An earlier version appeared in Quadrant magazine, September 2009.
The numbers do not look good for print-based media companies. On 4 June 2009 a Moody’s senior analyst in New York, John Puchalla, criticized the American newspaper industry for its “distorted” cost structures. Similar cost structures operate at newspapers around the world.
In essence, too much of each dollar is spent on printing and distribution, and too little on what sells newspapers – the content. Puchalla noted that 70 cents in each dollar were spent on paper, printing, distribution and corporate functions. Only 14 per cent of American newspapers’ operating expenses were spent generating editorial content. The other 16 per cent of costs were related to advertising and marketing.
The New York Times is one of the best newspapers in the world. It has won 101 Pulitzer Prizes, more than any other newspaper. Its annual editorial budget of $245 million is the largest of any newspaper. Yet that figure is less than a third of the yearly cost of printing and distribution – $795 million. It is a common story around the world. In Australia, for example, The Age in Melbourne had an annual budget in 2008 of $315 million. But only $58 million of that, about 18 per cent, was spent on editorial. Under a fifth of the staff at a typical American newspaper produce editorial. The New York Times employed about 1300 editorial staff in mid 2009 but the New York Times Company had 9,346 staff, according to the December 2008 annual report. The Age had a total staff of 850 in 2008. Editorial numbers were about 350, or 41 per cent of the total. In the years since then editorial numbers have been cut significantly. Anyone who knows about newspaper newsroom knows that only about half of the editorial staff work as reporters — the people who gather news. The rest spend their time processing content from wire services, checking reporters’ stories, attending meetings, designing pages and a host of other jobs.
It is expensive to produce a printed newspaper. Staff ratios are changing as newspapers restructure but an industrial-age product like a printed edition requires a lot of people beyond the editorial staff. So we must confront a key question: Is it time to ditch print as the principle platform for written news, and focus on digital? We think yes, over time. The issue is when.
Many factors need to be considered. These include the impact of fragmenting audiences, the influence of social media, the need for innovation and new products, and the potential for new revenue as print editions become niche products. Before any change happens we need to deal with limiting mindsets. Some media executives talk fondly of the “romance” of print. Journalists have surrendered manual typewriters and landline telephones for word processors and mobile phones. But old ideas hang around longer than old tools.
Marc Andreessen founded Netscape and sits on the boards of Facebook and eBay. He told Charlie Rose on Rose’s PBS program earlier this year that everything about the online experience was better compared with print newspapers. “If you are the guy delivering ice to people’s ice boxes at a certain point you gotta get into selling refrigerators.” Journalism will thrive when media companies free themselves of the shackles and mindset of print, and focus on online, wireless, interactivity, and whatever new platforms emerge for digital delivery.
Tomorrow’s journalism will appear on a variety of platforms designed to reach as many people as possible at all times of the day. Some older news consumers will prefer to read news on paper, and media houses will need to satisfy that demand. The average age of newspaper readers in Australia is 50, while the median age in the country is 36. Within two decades news will primarily be delivered via wireless devices and online.
Print will be a niche product, depending on the needs of advertisers and audiences. Generation Y will not replace Baby Boomer print readers as the latter die. Gen Y and related groups are too wedded to online and their mobile phones. They consume news, but not in print. One of the authors surveyed journalism students at a Victorian university in March 2006. The survey received 74 replies, a response rate of 52 per cent. Only two of the 74 respondents said they bought or read a newspaper on campus, despite a marketing drive by The Age, the Herald Sun and The Australian that allowed students to collect free newspapers on campus after buying a card for $20. In March this year Professor Alan Knight, in a survey of Australian journalism students, found 90 per cent of aspiring journalists did not read newspapers, preferring their news from commercial television or online. Yes, even journalism students are forsaking printed newspapers.
