What Does the Future Hold for Newspapers?

31 Comments

If you’ve been following the newspaper industry at all over the past year or so, you probably won’t be surprised to learn that 2009 was the worst year in decades as far as advertising revenues are concerned. But the sheer scale of the declines over the past few years is staggering. Last year saw a drop of 28 percent from 2008 –- and that year was already the worst for the industry since the Depression. Over the past four years, print advertising revenue has plummeted by more than 47 percent, to $24 billion from $47 billion. Online advertising has been growing (except for last year, when it shrank by 11 percent), but it still amounts to just 10 percent of what papers make from print. If you’re interested, the full numbers in all their gloom are available here.

According to the New York Times, the last time advertisers spent such a small amount on newspaper ads was in 1986. But Ryan Chittum at the Columbia Journalism Review notes that if you use inflation-adjusted dollars, the last time newspapers took in less in ad revenue was actually even further back — around the time John F. Kennedy died. Depressed yet? The head of the Newspaper Association of America, John Sturm, came out with this ray of sunshine in a response to Martin Langeveld at the Nieman Journalism Lab:

The velocity of the advertising decline for print classifieds continued to moderate, and adverse trends for national advertising and newspaper Web sites lessened considerably as last year came to a close.

While it’s great to hear that the velocity of the decline is moderating (remind me to tell that to someone the next time their parachute fails to open at around 10,000 feet), there are no signs that those figures are rebounding at all — and in fact, former newspaper executive Alan “Newsosaur” Mutter says that things could get even worse. Nor is there any indication that online advertising revenue is going to make up more than a thimbleful of that gap any time soon. If anything, online ad rates have been falling, at least for the kind of broad, mass-market reader that newspaper web sites cater to, because of the vast explosion of inventory from providers such as Demand Media and Associated Content.

So what are newspapers doing about it? Well, the main thing they seem to be doing is putting up walls. The Times of London said it will soon charge users for access to its web sites at the rate of 1 pound ($1.49) for a day and 2 pounds for a week under the mistaken impression that the way to determine the value of something is to put a price on it (the only way, of course, is to find someone willing to buy it). Meanwhile, the Wall Street Journal is turning to new technologies such as the Apple iPad — but is taking a distinctly old-school approach to the new device, saying it’s planning to charge $17.99 a month for the newspaper on the iPad (this interesting fact appeared at the very bottom of a story in the Journal itself, quoting someone described as “a person familiar with the matter”).

So will this plan help turn the WSJ into a money machine? Possibly, although CJR contributor Ryan Chittum argues that the proposed pricing “doesn’t make sense.” As he explains:

A WSJ.com subscription costs less than half — $8.62 a week. A print subscription delivered to your door costs just $9.92 a month. A print and online subscription costs $11.66 a month. But you’re going to charge $18 for the iPad app?

So if the iPad isn’t going to rescue the traditional media, what does the future hold for newspapers? Although it’s still too early to tell whether it will succeed, a model based on what David Weinberger has called “small pieces, loosely joined” seems to be emerging, with third-party sites such as GlobalPost and Politico and others filling in the gaps left by newspapers. And former Washington Post executive editor Len Downie suggests that non-profits can also help. Or do newspaper companies need to “burn the boats” and focus entirely online, as Marc Andreessen suggested recently? (Note: Please don’t beat me up about how Cortes didn’t *actually* burn the boats — that’s irrelevant for the purposes of the metaphor). Perhaps we should we just wait for Russian billionaires to buy them all.

The reality is that most newspapers simply don’t appreciate how different the online world is when it comes to content. Too many are still laboring under the misapprehension that the Web is just like print, except without all the tree-killing — you put your content on there just like it was in the paper version (except maybe you add a link or two, or a video clip) and readers line up to read it, and you go home. There are a few exceptions, of course, such as The Guardian — but even it has been struggling for profitability, weighed down by its legacy print operations. Too few mainstream media outlets realize that despite their similarities, the world of digital content is completely different from the world of print publishing, and needs to be thought of and treated differently. And walls don’t help.

