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Summary:

Optimistic newspaper proprietors like Sly Bailey and Tim Bowdler blame the business’ current malaise (we’ve covered over 1,000 newspaper job…

imageOptimistic newspaper proprietors like Sly Bailey and Tim Bowdler blame the business’ current malaise (we’ve covered over 1,000 newspaper job losses since October alone) on an advertising downturn that’s merely “cyclical”. In reality, 2009 is more likely to bring more layoffs, further consolidation and the death of certain long-running titles than it is a cyclical upturn in fortunes, as publishers grapple with the truth that their businesses have changed fundamentally and forever.

In 2008, every newspaper group either cut regional budgets, closed offices, shut titles or cut staff – in some cases, all of the above. In one way, this is nothing new – cutbacks are part of life for most newspapers and magazines nowadays. But there’s a strong case for saying 2009 will mark a shift from seasonal, sensible belt-tightening to the long-term shrinking of the newspaper industry in Britain. Here’s why…

The old business model is broken: The olde worlde of small, local newspapers with a reporter in every district, high circulation and a steady stream of advertising revenue is simply over. Now that they’re faced with oncoming recession and an advertising slump expected to last until 2010, until there is a scaleable business model for online news, Gannett’s Newsquest, Johnston, DMGT and the rest will simply continue to lower their exposure to a failing market. Don’t expect an upturn – newsrooms emptied of staff in ’08 are not going to be re-filled if the advertising situation improves down the road. Trinity Mirror (LSE: TNI) CEO Bailey may assure investors the advertising downturn is cyclical, but these cuts are permanent. Newspapers used to monetise a physical, geographic network and monpolised the publishing activities of entire towns and cities. Now that the network is online and unconstrained by geography, it’s Google that dominates, taking more than half of UK web advertising spend.

Print advertising is evaporating: The likes of Northcliffe Media and Trinity may have invested heavily in transforming their newsrooms for the online age, but the truth is they remain intrinsically tied to the 200-year-old model of classified ad revenue from homes, cars, properties and funeral notices. Media owners can only blame recessionary factors for so long – thanks to the web and media proliferation in general, their business models have been under threat for years. The deterioration peaked in ’08. Trinity’s income from 26 June to 26 October was 11.4 percent down on the previous year, dragged by a slump in regional print ads with property ads down by nearly half, cars by more than a quarter. Johnston Press fared even worse, its income from print ads down 17.8 percent between January and October from the year before thanks to a halving in property ads. For the nationals, print ad revenue is expected to drop another 21 percent in 2009 according to Enders.

Digital is still small, and stalling: All of this would be fine if digital revenue was growing to meet the shortfall, but current growth rates are not nearly enough. DMGT-owned Daily Mail (LSE: DMGT) publisher Associated Newspapers nearly trebled its online income to £9 million in the year to September, while regional stablemate Northcliffe made 42 percent more at £17 million. Impressive, yes; but it didn’t stop profits falling nine percent overall to £262 million. Even publishers that haven’t made online pay might have at least hoped a continuing online advertising boom would grow their online wins by default – but now the economy is taking that away, too. Enders Analysis says UK digital ad spend’s annual growth rate will slow from 20 percent in ’08 to just 2.1 percent next year. Some analysts argue that newspapers should seriously consider giving online-only a shot, but not even Guardian.co.uk, with 25 million unique online users worldwide, is considering scrapping its loss-making print edition – such is the Catch 22, multimedia publishers feel compelled to hang on to the dead trees.

Synergies wanted, apply within: Few in the industry would argue that more newspapers will close in 2009. But many will merge with papers in the same group and many editorial and commercial teams will be combined or outsourced to agencies as publishers look for ways to knock off unnecessary overheads. Last week Newsquest merged its two Wiltshire titles and Independent News and Media was forced to move its two national papers into DMGT’s offices to cuts costs, even after making 90 job cuts. DMGT’s local division Northcliffe Media is considering outsourcing the majority of its national sales staff to the Mediaforce agency. One media company that may fare well 2009 well is Press Association: the agency was represented at a meeting of Johnston Press executives to discuss the possibility of out-sourcing all subbing duties for the Yorkshire Post and Yorkshire Evening Post, although at least one foreign company is thought to have pitched at the meeting too.

Disclosure: paidContent:UK is a wholly-owned subsidiary of Guardian News & Media.

(Photo: Makz on Flickr, some rights reserved).

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  1. Rich Chuckrey Sunday, January 4, 2009

    Trick is to tie in your print with your website. Use trackback-like URLs in your print and at the same time apply marketing strategy to your online products that drive to the print product. Easier said than done — I know.

  2. There was a post on one of Jeff Jarvis' blogs (newsinnovation.com) that I put in the website address box of this comment so I think it can be clicked on above. It's one of the only cogent posts I've seen on how local internet media is shooting itself in the foot as far as tapping the revenue available with online. It's titled "Five Fatal Flaws that are killing local Internet plays". It's worth reading for any newspaper man trying to get more revenue out of their online investment.

  3. Three items that are rarely brought up in the discussion of the industry are:
    1) the role of distribution for free papers, like Metro or the weekly community papers — papers where the selling point for advertisers isn't the number of subscribers but how many households (or people for the transit-type products) the paper is delivered to. The point being that some of these products are not suffering, and in fact seem to be thriving. This is probably for a number of reasons but I'm going to guess one of the main ones is they've changed their focus to becoming a targeted distribution mechanism for advertisers;
    2) readership has been declining for at least 25 years. The Internet is just the bale of straw that's finally breaking it's back, but the attractiveness of newsprint for readers (and hence advertisers) has been in decline (generally speaking) for a while, probably because:
    3) the medium no longer provides adequate perceived value for the advertiser because there so many other options for them to get their message out there. Newspapers, in the meantime, are still operating under a paradigm that was probably true in 1954: they are the best means of mass communication. Well, the world has evolved and there are many means of reaching people and who does "mass communication" any more?

  4. Readers of online newspapers should be more open to visiting the sponsors of their favorite online newspapers. For example, if you read XYZ-Times.com every day, why don't you look at some of the ads you see and if one interests you click it and learn more… and do business with some of those sponsors. If everyone did this, the newspapers would be fine. I'm not talking about click fraud, just being more open to sponsors on newspaper websites.

  5. @chrisco — you think it's the readers' responsibility to 'save' newspapers?
    How about asking print readers to buy multiple copies too?
    ;-)
    If online media sites want to make more money from online advertising, they'd better discover what their readers want to buy and insist that their clients' adverts are more appealing.
    Anyone in the (once great) news media industry not listening to Jeff Jarvis is finished already!

  6. This is a radical time. Top down media is paving the way for "collective consciousness"

  7. With so many journalists out of work, why don't we try something innovative?

    Here's an idea to use prediction markets to fund journalists.

    http://generalprop.newschallenge.org/SNC/ViewItem.aspx?pguid=54e1c82d-5dd9-4918-aae6-4634fccca5a0&itemguid=025e53a7-c658-4563-b1c5-f97452afd108

  8. I think the future for online newspapers (online attention/ advertising revenue) is discussion forums where the public can interact and comment on the news. This is already beginning to happen with comments being allowed on some newspaper sites. This trend will expand and those newspapers that open their online platforms up, or create specific platforms for this commentry, will get the clicks. The attention.

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