Americans already favor online as their main source of news and information. In June 2009 polling firm Zogby International published reports of two major polls on how Americans got their news and what sources they most trusted. Zogby asked which of the four primary information sources was most reliable. More than twice as many people chose the Internet (37 per cent) ahead of television (17 per cent), newspapers (16 per cent) and radio (13 per cent). Ironically, most of the news Americans consume online comes from traditional media sources. Zogby offered two explanations: “The Internet allows people to seek information from thousands of blogs, aggregators and social networks, and to migrate to those that share their point of view. The information received may originate from the same old media, but it is wrapped in designer packaging that matches personal tastes and ideologies.”
Technologies such as electronic-readers, often abbreviated as e-readers, offer a platform that cuts the cost of non-editorial operations. They maintain the metaphor of the printed product. But they are a limited option because they lock people in with proprietary software. Amazon’s Kindle DX is being trialed in New York and Washington to deliver newspapers. The New York Times and The Washington Post cost $17 a month and $12 a month respectively, but content only appears in black and white. News is downloaded wirelessly while people sleep. But Kindle’s wireless option is only available through one telecoms company in the United States.
Amazon CEO Jeff Bezos said the Kindle DX would change the economics of the newspaper business. But all e-readers work on proprietary software, meaning customers with different devices such as the iRex iLiad, the Sony Reader or the host of un-named e-readers due out early next year can only access books, magazines and newspapers in the format designed for each specific device. Would you buy a music player that forced you to buy songs from only one label? Or a car that forced you to use one brand of petrol? Journalism will be liberated and ready for a commercially viable future when it embraces interactivity and involves the audience, and focuses on delivering content to standardized mobile phones and online platforms.
Why wireless and online? Because consumers already pay for mobile phone content, so a payment mindset exists. Audiences will not pay for online content they have received for free for more than a decade. That issue is discussed later in this article. In June 2009 the head of digital operations at the New York Times Company, Martin Nisenholtz, said his company was likely to begin charging for access to news on mobile devices before it did so on the web. “Mobile offers a better opportunity for paid content,” Nisenholtz said. Publishers could charge for micropayments in the sense that audiences were already accustomed to paying for individual items on their mobile phone. People in the Nordic nations and Europe already pay for cans of soft drink or parking with their mobile phones. It is a short leap to pay for news as well, if it has added value.
Mobile phone ownership in Australia had almost reached saturation point by early 2009, with 92 per cent of the population owning a mobile phone, according to Nielsen data. A range of functions such as mobile Internet boosted the uptake, particularly for users aged 16 to 29. Australia’s telecoms market continued to grow in 2009 despite the economic crisis, driven by demand for mobile Internet and broadband, IDC analysts said. Despite having less than 1 per cent of the world’s population, Australia ranks ninth in the world in terms of data downloads onto mobile phones. Smart-phones, which are effectively small computers that allow people to access the Internet wirelessly, will always be more popular than e-readers because people can do more with them than read black-and-white text.
As smart-phones evolve they will become one of the main delivery mechanisms for news and information. Media houses need to prepare for ways to charge for that content. Three in five iPhone owners in America already use the mobile web more frequently than they read print newspapers, according to a survey by metrics firm comScore published in July 2009. Only one in 10 of the world’s 4.2 billion mobile phones are smart-phones. In July 2009 Morgan Stanley Research predicted the proportion could reach half in the “next few years”. They described the migration to Internet-connected mobile devices as “one of the biggest opportunities in the history of the technology industry”. Newspapers in developing nations Printed newspapers are thriving in countries with low broadband penetration.
Newspaper executives in these countries should not be complacent, because demographics and technology will produce rapid change. India represents an example of how profound the change will be. In 1976, when the country’s population was 775 million, one copy of a newspaper appeared for every 80 people. A quarter century later, as the population passed 1 billion, one newspaper was available for every 20 Indians. By mid 2009 India had 68,000 newspapers, with more expected to emerge. They sell for a few cents per edition. Unlike online, print does not require electricity and Internet infrastructure. Power shortages still occur in some parts of India. Broadband penetration in 2008 was a mere 3.7 per cent, and concentrated in major cities.