For a great overview of the issues confronting traditional media in a digital world, check out this video of Clay Shirky speaking at Harvard’s Kennedy School last year, in a talk sponsored by the Joan Shorenstein Center on Press, Politics, and Public Policy:

And the Poynter Insitute has a clever (and depressing) interactive timeline that tracks all the newspaper industry layoff notices going back to 2007:

Poynter on Dipity.

Related content from GigaOM Pro (sub req’d):


Are Sponsored Apps the Key for Traditional Media in Mobile?

Post and thumbnail photos courtesy of Flickr user Zarko Drincic

31 Comments

justmakler

Just to be clear, where I was coming from on the walled garden comment.

Newspaper websites make most of their money based on pageviews as well as how many unique visitors they get. A paywall would significantly reduce those numbers.

Online subscribers revenue will never grow or offset what papers have already lost. The strategy behind paywalls are often about retention of print subscribers more then it is new online revenue. In my opinion the amount of money that will come from subscribers online will not offset what is lost from the reduction in page views.

With the growing number of quality (neighborhood) bloggers, the use of location aware news services that are already starting to spring up. Then look at growing number of local competitors and sites like (AOL owned) Patch.com. This equals more and more places to find local content that might be “good enough”.

A good percentage of newspaper traffic comes from search (Sometime as much as half). More and more people start their search for news at google, msn or yahoo. One of the reasons is Newspapers have always had very poor search engines. The engines are already ranking AP and twitter very high. Soon they will start surfacing geo located news.

A major unnamed search engine is threatening to rank Pay wall news content much lower. It would take every newspaper in the country to bind together and fight this search engine. Hell will freeze over before you get all newspapers to agree.

All of these combined make me a scary fight against paid content. I do think there are paid strategies that will work but not the ones I’m hearing discussed.

/JustinMakler.com

Fred

I think this comment is too broad: “Walls don’t help.” The most profitable Web sites in the world are paid sites (think of just about every major dating site on the planet), and a lot of niche sites (tech pubs, espninsider.com, training sites, educational sites, netflix.com, gaming sites, etc.). High-quality newspapers will be walled because they stand to make more money that way. Subscription-based models are easy cashflow once you convince people to sign up. If all the major news sites start doing it, there’s going to be a serious dearth of good content online, so more people are going to start paying for their news (and appreciating it more!).

Mathew Ingram

Well, I guess we’ll have to agree to disagree, Fred. For one thing, even websites that charge money don’t make all that much from them — and that includes the Wall Street Journal — and one of the most popular dating sites, Plenty of Fish, is 100 percent free.

In any case, I’m not disputing that paywalls can make money — some money, that is. Whether they can make enough to counteract all readers who are going to go away and never come back remains to be seen. I don’t think so.

Marl Balou

I believe there are 3 separate pillars here – Journalists, brand and delivery vehicle. People will still pay for Journalists who come up with non-commodity stories (ie Investigative journalism). They will pay for the brand behind the content if it engenders trust (ie NYT). The issue is that the current delivery vehicle (print) has a high cost structure that is killing the overall business.

Another model not mentioned here is something like NPR.

