This digital liberation from the analogue
paradigm has had far-reaching and continuing effects on the way information is
researched, created, shared, sold and consumed across time and space.
News is no longer a product exclusively
generated from established institutional constructs of Press, TV and Radio.
Audiences are no longer waiting for time-programmed news updates as interpreted
by and limited to, these channels.
News is available FREE from global portals
as a by-product of broadband and mobile phone subscriptions. General news has
been commoditized. The supreme irony here is that newspapers are the primary
source of free news offerings from the global portals!
What was the
legacy of Press?
For 250 years, press was the primary means
of gathering, organizing and distributing to the citizenry, the previous day’s
news. It was always a record of yesterday’s events. Press had more space and
wider range for content beyond the restricted formats of Radio and TV. It had a
physical reality which allowed referencing and sharing.
By default, Press remained the primary
medium of record for any society. It was the key tool of political influence.
Mainstream news processing has a rigid
hierarchy of filtering from news desk (gathering)
to selection and length (sub-editing)
to position (by section), constrained
by page allocation to national, international, sport and social content.
At the centre of the process was The Editor
as the final arbiter of what was newsworthy, how much prominence to give
particular content and which items of news would be ‘buried’ or blocked out,
whose photograph would get front page prominence, etc.
The audience was hostage to the biases,
political and business affiliations of the editor. Inevitably, national newspapers
reflected the Establishment positions of the day and down-played perspectives
which challenged the ‘dominant narrative’.
Control of Press is a priority in all
political systems, from dictatorships to democracies. Methods of control range
from state ownership, to government approved editors and chairmen, to
ex-Security and Intelligence agents embedded within newsrooms and executive
positions, to pressure on advertising flows through big business-government
collusion and video-clips packaged for TV by government agencies and public
relations lobbyists.
The most pernicious effect of this rigid
control over content is the blocking out of the powerless underclass and
dissidents who champion alternative viewpoints. A ‘loyal’ press is not expected
to give space to those who question the Establishment. There is no concept of
media accountability to citizens. The primary role of Press was to entrench
incumbent power structures and advance their agendas.
In jurisdictions of ‘managed media’ where
competition is blocked off through license controls and other blunt tactics, favoured
newspapers could be highly profitable while serving the power elite. That can
prevail as long as alternatives to information flow are absent.
Now many of these newspapers across developing
countries are embarrassingly exposed where the Internet, mobile communications
and social networks are actively used for alternative news and views. They are
confronted by a credibility crisis which they and their sponsors are struggling
to deal with.
Addictive reading
habit. Wastage model for advertising
Generations of readers started their day
with morning coffee and their daily news ‘fix’. It was an addictive
relationship played out in homes throughout society and continued over the
increasingly longer public transport commutes to work from suburbia.
Advertisers found this addictive
relationship and relatively longer exposure to commercial messages,
cost-effective. The metric was the ‘cost-per-thousand’
or CPM in media-planning jargon. Newspapers with the largest circulations had
the lowest CPMs. If they also had reader demographics with higher comparative
purchasing power, they could charge premiums over competitors.
Most metropolitan newspapers artificially
lowered their cover price below cost of product, to grow circulation so they
could ratchet-up their annual advertising rates. Dependence on advertising
became the formula to make up the shortfall in product cost, overheads and
yield handsome profits.
Advertisers largely targeted urban
audiences as they were the primary consumers for supermarkets, department
stores and branded products.
As the driving advertising logic was widest
reach at lowest cost, there was inherent wastage in the commercial messaging.
To reach 15% of an audience who could afford premium cars, the advertiser was
obliged to pay for 100% of the reach. A waste factor of 85% was thus built into
the pricing model in the rate card.
When digital targeting by email and social
media platforms became possible, this ‘waste’ model of advertising has been hit
by a migration of budgets to targeted channels. The digital mechanism is able
to measure ‘click-throughs’ of potential consumers. A results-based payment
scheme is possible. Advertisers find this logic far more acceptable than the ‘waste’
pricing model.
The heavily advertising-dependent
metropolitan newspapers are experiencing revenue decline or stagnation in most
parts of the world. They have legacy costs of overpaid and under-worked staff
in all functions, usually heavily unionized. They carry multiple layers of
richly remunerated executives with company cars, club memberships and expensive
perks.
It does not take more than a 30% decline in
revenues to push most metropolitan newspapers into the red.
Rural and community newspapers did not have
that access to affluent consumers by geography. They had to ensure their cover
price was affordable to their readers and covered their cost of product and
overheads. That inevitably meant that their pagination was limited and content mostly
focused on everyday local issues. They were the ‘poor cousins’ of the rich city
newspapers.
The saturation of advertising in cities has
seen marketing initiatives for new consumers expand gradually into semi-urban
and rural geographies. That is benefiting rural press.
It has energized a scramble by metropolitan
newspapers for the rural advertising stream, through buying-out community
newspapers or launching new ones.
Digital
Disruption: Loss of the ‘Rivers of Gold’
The single biggest and probably mortal blow,
to metropolitan newspapers has been the loss of their exclusive classifieds franchise.