Some pundits have suggested that rising literacy in India will mean an audience for printed newspapers well into this century. In 1976, 35 per cent of Indians could read. By 2008 the figure was 70 per cent. Rising youth literacy, at 82 per cent in 2009, does suggest plenty of potential readers. But those youngsters are more likely to seek their news and information online, just as their counterparts do in other countries. As cheap broadband inevitably becomes available, newspaper circulations will decline. A July 2009 report from Forrester Research estimated that about 2.2 billion people worldwide would be online by 2013 – a global increase of 45 per cent. Almost half of those new users would be in Asia, with 17 per cent in China alone. This year the United States had the most Internet users followed by China, Japan, Brazil, and Germany. Within five years China will be in first place, followed by India, and then the United States, Japan, and Brazil. “Per capita online spending is likely to remain highest in North America, Western Europe and the developed markets of Asia throughout the next five years,” Forrester senior analyst Zia Daniell Wigder said. But shifting online populations and growing spending power among Asian consumers mean that Asian markets will “represent a far greater percentage of the total in 2013 than they do today”.
The Internet is a constant stream. It is continuous. Torry Pedersen, CEO of Norway’s VG Company, describes it as a “bubbling brook”. Pedersen was managing editor of the print newspaper VG and later editor-in-chief of the online edition before becoming CEO. Online news coverage was a constant stream “like a bubbling brook” while print coverage was like bottling water, he said. “Both the brook and the bottle contain water, just as both the online and print editions can contain fantastic journalism. But they are two different formats.”
Print content is fixed in time and tends to look backwards because of its reflective nature. Online and print need different kinds of journalists to produce different forms of content for specific audiences. In an era of constantly updated digital content for online, with content offered on a variety of platforms, we need flexible editorial staff. For long-form print content we need a reflective kind of journalist.
Each platform requires a different form of content, which suggests that integrated newsrooms, which combine newspaper and online staff and often expect reporters to work in several platforms, are not relevant for all forms of journalism. Pedersen believes integration should be reserved for specific areas such as sport or culture or lifestyle or travel because reporters can specialize in these subjects. Successful revenue models will involve a myriad of approaches, or what we are calling a “confederacy of models”. The actual number will vary for individual media houses, each with its own unique culture and way of delivering news. The issue here is that all media need to be new media. The key to success in the future will be experimentation, innovation and life-long learning. Those who can adapt the fastest will win. As Darwin famously pointed out, the species that survive are those that adapt most efficiently, not the strongest. This means that innovation and creativity will become paramount.
All of the changes discussed so far will require new forms of leadership and new kinds of editors. A solely print-focused editor is a dinosaur. As John Maynard Keynes, the Nobelprize winning British economist, noted: “The difficulty lies not so much in developing new ideas as in escaping from the old ones.” Modern media houses need leaders who look forwards rather than backwards, and the industry needs to start grooming the right kinds of people: individuals with flexible mindsets who understand change management.
Frederic Filloux, former editor of Schibsted International, said spotting and nurturing talent should be the “most critical” part of an editor’s job. The past 20 years had revealed a “clock-punching” mentality at too many newspapers that created “multiple levels of inefficiencies”. Newspapers needed people comfortable with the digital world, and not those who sought to push online into the too-hard basket or the periphery of the organization. As part of the future, media organizations must embrace the audience and work with, not against, social media and social networks such as Facebook and Twitter.
Consumers have already embraced social media, and we argue that one avenue to the future consists of building communities through social networking. In the UK, eMarketer estimated that two in five Internet users, or about 15.4 million people, used social networks at least once a month in 2009. By 2013, eMarketer predicted the social networking population would reach 21.9 million, or half of UK web users. Many of these people are members of the desirable AB demographic. Lena Samuelsson, editor-in-chief of Svenska Dagbladet, the major daily in Stockholm, summarized the situation: “Newspapers must genuinely listen to, and interact with, their most important target groups.” Newspapers need to focus on the demographic they seek to reach rather than being mass media. Given that advertising goes where the audiences go, media companies must embrace social media to get those audiences to come to online newspaper sites.