Kieran

This comment nails it. I was just involved in journalism training here in UK and it made me more optimistic about the importance of a good journalist; the age-old stuff such as spelling names right and knowing your libel law etc. So a good journalist and – in a group – a good brand should always be worth something to someone.
However, print is dying and TV/radio (like the free BBC) have the new media sewn up, so it’s hyper-local and deep background which are both very valuable.
But who pays? Paper is merely a delivery medium heavily subsidised by advertising and it distributes mostly PR/advertising puff (George Clooney interview EXCLUSIVE! – translation: shouldn’t you be watching my new movie instead of reading this?).
Papers had a good thing going. They delivered a mix of things well: news, sport, health, crossword… But the web is about specialising: xxnews.com, xxcrosswords.com…
So do we want a portal that chooses a package for us any more? Perhaps. The iPad is the first/last, great hope for that, as it is restrictive in many ways. Which might be a good thing; the net is dauntingly vast and trying to keep up makes us all stressed. Which means reporters may end up packaging the virtual world as much as the real world. Which will need proprietors who embrace the net rather than see it as a death knell. Which needs a new generation of proprietors. If I ran a paper right now, I’d close it down and fire every manager over 21 (I’m half-serious), then give the staff a blank sheet to start from, online, writing for an iPad-style format, constantly updating during the day, going deep into issues as they hit the headlines (instead of ’24-hour’ news which is 5mins of news repeated endlessly). Use the experienced writers (ie the old guys like me) to deliver the depth. It would be pretty exciting.
And let’s get business to pay. You want us to run an interview with George Clooney to promote his latest film? Sure, here’s what it will cost. That already half-happens in travel journalism: ‘You pay all my expenses to go to your lovely hotel in Thailand; I give my unvarnished opinion about it as a trusted name in travel’. Small outlay for a couple of well written pages with pix set before a million readers, so let’s raise the price. And readers are clever enough to understand the game. Murky waters, of course; where do you draw the line? Perhaps even government can pay; local papers here in UK are being killed by councils producing their own papers, using taxpayer money to produce Pravda-style nonsense. Why not ban them and pay proper reporters to come to town hall meetings and do proper reports? Otherwise you leave it to bloggers with a personal agenda, whose funding might be a lot less transparent. What ‘price’ democracy, indeed?

Tricia

In our small town, we still have a locally owned daily as well as two very successful online news outlets. They have each added Facebook/Twitter feeds to their news outlet channels. However, a request to buy ad space on either of the social media networks was rejected (for various stated reasons).

The idea that they would turn down ad revenue just because it wasn’t in their primary channel seems insane to me.

Supposed principles may thwart their profitability because they can’t adapt their model. Perhaps we in our small town are just a microcosm of the bigger problem.

Jason Burden

I really don’t see newspapers lasting much longer. I’ve kept my subscription going to support the company here in Arizona and I’m starting to regret it. If the paper arrives on time or at all it, I find myself noticing a downward spiral in content and quality. Hopefully the push of ereaders and iPads will turn this back around. smi.sh

Sanjay Maharaj

The problem is that no innovation has come from the newspaper industry which enhances the use of technology which in turn not only keeps the existign user base but attracts new ones. Look at their apps on smartphones, it does nothing to innovate but simply push out news like they did on the print side of things. There are so many interesting ways in which they could have innovated their apps to make it really interesting which I believe would be the key to their success online.

justmakler

Here are some thoughts I had, does anyone agree?

Subscriptions costs are not the way to fund the eReader content.

Unless:
1.The content is HIGHLY targeted for the end user
2.The eReader is provided to them with a 3 year subscription and maybe the bundle gives them the sunday print aditon (Or whatever length makes sense on the subscription) etc..
3.If it’s exclusive content* and a high end eReader experience
4.A free product that teases a paid model that adds some highly exclusive content or niche content (Example below)
5.Free version but some of the exclusive content* has been embargoed. So, they will still get 100% of the content but select pieces have been held back for a small length of time. – Don’t like this one as much but it is added it anyway.

My example of number 4 – I’m using a magazine but it’s not hard to come up with something for newspapers (Local Sports, Coupons, maybe you get the classifieds the night before (if you have any left)

Example of number 4: Martha Stewart magazine, offers recipes and gardening tips in the free product with 1 to 2 videos only. If all the videos, alternative versions of the recipes for diabetics or lactose intolerant people you pay a small monthly fee.

Thoughts or job offers?

http://www.justinmakler.com

justmakler

I spent the last 19 years in media (Newspapers, Magazines and Broadcasting) 17 of those years around interactive development. This article made me post one of my own.