Rupert Murdoch characterized classifieds revenue as “Rivers of Gold”.
Most highly profitable metropolitan newspapers
enjoyed an almost guaranteed and growing near-monopoly of city-based
classifieds advertising placed by readers and small businesses for real estate,
cars, jobs, dating and household services of plumber, painter, electrician,
etc.
Classifieds were the unglamorous but most
significant component of metropolitan newspaper income, often near a 60:40
split of classifieds to display advertising revenues.
Classifieds advertising was open to
citizens and small service businesses with no commissions rebated to the
advertiser. The profit margin was much higher than for agency-placed display
advertising for which a commission of 15% was standard. Classifieds attracted a
readership audience which ensured copy sales at retail for dominant classifieds
newspapers. It was a virtuous-circle of revenue and readership.
The speed of direct response and fulfillment
was the success driver in the classifieds business. It favoured well
established metropolitan newspapers with large circulations.
The Internet classifieds challengers disrupted
all that comprehensively. The barrier to entry was low. No professional
journalistic staff was necessary. The entire mechanism of offer and response
could be automated at very low transaction cost or inconvenience, to buyer and
seller. The high rates of newspaper classifieds gave the digital upstarts
plenty of room to severely undercut prices and turn a good profit.
The digital alternative to newspaper
classifieds had other advantages: buyers and sellers could search precisely for
what they want without wading through pages of small type; it could be accessed
from anywhere with digital connectivity; offerings could be updated in
real-time; the rates were a fraction of what newspapers charged.
Environment-conscious consumers reject newsprint
accumulation at home as a deliberate choice away from dumped paper classifieds.
Craigslist in the USA
is credited with triggering the migration of classifieds revenues from
newspapers. It spawned copycat digital classifieds portals everywhere.
The loss of the classifieds franchise was
not total but forced newspapers to lower their rates to save the business. They
are not able anymore to play the trick of annual rate increases. Rates have softened
considerably.
Newspapers rushed to create parallel online
classifieds for a token additional charge over their print versions. They are
still fixated on protecting their print classifieds franchise and are unable to
match the agility, creativity, pricing and marketing aggression of the digital
classifieds upstarts.
None of the defensive counter-measures have
regained newspapers their pre-Internet hold on the classifieds franchise. This
has been the single biggest disruption on the newspaper business worldwide,
apart from the diminishing value of news content.
Generational
readership disconnect from newspapers
Generations Y and Z grow up in a world that
is digitally always-on and connected. They take naturally to screen based
information search and social intercourse through Facebook, Twitter, Friendster
and their national variants. Their smartphones are always with them. They are
acquiring tablets for movies and games. They define their news feed content
which is delivered to them for free.
The idea of sitting somewhere to turn a
newspaper page is just so ‘un-cool’!
The newspaper industry is a sunset business.
The stock valuations of the global brands all attest to a lack of investor
confidence. It is beset with stagnant circulations, migrating revenues and an
ageing consumer profile which panics marketers.
The industry is challenged to use its still
substantial earnings to become strong players on digital platforms or perish.
Screen tablets
to the rescue?
The iPAD has pushed new hope for newspaper
publishers, using a model which has subscription payment in-built. However, the
uncompromising stranglehold of the Apple Store on 30% share of subscription
revenue and its refusal to share reader data with publishers has caused major
disputes with leading newspapers.
The Financial
Times (FT), while continuing to offer iPAD downloads, has broadened its
platform to include Android-driven tablets and alternative direct downloads. A
key value of readership is to build databases which can be segmented by
demographic and psychographic criteria, for better targeting of advertising
campaigns.
The FT is growing substantial revenues by monetizing
its reader database as an additional revenue stream beyond newspaper
subscriptions and space advertising. Its online subscription income is
significant. It has developed a valuable digital archive for researchers and
marketers on industry reports and listed corporations. The digital potential is
being smartly exploited in content and readership across online, mobile and
tablet platforms.
That said, it must be recognized that the
FT (like the Wall Street Journal) is
a specialized global business news service for fund managers, currency traders,
stock investors, commodity trackers, bankers, marketing managers and corporate
leaders. Its subscriptions are largely company paid. It is taken as a necessary
resource and valid cost of business.
Nevertheless, the FT is showing established
newspapers how to leverage digital technology to monetize the value of deep
content and reader databases – beyond the printed product. The FT expects its
reader data analytics earnings to match its global advertising income by 2011! It
is fully embracing 21st Century engagement with professional
audiences in ways that fit their lifestyle and information needs.
Metropolitan newspapers bloated on news
agency feeds (available to all
subscribers) have a depressing similarity of world news, entertainment and
sport content. In Malaysia,
Bernama the national agency adds to the loss of reader interest in official political
news. There is little value-add or differentiation among mainstream press which
justifies a subscription.
Business news pages are dominated by press
releases from public relations agencies, perfunctorily re-written with by-lines
of the reporters whom they feed. None of this chicanery is going to save the lazy
beast from extinction.