Paul Gillin, a research fellow and member of the advisory board of the Society for New Communications Research, co-chairs the social media cluster for the Massachusetts Technology Leadership Council. Ironically, he also writes the Newspaper Death Watch blog (http://www.newspaperdeathwatch.com/). Crises such as those the American newspaper industry face in 2009 demand innovative thinking, fast reaction times and tolerance for risk, he wrote on his blog. “One reason we’ve seen so little of this in the newspaper industry is that the people at the top have no capacity for making dramatic changes. The innovation that we’ve seen comes almost entirely from startups or skunkworks operations.”
The Norwegian media company Schibsted, which owns a range of media houses in Europe, offers an example of a future-focused organization that succeeds because it embraces innovation. Schibsted owns VG, Norway’s highest-circulating daily newspaper, and VG.no, the country’s most successful news and information web site. VG editors believe they need different kinds of journalists to produce news content for each platform, so they have separate structures and companies even though they share the same newsroom. The online news site has 50 journalists compared with about 270 for the print edition. A higher proportion of the online journalists produce original content compared with the newspaper: 40 out of 50 online, compared with 150 out of 270 at the newspaper. As noted at the start, too many staff on a printed newspaper are not focused on the key processes of producing and selling content. And too much of a print newspaper’s budget is spent on printing, paper and distribution.
VG’s Pedersen believes integrated newsrooms might be needed at small media organisations. But not for a large media house like VG. “In my opinion a completely integrated model is so hard to get right that it reduces the chance of success of both editions.” He argues for advertising as the primary business model for online. “Online positions are all about critical mass. If you manage to occupy a leading position, it becomes very difficult for your competitor to take you on. In reality critical mass offers greater protection than actual quality differences in relation to your competitors.” Pedersen also noted that print newsroom costs were higher than for online editions. “If they are merged it is more likely that the higher cost structures of the print editions will infect the online editions rather than vice-versa. If both print and online editions are part of the same company, with the same board of directors, I believe that more time will be spent on the challenges facing the established medium, than on the opportunities presented by the new medium. Both deserve proper attention, but not at the expense of each other.”
The VG media house in Norway has succeeded financially even in times of recession. The online site had earnings before interest and tax of 109 million Norwegian crowns (about $21.35 million) in 2008, on an operating margin of 33 per cent. A huge proportion of its traffic (86 per cent) comes through the home page, which means the site can charge high advertising rates on the home page. In mid 2009 advertisers paid 210,000 Norwegian crowns (about $41,140) for a banner advertisement on the home page, for 24 hours duration. Most online sites around the world would kill for that kind of rate. Google News has struggled to get established in Norway because of the domination of VG.no and the company’s other online sites. The print edition of VG gained about 75 per cent of its revenues from newsstand sales (by law people cannot subscribe) with the rest coming from advertising. In 2008 the newspaper had earnings before interest and tax of 214 Norwegian crowns, or about $41.92 million, on an operating margin of 12.9 per cent. Revenues for online came from advertising and a collection of areas such as the site’s weight-loss club, live video of key football games, and a range of small but important niche areas. Eivind Thomsen, senior vice president for Schibsted, said the future would consist of “many hundreds of business models, all changing over time”. Schibsted’s success also shows the importance of embracing social media and being part of the community. The Norwegian media group came to that realization early. VG.no editors require their journalists get involved with social media. Well-known reporters have effectively become a “brand”. By-lines on the online site include links to each reporter’s Facebook profile and Twitter account. Reporters recommend stories to Facebook “friends” and Twitter “followers”. VG.no’s editor-in-chief Espen Egil Hansen said communication with audiences should make up at least 20 per cent of each reporter’s workload.