My point of view: 10 things to consider as well as some models to think about for eReaders and Tablets. Skip down to 10 things Newspapers need to consider The post would be a little long to post here but so you can read it over at http://justmakler.wordpress.com/

Robert Ivan

The short answer to your headline question is: “a decline into obscurity”.

  1. The entire business model of a newspaper rests on advertising revenue as derived from businesses attempting to reach and influence a general audience.
  2. Cheap, widespread broadband connectivity has shattered this century-old advertising model.
  3. Companies now funnel money into online marketing, branding, web development, social media, SEO, SEM, PPC models, eNewsletters, and direct mail where the audiences are specific and conversions can be tracked.

As a business owner I cannot imagine spending a dime on a newspaper ad if i have not yet exhausted all the other methods first.

Mathew Ingram

Thanks for the comment, Robert — your last sentence hits the nail on the head as far as one of the big problems for newspapers.

Brian S Hall

There is no future for newspapers.
Even if they somehow figured everything out — went hyperlocal, embraced social media, delivered news real-time, enabled you to link and embed stories, fostered user-generated content, the harsh reality is that:

the cost structure of newspapers is not sustainable, period.

enrolled agent 2010

It has been sustainable for a century or so now… Why not in the future? Cost wise, it would be very effective if these newspaper companies can invest both online and on hard copies because some people prefer one medium more than the other. And vice versa. As long as the newspaper is maintained properly, I don’t see it dying in the next century.

Mathew Ingram

I agree that the cost structure of printed newspapers is a big part of the problem, and it’s still not clear how to get from that model to a new, lower-cost model that works.

Raul Chavarria

Let me give you a real life perspective. In 2007 I left radio and joined a suburban newspaper chain. I was floored when I saw their Chicago revenue at $20 million. That was far more than most radio stations in Chicago. I was very impressed until I began to count the number of managers, assistant managers, co- managers, department heads etc, in the room. The shear bulk of the staff and management meant lower margins vs. radio where most stations had 5-6 managers or department heads. I realized then that newspapers didn’t have much of a future.

@udeme

I’ve been tossing around the idea of a global news organisation based on a twitteresque platform. Everyone (with their mobile phone) becoming a “reporter” of sorts. Crowd-sourcing news. Not a new idea, I know, but with Scoble’s recent rant (wish I could link to the article) about gaps in curation tools, I feel its time to start taking that idea much more seriously.

Most Twitter apps merely replicate the Twitter stream. What would be even more advantageous to news seekers at large will be exchange apps built on top of Twitter, truly making it a “platform” (or whole new info-exchage platforms all together)

Yes, the challenges of identity verification and attribution need to be addressed, but the underlying idea of free news (by-all, for-all) is here to stay. The future of newspapers (as they are now) is not very bright.

Op-Ed will be the final domain news organisations will be able to hang on to (if at all), but “influential” bloggers will give them a run in that space. And if curation tools improve to add greater depth and background to posts, the newspaper, as we know it, is surely dead.

Mathew Ingram

Thanks for the comment, Udeme — I think smart newspapers can take advantage of some of these tools, but not many seem all that interested in doing so, to be honest.

William Mougayar

The short answer to your headline question is: “Uncertainty”. That’s what the future holds for newspapers. The fog hasn’t cleared yet.
“The reality is that most newspapers simply don’t appreciate how different the online world is when it comes to content.” hits it on the nail, and is an understatement.
iPhone & iPad apps offer interesting new revenue streams, but in no means will save newspapers. The reality is that not all newspapers are salvageable.
I’ve been following the metamorphosis of this industry via a dedicated news environment http://bit.ly/KOlc, and based on what I’m seeing, we’re only about 30-40% into the tunnel.

Mathew Ingram

Thanks for the comment, William. As the old saying goes, there is light at the end of the tunnel, but in some cases it’s an oncoming train :-)

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