation at Huffington Post, the concise presentation at Circa, the data wizardry at Pro Publica, the crowd power at Bleacher Report, the electric vitality of BuzzFeed and the addictive virality at Upworthy. 

:: Rather than reliably “owning” their audiences as they once did in print, the internal metrics at every newspaper show an increasing dependence on the likes of Google, Facebook and Twitter to generate the traffic that is the lifeblood of any media enterprise. As but one example, a recent internal report showed that even the New York Times is consistently, and embarrassingly, out-gunned in promoting its own stories on the web. 

:: The top digital revenue sources at most newspapers are run-of-site banners that are the least-valuable forms of digital advertising to the growing number of sophisticated brands demanding detailed data about readers so they can target their ads to the right prospect at the right place at the right time. Because most newspapers cannot deliver state-of-the-art ad targeting, many publishers have difficulty selling even half of their interactive inventory. The publishers who do offer targeted advertising depend on Google and other digital natives to provide them with both the customers and technology they need to do the job – thus, sacrificing a healthy percentage of the margins they enjoyed when they dominated print advertising in their markets. 

:: Newspapers missed out on – and, accordingly, have been shut out of – such large and significant digital revenue opportunities as search advertising and commerce. The Boston Globe famously declined to invest in the nascent Monster.Com because its managers did not want cheap online advertising rates to cannibalize the hefty fees they charged for print want-ads. Although the newspaper industry eventually got around to establishing Career Builder and Cars.Com as strong online classified brands, it is notable that the broadcasting side of Gannett plans to keep these successful sites for itself when it severs the newspaper division that built the parent company. With respect to commerce, most newspapers remain so digitally tone-deaf that they don’t bother to link to Amazon or iTunes when they review a book or an album. 

Perhaps the biggest challenge facing the newspaper industry is that its practitioners tend to avoid change, instead of embracing it. To some degree, newspaper leaders cherish print, as I do, out of sentimentality. To a larger degree, they carefully cultivate print because it is their core business. But, to the largest degree of all, they focus on print as the only way they know to earn a living, hit their bonus objectives and hang on to their hard-to-replace jobs in a steadily contracting industry. 

Because nearly all senior publishing executives are held to exacting profit targets at the end of every quarter of the year, they have to squeeze the most they can out of the revenues available to them.  When revenues decline – as they have been doing relentlessly since 2006 – they have no rational choice but to cut expenses by consolidating printing plants, restricting circulation, outsourcing ad make-up, reducing newshole and eliminating staff. 

In their hearts, they know that these tactics – which, among other things, have led to the elimination of 1 out of 3 newsroom jobs  in the last decade – are making their products less desirable and less compelling than ever. So, they are understandably reluctant when someone proposes a digital initiative that will siphon resources away from the troubled legacy business they are trying to preserve.

Unlike the stampede of bold, well-funded and single-minded digital natives who are usurping the audience and advertising revenue once commanded by publishers, newspaper executives are trying to tiptoe from print to pixels. But tepid measures won’t work.  

To save newspapers – or, more precisely, local news ventures that may or may not involve putting ink to paper – publishers have to commit to disrupting their tottering business model as enthusiastically as their competitors are committed to overtaking them. There is no other choice. 

8 Comments:

Blogger Ddddddffre said...

Newspaper execs are in what's called in AI as a local maxima. They're at a local peak- of their careers,earning potential, skill set etc.- however the global maxima , which in this case is increasing revenues and even continued existence, is over yonder and every path to it first leads down into a local and possibly global minima. Anyone with the temerity to start that journey will find themselves separated from the authority and resources to make it even into the valley.

This is part of the reason the change that needs to happen will come from outside the boardrooms and executive's desks.

Give me 5 million, 5 years and full control over all the archives of the NY Times to do with as I see fit and I'll make it more profitable than it's ever been. Of course, that's not going to happen, but That isn't because it can't be done.

8:56 PM  
Blogger The End Zone said...

I guess television and radio get a free pass to criticism. Newspapers will be around for quite some time. It may be in print, digital, mobile or social forms if not all of the above. The internet is just another circulation option. People will always want and need the news.

5:04 PM  
Blogger Tami Tran said...

