Newspapers’ Perilous Crossing to the Online World

reading a paper in the waterNewspaper publishers in the United States are facing challenging times.  As reported in the New York Times earlier this year, their print ad revenues are in a steady decline.  Figures reported by the Newspaper Association of America (NAA) showed that while online ad revenues rose by 31.5% in 2006, they were not yet enough to offset the decline in print advertising.  Online ad spending currently accounts for only about 5.4% of total newspaper ad revenues.  NAA figures from Q4-2006 illustrate where the revenue declines originated:

  • Recruitment advertising down 13.7%
  • Automotive advertising down 11%
  • Real estate down 2.3%.
  • All other classified advertising up 0.9%
  • Overall newspaper classified advertising down 7.1%

One example that highlights this trend is Gannett, the largest newspaper publisher in the US and parent of USA Today.  Recently, it reported that its newspaper ad revenues fell 6% to $1.19 billion.   The grim news for the newspaper industry has continued into 2007 according to the Center for Media Research.

At the same time, circulation is also declining as more readers turn to the web and other media venues for news.  Circulation has been in a slow decline since 1984.  At that time, there were 1,600 paid dailies with circulation of 63 million.  Today, there are 1,450 paid dailies, with circulatino at 53 million readers.  At the same time, finding new subscribers has gotten more expensive.  According to the Newspaper Association of America, the avergae cost of gaining a new subscriber has more than doubled to $68 in 2006 from 2002.  In an article October 1, 2007, Richard Perez-Pena of the New York Times, highlighted the strategies big newspapers were using to eliminate low value subscribers and build a more loyal, if smaller readership. 

These trends, according to the World Association of Newspapers, are not yet mirrored in world markets. The association reported that the only declines in circulation and advertising were in North America.  Howeer, what is happening with American newspapers should serve as a warning of what might befall non-US newspaper franchises. 

journalists in a newsroomSo how are newspaper coping?  Not well.  Newspapers are struggling to find a formula that will preserve (and preferrably expand) their readership, as well as increase their ad revenue.  However, they are on a clock.  Advertisers have found the web to be a much better medium for targeting narrow audiences.   But as print ad revenues decline faster than online ad revenues grow, they have been forced to cut staff and expenses, which impairs the quality of their product.  Part of the problem is that newspaper publoishers waited too long to take action.  Alan Mutter, on his blog Reflections of a Newsosaur, cogently deconstructs the reasons for the plight of the American newspaper.   In the November 5, 2007 issue of BusinessWeek, Steve Hamm takes a look at one particular case study – the San Jose Mercury News – to illustrate the difficulties of transitioning to the digital world.

What will the newspaper of the future look like?  There is no lack of vision, advice and speculatino.   A great sampling from people in the newspaper business around the world is showcased in an October 18, 2007 article by the World Association of Newspapers.  The organization has commissioned 22 futurists, academics, industry insiders, internet pioneers and other media experts to envision the newspaper of the future, which will be summarized in a soon to be published report. 

One things that emerges is that the survival of newspapers will depend on maintaining their journalistic credibility, regardless of the format they use to deliver content to readers.  They also see newspapers needing to reach out (carefully) to embrace the world of consumer generated media – e.g. blogs, podcasts, social networks.  This trend is underway already in the US, where bloggers and newspapers are teaming up.  A number of blogs are now more valuable media properties than their Old Media cousins.

old TV with rabbit earsAny medium supported by advertising revenues will have to follow its advertisers to the most efficient venues for delivering targeted audiences.  The next crisis could be in television, which, like newspapers, has been slow to integrate effectively with the web.  As finding and aggregating niche audiences becomes easier and cheaper, every product, even those mainstays of mass media – autos and drugs, will be a niche product.  Venues that can’t adapt to this reality will become extinct, regardless of their reputation and past glories.

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