How many Australian newspaper reporters welcome that level of personal contact with their audiences? Too many avoid their audiences. The web is the world’s biggest photocopy machine. It is too easy to copy innovations that work. So innovative companies are forced to innovate all the time to stay ahead of competitors. Eivind Thomsen, Schibsted’s senior vice-president, described the process as having a “temporary monopoly” – in other words his company had to continue to innovate to stay ahead. “One of our business models is to get readers to come to us.” VG.no is one of the few online sites with at least two editors, sometimes three, assigned to look after the home page. It is a reflection of the importance of the front page – remember, 86 per cent of the site’s traffic arrives via the home page. VG.no’s traffic is huge – three in four Norwegians visit the site each month – and most of the content is free.
The danger of charging in a world of excess information
In June 2009 News Corp CEO Rupert Murdoch said newspapers had to charge readers for online content. American industry heavyweights met in “secret” in Chicago a month earlier to discuss strategies for charging. In an interview on the News Corp-owned Fox Business Network, Murdoch said online content would no longer be free and newspapers would sell subscriptions for premium content, though conceding newspapers would continue to make money from advertising. It had been a mistake for newspapers to rush to the web to try to get a bigger audience, Murdoch said, and all News Corp newspapers would be charging for content within a year. He suggested one of the company’s prime assets, The Wall Street Journal, was proof that paid premium content worked, though noting it was because of the paper’s proprietary financial reporting and analysis.
Lionel Barber, editor of the Financial Times, told the Media Standards Trust in London in July 2009 that “almost all” news organizations would be charging for online content within a year. “How these online payment models work and how much revenue they can generate is still up in the air,” Barber said. Building online platforms that could charge readers on an article-by-article or subscription basis was one of the “key challenges” facing news organizations. Barber said quality news was expensive. The Financial Times had 100 foreign correspondents in an editorial staff of 600 worldwide. By mid 2009 its website, FT.com, had more than 1.3 million non-paying registered users worldwide, with another 110,000 paying subscribers. The print newspaper had a circulation of 411,988. Business people with expense accounts are willing to pay for newspaper content, as are people who consider paying a small amount for information to use that information to make more money.
But business-to-business audiences represent a small segment, relative to the amount of free online content around the world. Charging for online content for general news is folly in societies where audiences have access to high-quality free services such as the ABC or BBC or CBC. Vast amounts of English-language news is available free on the Internet. Charging can only work in small and affluent markets where people want local information, or within unique language groups like Norway.
Vivianne Schiller, head of America’s National Public Radio (NPR) and a former head of NYTimes.com, told Newsweek in July 2009 that people would not pay for online news in large numbers, describing proposals to charge as a “mass delusion” in the newspaper industry. “In other words, they [executives] think that wanting it so badly will … change the behavior of the audience. The world doesn’t work that way. Frankly, if all the news organizations locked pinkies, and said we’re all going to put up a big fat pay wall, you know what, more traffic for us [NPR].”
Americans have a phrase that is apt here: You cannot put the toothpaste back in the tube. People will not pay for general news content they can get elsewhere for free. And only a tiny part of the content of a local daily newspaper, as they are currently configured, is worth putting behind a pay wall. But people will pay for a variety of services they value. The free-pay hybrid model – often called “freemium” – or the free model will grow stronger as world economies pull out of the recession, as long as that content is distributed digitally.
We have already seen that print production and distribution consumes upwards of 70 per cent of costs, eating into resources that could be devoted to the digital product. Quality free content online will attract advertising. Other revenue sources will emerge, depending on what is delivered along with free news content. Successful examples include online crossword puzzles from The Times or Schibsted’s weight-loss program.