Perhaps go ‘hyper-local’?
One direction for print, championed by
newspaper industry research associations, is to become “hyper-local” to connect
with community and local business. Part of the logic is that these localities
may also have limited broadband access. The hope is that the reporting depth of
competent newspapers can make them dominate marketing communications in defined
geographies under-served by public media.
That has led several metropolitan
newspapers to invest in local radio, in addition to a weekly or daily print
product. This is still a work-in-progress.
Given that local community advertising
revenues are meagre, a low-cost operational model and mindset has to prevail.
Whether big-company thinking can work in the hyper-local environment is yet to
be seen. Community reporting requires respected locals who are part of that
social tradition. High flying urban newsmen parachuted into position may not be
the most effective way to engage with local communities.
KARANGKRAF in Malaysia which is a leading Malay
language magazine, book publisher and printer, initiated local community
newspapers in the East Coast with just such a low-key formula of local citizens
reporting everyday issues which the national press did not have space for.
It uses mobile phones for community
call-ins and small vans with its reporters’ telephone contacts emblazoned. Its
reporters live in the communities they cover. The reporting is generally
acknowledged to be accurate, fair, sympathetic and unbiased without any
political party affiliation. This has for the first time, connected
under-served local communities beyond the national capital and big towns.
The newspapers are expanding steadily into
the other states of peninsular Malaya with
positive community support. They avoid the quick-hit tabloid formula of
sensationalism, entertainment and society gossip. The publisher honestly sets
out to serve the needs of media-neglected communities.
There are no famous writers or egoistic
editors on staff. The papers seek to improve the daily lives of readers where
they live. They facilitate interchange between local government and community
on health, schooling, transportation and other everyday needs – back to the basics
of service without swagger.
Online Ads grow
20-25%pa. News sites make 8-10% online
Newspapers have scrambled to have a digital
presence to share in the dynamic growth of online advertising. While the annual
growth of online advertising averages 20-25% globally (from a very small base) newspaper websites are averaging 8-10% contribution from online revenues.
Most of that is coming from package deals
with existing print advertisers. In reality, the main thrust of online
advertising investment is heading for true digital audiences with targeted
interactivity. The dominant global portals vacuum the majority of that spend
with contextual advertising. Google alone is estimated to pocket 65-70% of
online advertising worldwide.
Soon the ubiquity of smartphones will see
increasing advertising investment on mobile platforms direct to consumers,
which may leave newspapers even further adrift in digital advertising flows.
Where did Groupon &
Facebook come from?!
The discount formula is a post-WW II
newspaper idea of offering coupons to be clipped and redeemed at participating
stores. Newspapers abandoned that as too old fashioned and below their value of
space.
Andrew Mason, 30 years old, refreshed that old
newspaper idea of discount coupons with slick modern design, online transaction
and daily listings of new products and services with time-limited redemption.
It has taken off like a rocket across the world with local retailers. In a recession-threatened
economy, savings such as these are highly attractive and appeal to everyone. Groupon
helps retailers clear excess stock.
“I
never wanted to be in this position. I just wanted to work on cool stuff” said young Andrew at his ABC interview Dec 2010. He is now crying
all the way to an IPO.
Google offered to buy Groupon at US$6
billion and was rejected. Groupon is preparing for an IPO touted at US$15-25
billion by promoters.
Goldman Sachs which is seeking to IPO Facebook
valued it at US$50 billion in Jan 2011. Now the valuations are reaching
US$50-100 billion!
Facebook searched for a long time to find
an advertising logic and methodology. Its advertising mission is articulated to
advertisers as: “Find a creative way.
Facebook is not just an advertising platform but a way to transform a business.”
To that end Facebook has set up a high profile ‘Client Council’ of 12 premier
advertisers and advertising agency leaders to guide it on how best to position
the platform to serve consumer engagement objectives.
The methodology includes sponsored stories
and comment ads from opinion leaders and experts. The hope is to inspire user conversations
within social networks.
Do these stratospheric valuations hint at
another tech bubble? Maybe. But they are way beyond anything that will be
offered to the most profitable newspapers anywhere. What does that say about
the future of the newspaper industry and the contrasting momentum of the digital
economy?
Microsoft CEO Ballmer
allows 10 years for newspapers
In an interview with the Washington Post 5th
June 2008, Steve Ballmer predicted:
“In the next 10 years the whole world of media,
communications and advertising will be turned upside down.
There will be no media consumption left in 10 years
that is not delivered over an IP network. There will be no newspapers, no
magazines that are delivered in paper form.”
Will Steve Ballmer be proven right? All
indicators of revenue flows, generational switch to screen devices and investor
preference for digital entities, point to a diminishing window of survival for
traditional print.
Yet content skills are the defining
excellence of great newspapers. An informed citizenry needs trusted reporting
and analysis on issues of the day. Perhaps a new generation of newspaper
leaders may frog-march the industry to harness digital channels effectively –
without selling their souls to politicians and big business advertisers.
ENDS
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