Six Issues That Define the New News Landscape
Important Details: Two events brought home the rapidity of news industry change this weekend.
The first was a personal one. My wife – long a “phone is just a phone” person – succumbed to the siren call of the iPhone. Then she spent an entire afternoon joining her 14 million US confederates (the iPhone is just starting to roll out in Europe and Asia) gorging at the App Store, and loading up on news apps from the US, the UK and India.
The second was a Gallic shot. French President Nicolas Sarkozy declared the French press in crisis and responded to what he called an “emergency” by declaring his intention to provide €600 million in new subsidies (the French government already provides about 5% of French press revenues, through various programs) over the next three years. A centerpiece of his plan: free newspaper subscriptions to every French 18-year-old.
Those two events, selected from so much press news, reinforces the notion that this is time unlike any other in press history across the US and Western Europe. Technological change in how people read news is strong, but still nascent. Having government leaders point out the press’ weak lifeline is another.
Outsell has talked with many publishers recently. Their gallows humor includes their movement from being supremely profitable companies to “profit-seeking” companies. Their concerns about the future of their businesses, and the independent press as we know it, are profound.
Implications: Out of these conversations and research, we’ve put together six key issues that will define much about 2009/2010 and the future of the press as we know it.
- When will the advertising recovery start? Many news companies are struggling with making their basic nuts. Cash flow for some doesn’t equal even reduced operating costs plus debt service. Those companies are in negotiations for their very futures. Companies which took on debt in the last four years to acquire other newspaper properties and those in healthier financial positions must answer this key question. The deep recession has exacerbated the ad revenue downturn. Returning to a more normal economy – some semblance of recovery — is the lynchpin of restructuring and re-strategizing. The most hopeful recovery scenario is now looking like late 2009, with pessimists talking about some time in 2010.
- What percentage of ad dollars will come back to print? How many will move to “newspapers” online? How many will no longer go to newspaper companies at all? Newspaper companies were already battered by internet competition for advertisers and readers before the recession knocked them back on their heels. With the continuing advance of paid search and other more measurable marketing, publishers know they won’t be setting back the revenue clock to pre-recession times. Even with a recovery, only a percentage of pre-recession ad revenues will come back. Publishers are most hopeful about retail and about auto-related revenues, with deeper concerns that recruitment and real estate advertising (listings-heavy and thus increasingly internet-friendly) may suffer deeper, permanent losses.
- Will owners view content-creation and sales-creation labor differently? Re-structuring has already meant deep cuts to the legacy (printing, production, and distribution) parts of the business. A key point going forward is how, and how much, publishers will pay those who help them build their digital businesses. Those builders fall into two categories: content producers and ad sellers. Content production going forward will be all about producing highly monetizable news and feature content for the lowest possible prices. That doesn’t mean letting go of top-flight, and expensive, professionals. It does mean though that media companies’ staff mixes must include eager or lower-cost young journalists, expert bloggers, and high-end, user-generated content. On the ad side, the key is hiring and/or re-training commission-based salespeople savvy about using the latest ad technologies to deliver the audience slices advertisers want.
- How much can print product costs be trimmed while maintaining lion’s share of print revenues? Recent moves to scrap daily publication on Mondays, Tuesdays or Saturdays are one manifestation of this phenomenon, which we’ve seen recently in the US. (see Insights 7 January 2009, DayScrapping Starts to Look Like a 2009 Model). In the UK, smaller dailies are becoming weeklies. In addition, some papers are maintaining a daily schedule, but axing early-week classified sections, or reducing themselves to one- or two-section papers. Outsell believes that cutting the cord of daily production altogether risks breaking reader habit, and accelerating readers’ moves online – where publishers still have relatively meager revenue streams to gain. Rather, the move to prudently cut back the product – the elimination of Monday and Tuesday classified sections is a good example – may do a much better job of retaining the greatest revenues, while reducing costs.
- How much more can fixed costs be reduced without irreparably damaging the product/customer proposition? This is a question parallel to the issue of cutting costs while maintaining revenues. It’s a tougher question in some ways because newspapers are getting closer to alienating core readerships. Massive cutting of staff, of news and of familiar bylines is no doubt accelerating reader defection, even among once-loyal baby boomer subscribers. Even lenders doing workouts with publishers are concerned that newspapers are on the edge of cutting too deeply into muscle — and the product’s very value proposition.
- What will happen with newsprint pricing? Newsprint and ink make up the second largest expense for most dailies. Newsprint increased more than 40% in price last year. It’s stable for the moment, but given the wild, global ride of commodities pricing, all bets are off. If prices plummet, publishers may find much-needed relief. If they should reverse, it will push the pain threshold even higher.