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News Biz 2010: Online Revenue Is A Marathon, Not A Sprint

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It’s been a bad year for newspapers, but what does 2010 hold? It’s going to be slightly, but the industry will still have to be patient before its online investments really start to pay off..

I wrote 12 months ago that 2009 would see “layoffs, further consolidation and the death of certain long-running titles”. There might not have been too many closures — London Lite and thelondonpaper excepted — but that prediction turned out to be otherwise true. We counted more than 1,000 publishing redundancies in the first three months of the year and we worked out that almost 1,500 printing press jobs have gone since 2005.

But what about newspapers’ future? We can see a better outlook for news media in 2010, as advertising stabilises and cost cuts drive revenue upwards. But the challenges of adapting to new publishing platforms remain and only those that take tough decisions now will survive

Advertising will improve, but not by much: According to ZenithOptimedia, newspapers’ advertising freefall will bottom out next year. But more importantly, Zenith fully expects online to be the world’s second-biggest advertising medium, behind TV, by the middle of the next decade: that is what the industry should be preparing for.

Pursuit of profits could hurt editorial quality: The thing that worries journalists and ordinary people isn’t EBITDA or profit margins, it’s how good their paper is. How can titles — many of which have seen their staff numbers drop by a third or more this year — still produce the same quality product? Here’s anonymous regional journalist “Blunt”, of the Playing the Game blog: “The papers were constricted, in both pagination and editorial space, morale was at an all time low and it was the best we could do was to cling on by our fingertips to bring out papers that weren’t total shit.”

The challenge for Johnston Press, Trinity Mirror (LSE: TNI), Northcliffe Newsquest, Archant and GMG Regional is to maintain a minimum level of editorial quality while driving revenue: it may simply be that – in a mass-reach-based, display and classified-led print media world – real quality and real profits are mutually exclusive. In other words, the industry can’t afford to lose many more reporters.

Online isn’t the saviour yet: We’re realistic enough to know that the lion’s share of almost every mass-market consumer-facing news business comes from print. Blunt aptly reflects the disappointment across regional papers on web revenue growth: “While the net is important it is not, at this time, the cash cow they thought they could rape and pillage.”

Very true, and it shouldn’t be thought that investing in online — or iPhone apps, the current publisher craze — will return anyone to positive revenue/profits any time soon. That growth is long-term, as broadband penetration continues to grow, reading habits change, mobile reading increases and advertisers at all levels see the potential of digital — that’s when online will start paying back the investment papers are putting in now. But they must be patient…

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