Print advertising continues to dominate revenue share at most newspapers. There is little annual growth in mainstay print revenues while digital revenues (averaging 8-10% at most press currently) are growing robustly across other promotion channels.
Janet L Robinson, President & CEO of the New York Times Co. articulated the scramble to find new revenue sources recently:
"The rethinking of our business models has been driven by the desire to achieve additional revenue diversity to make us less susceptible to the inevitable economic cycles."
Robinson seems unduly bothered by the boom-bust paradigm when print, in reality, is being disconnected steadily from advertising budgets irrespective of economic cycle.
One silver lining for NYT is the successful paid conversion of the free digital content. Departing digital chief, Martin Nisenholz (retiring Dec 2011) added revenue from a loyal audience without loss of visitors.
Nisenholz created a metered paywall which kicks in after a certain level of access frequency. It does not stop daily accesses. It does not inconvenience news skimmers.
L Gordon Crovitz, former publisher of the Wall Street Journal and founder of the Journalism Online Press+ Service explains why: "Until recently, technology was limited. Publishers had to choose either a paywall where everyone must pay, or be fully free. New technology lets publishers charge only their most engaged readers who value unlimited access."
Crovitz makes the point that the marketplace for news is very crowded and "no publication has a monogamous relationship with its readers." A total block on unpaid access will only destroy a newspaper's digital profile and future.
Cities - where newspapers prospered (till now)
Metropolitan cities have anchored profitable newspapers for two centuries. Cities are magnets that aggregate affluent consumers. Marketers invested heavily in advertising to city residents. Metro newspapers rode the gravy train.
That formula has come apart globally, undone by next generation 'digital natives' fully on Internet and mobile channels. The urban wealth is still in the city but marketers by-pass newspapers to connect these digital consumers.
Newspaper single-copy sales have tanked. Advertisers are migrating to new platforms where the youth congregate.
The deflating twin ballasts of affluent readers and big-budget advertisers, sink top and bottom lines of metro newspapers. There is little chicanery left to play.
Consumer marketing is also shifting to semi-urban communities for expansion beyond the overworked metro markets. This trend is most pronounced in India, The Philippines and Indonesia.
As metropolitan newspapers stretch to explore growth in semi-urban space, they discover their product, cover price, overheads and city habits inappropriate for ex-metro markets.
Community newspapers operate on an entirely different logic of local relationships, neighbourhood content, meagre advertising revenues, low-cost production and tight geographic distribution.
Community press has to live on the surplus from cover-price - the opposite of metro strategy which is to under-price product to encourage copy sales - to justify premium advertising rates. Advertising revenues used to make up the cover-price deficit comfortably.
City newspapers need radical re-structuring to be able to survive in community newspaper habitats. Successful transitioning from metro to community space is rare. Community press has to build from the ground up, in the right context of service and relationships.
Every trick to pump up the numbers
Annual circulation growth was the lever for ratcheting advertising rates. It was a simple formula: declare an annual percentage increase in copy sales and jump advertising rates.
Where you can get away with it, add on a percentage for annual cost inflation too! A small increase in rates translates to magnified gross revenues and profits. What a happy way to run a business! Especially as the annual demographic readership increase came so predictably.
Things have not been so easy since the Internet disrupted information flows from the mid-90s. Consumers could receive real-time news alerts free through e-mail portals and mobile service providers. Smartphones and free Internet search connected content to consumers, independent of newspapers.
The newspaper industry responded with cut-price subscriptions and bulk sales in cahoots with complicit distribution agents, to game circulation audits. It also dumped discounted bulk on schools, clubs, airlines and hotels, to camouflage the hollowing-out of paid readership.
The fakery could not be sustained. Advertisers eventually twigged that the print channel had stopped growing.
Marketers instinctively bail out of any channel in terminal decline.
And that is exactly what they are doing in a measured way, as they experiment with videos, blogs and social networks beyond print.
Meanwhile, they depress the value of the print channel with a vengeance - through ruthless discounting.
Free 'commuter' papers mushroomed in the hope of staking a claim for marketing dollars, as paid papers stalled.
Paid papers are left with no choice but to curtail spurious bulk distribution and to increase cover price to close the deficit, as print advertising revenues continue to decline.
The game is up. What to do with legacy cost structures?
Boom times allowed excess headcount, inflated salaries, bonuses and perks. It led to laxity of management, reduced productivity and spawned high levels of waste in all aspects of the business. Bad practices became sacred cows of prerogative and privilege.
The newspaper industry has to adjust to shrinking advertising and circulation revenues. It cannot continue to shoulder its legacy cost burden and live on hope for the next boom.