Newspapers should change its "label" to "the source of news". It's not about the paper. Communities still rely on the source of quality, accurate and timely news. All giant digital platforms, i.e. Facebook, Google, Twitter, etc. know that news is needed and get the highest fan reach. Why? Simply because it's fresh content, original, and trustworthy. It has a built-in fan base that the giant digital platforms want to own. That's exactly why they make every effort for newspapers to publish news on their platforms and get it viral. As long as newspapers continue to be the source of news and OWN their consumer base, they will find a way to reinvent themselves and thrive again.

The key missing element that newspaper industry hasn't confront head-on is owning the consumer data. Putting news on Facebook, Twitter and Google is nothing more than winning a popularity contest that doesn't convert to dollars at all. It's designed for the digital platforms to own the consumer data and monetize on the highly desired news.

Newspapers need to own their consumers again. That should be the focus when thinking of adopting digital programs rather than surrendering to digital marketing and helps migrate all their businesses over to Facebook, Google and Twitter.

Are newspapers doomed? It depends on how you play the game of digital. Don't blindly play the games by the rules created by your giant digital opponents. Know when they are friends and when they are foes. Understand the intent and purpose of each digital opponent, and I bet you it'll be around owning the consumer data and meeting their needs.

What have newspapers done about gaining and owning knowledge of their consumer behaviours?

6:15 PM  
Blogger Tami Tran said...

Newspapers should change its "label" to "the source of news". It's not about the paper. Communities still rely on the source of quality, accurate and timely news. All giant digital platforms, i.e. Facebook, Google, Twitter, etc. know that news is needed and get the highest fan reach. Why? Simply because it's fresh content, original, and trustworthy. It has a built-in fan base that the giant digital platforms want to own. That's exactly why they make every effort for newspapers to publish news on their platforms and get it viral. As long as newspapers continue to be the source of news and OWN their consumer base, they will find a way to reinvent themselves and thrive again.

The key missing element that newspaper industry hasn't confront head-on is owning the consumer data. Putting news on Facebook, Twitter and Google is nothing more than winning a popularity contest that doesn't convert to dollars at all. It's designed for the digital platforms to own the consumer data and monetize on the highly desired news.

Newspapers need to own their consumers again. That should be the focus when thinking of adopting digital programs rather than surrendering to digital marketing and helps migrate all their businesses over to Facebook, Google and Twitter.

Are newspapers doomed? It depends on how you play the game of digital. Don't blindly play the games by the rules created by your giant digital opponents. Know when they are friends and when they are foes. Understand the intent and purpose of each digital opponent, and I bet you it'll be around owning the consumer data and meeting their needs.

What have newspapers done about gaining and owning knowledge of their consumer behaviours?

6:15 PM  
Blogger frank h shepherd said...

The Problem: The lose of print revenue IS NOT SHOWING UP IN NEWSPAPERS DIGITAL EDITIONS...in the long run newspapers will fail because the dollars are not enough on their digital editions(and never will be) to sustain a relevant editorial product...state, national and international news is a commodity... can be gotten free at some tremendous sites...so what does that leave... local news? Try and sell local and regional advertisers on supporting with enough ad dollars... It will not happen...color MOST dailies gone...not for lack of trying(going digital) but for lack of sufficient revenue....trading dollars(print) for less than dimes(digital) just won't make for a profitable financial model..Sorry, but if digital editions have 10 problems, 9 of them are lack of revenue...(Including Huffington Post)....

2:52 PM  
Blogger macca said...

Lets face it most Ozzys don't read really in-depth news. Particularly on subjects like economics, finance,complicated law reform etc. That is why they are happy to hop around the free news sheets and MSM headlines. Democracy is in a poor state when news coverage is so ragged. Also need to get away from turning news into a an opinion piece just because it is more sensational and has an angle. A lot of "news" seems to not just come from who knows what on Twitter but is Twitter itself. Young folk just are not able to fully focus on what is happening as so many online distractions. Got to be some scope in regional areas for much better online news via webcasting other wise we are sunk.

4:46 AM  
Blogger Benjamin Cohen said...

Really...tell me more.

2:12 AM  
Blogger Mike Fuller said...

At exactly no business school will they tell you the best way to succeed is to piss off half of your potential customer base as often as possible.

8:40 PM  

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