Resistance to change from management is high - especially when it means reducing headcount (territorial fiefdoms), pay and perks for those that survive the cull. The culling usually starts at the commercial end of the business where the numbers talk loudest.
Given the space surrendered to wire service copy for national, international, entertainment and sports content, the productivity of editorial contribution has been declining across the industry for decades. High-cost, high-headcount manpower with sharply reduced productivity is unsustainable. Especially when the business model itself is broken.
The chronic similarity of content across newspapers because of heavy dependence on often common syndicated wire stories, is another source of irritation for the paying public.
The trimming of editorial waste is resisted to the bitter end. By the time the cost tailors arrive at the editorial door, it is almost too late. That scenario has looped repeatedly in the US newspaper industry like a slow-motion train wreck. When editorial lay-offs are finally announced, closure is usually one short step behind.
Re-think content strategy & business model
Abundant digital free news forces print media to re-define value. News is already in the public domain by the time the papers arrive.
Quality press has to guide citizens through the sheer density of political and corporate 'noise' with incisive analysis, strong opinion and pointed commentary. "He-said/she-said" reporting is useless. Where facts are clear, the newspaper has a duty to take a stand for its readers on matters of public interest.
The mushy equivalence of much broadsheet reporting leaves readers lost for what is right. It fails citizens where disinformation and political spin is rampant. "Neutrality" allows sponsored spin-masters (commercial & political) to dominate public discourse. That is unhelpful to citizens.
Quality press has to be more than a shovel-dump for vested interests. It is false modesty for newspapers to be inhibited about blowing the whistle on venal politicians and shady businessmen.
To assume that position requires solid research, mastery of subject, integrity and clarity of thinking. Without intellectual heft and professional integrity, press cannot stake a leadership role in the multimedia landscape. It is already losing relevance fast.
There are punchy blogs and whistle-blower sites filling the gap left by mainstream newspapers. The spikes in web traffic during political crises and national elections is a clear indication of the failure of mainstream press to fulfil its duty to citizens.
The advertising rates should reflect a premium for quality reach. It is not about circulation numbers and cost-per-thousand anymore. It is about premium, targeted audiences.
Much of the fluff sections that newspapers padded on during the boom times have to be re-assessed for reader and advertiser value. The fluff can be catered to far more cheaply on the website to save tonnes of wasted newsprint.
Who owns the Press calls the tune
The stark reality of press systems globally reverts to the basic ownership question. Does the State own it? Is it a publicly listed business expected to deliver endless profit growth? Is it a family-owned property? What is the motivation of the owner/s?
In which ownership context is the interests of citizens best served?
The Murdoch organization is perhaps the best cure for liberal idealists. It is a huge multinational which is publicly listed. The Murdoch family with only 12% shareholding manages to control 40% of the votes through a dual class share mechanism.
In its UK tabloid properties, a culture of illegal phone hacking to get "exclusives" was standard practice. Mr Murdoch has long traded his press influence to bend political parties to exempt him from cross-media ownership rules on three continents.
He helped channel publicity according to which party seeking election would co-operate with his 'to-do' list.
He surrendered his Australian citizenship to become a broadcast network owner in the USA. His Fox Network is rabidly right-wing and highly profitable. As one of his managing directors observed "People are like sheep. Let's shear them."
Citizens have to challenge vested-interest control of media, whether political or commercial. Societies get the government and the press they deserve.
Are the benchmarks of press journalism falling?
The default position in reporting has sunk to picking up press releases and handouts and presenting them with the reporter's by-line. In many newspapers around the world now the public relations industry is busy feeding reporters self-serving content. It is a shameful situation getting worse by the day. It shreds the credibility of press even more.
The recruitment, training and supervision of reporters seems to be a forgotten mission. The reporting pool has become a revolving door of self-promoters working their way to cushy public relations jobs after garnering sufficient by-lines.
How can press secure the domain expertise needed to respond real time to economic, political, health, education, environment and security issues? This expertise is more likely to be found at universities, research labs and think tanks than in newsrooms.
The organizational re-configuration that newspapers need, must include a bench of 'domain experts on tap', for quick comment and analysis of breaking news like the Fukushima nuclear meltdown, the Bangkok floods, the SARS epidemic and the Arab Spring. They do not need to be full-time staffers.
The discussion is about quality press and the thinking citizen who expects to be informed about the issues that matter. That narrows readership appeal to a moneyed elite at the top of the social pyramid with the luxury of time to read.
The other market alternative is to be a free tabloid with vacuous social gossip, violence, gore, sex and crime as opium for the masses. That may just allow a survival existence through low grade advertising and a skeleton staff.
I cannot think of many professionals who would want to enter that bog by choice.
ENDS
Sounds very interesting! I will check this out! consulting
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