The future will also see a world of niche advertising – lots of slivers of content, all waiting to be monetized, and all based on the free or “freemium” model. With the latter, basic content is given away and a premium charged for advanced or special features. News Corp was looking at bundling content, chief digital officer Jonathan Miller told the Editors’ Weblog in mid 2009. This could include putting all the media group’s New York-based content into one subscription package. In June 2009 The New York Times was looking at different ways to charge for online content. One was similar to a model the Financial Times used, where readers could surf the site without charge until a pageview or word limit was reached. Then a metered device would start running and it would charge the user for the rest of their time spent. At the time of writing the Financial Times allowed ten free articles a month per user, then required a subscription. The other option involved a “membership” scheme where readers would donate money and then be invited into a community that would offer free merchandise and other benefits.
Many people find their news through search engines such as Google. But articles behind a pay-wall cannot attract a good Google ranking, making the content nearly invisible. So newspapers need to find a solution to this when they start charging. The Wall Street Journal currently allows its paid content to be accessed free via Google. Is this fair to paying customers? Could this knowledge deter potential subscribers?
Rupert Murdoch was right when he said the print editions of newspapers would look “very different” in the future. In the interview on Fox Business Channel mentioned earlier, Murdoch said it would probably take 10 or 15 years for the public to “swing over” to accepting news on mobile phones or panel devices such as the Kindle DX. We need to distinguish here between changes in print forms of media, and changes in news distribution via mobile phones or panel devices. Print will become a niche product. Within a generation most news will be delivered to mobile phones and newer versions of personal data assistants, as well as online.
It will be much more interactive than we currently know, constantly updated, and make better use of the strengths of online and mobile technologies. Smaller and less frequent newspapers Printed versions of newspapers will still exist, but in significantly modified forms. They will be full color, smaller in size, and appear a few days a week. Their content will focus on the future rather than telling audiences what happened yesterday. Think of a bi-weekly version of The Economist. In other words, print will play to its strengths. Media houses must move away from shovelling print content online. That is the way of the dinosaur.
The daily newspaper will get smaller – the size of an A4 magazine. They will be edited to cater for busy people, and not the bloated publications we got when broadsheets moved to compact size and tried to replicate all the content from the broadsheet. Print editions should focus on what audiences can expect today and later in the week rather than yesterday. Perhaps a fifth of the content should reflect on the significance of yesterday’s major events. People appreciate an overview of what was important yesterday. But it must be combined with analysis of what will happen today and tomorrow.
A print journalist who focuses on yesterday is a stenographer or secretary. A journalist who tells people what to expect later in the week is a “journ-analyst”. (Journalism education, incidentally, will also need to change to produce these analysts rather than secretaries.) Print needs to focus on backgrounding the news, and giving people insights into why things happened rather than merely telling them what happened yesterday. Audiences have already read and heard what happened today on web sites, and on radio and television news.
Juan Senor, director of the Innovation International consulting company, said newspapers had to move from being a heavy to a light industry. Senor used the analogy of the circus that Phineas Taylor (“PT”) Barnum introduced in 1871, at the time the “greatest show on earth”. The prime performers then were the elephants. But circuses have changed. By the twenty-first century live entertainment such as the Cirque du Soleil have become vastly more popular. Cirque du Soleil has been credited with re-inventing the circus. It has no animals, and relies on human ingenuity. Senor said it was time for newspapers to “get rid of the elephants”. This involves significant format changes and a need to understand different audiences, as well as build communities. “We need to think of newspapers as service platforms that create profit.” Traditional news that covers the “who, what, where and when” were a commodity available free online around the world, he said. “But how, why and what’s next are worth a premium.”
Disclosure: One of the authors is a consultant with Innovation International. The death of the newspaper: exaggerated One of the great exaggerations of the recession in 2009 involved reports of the death of the print newspaper industry. Yes, some will die. But most others will modify themselves, and some will prosper over time. Roger Fidler’s “mediamorphosis” theory tells us that new media do not kill old media, provided the old media learn to adapt. Remember what we said earlier about Darwin? Gavin O’Reilly, president of the World Association of Newspapers (WAN), acknowledged newspaper managers needed to embrace change, and echoed Fidler’s words: “When new technology is launched, it usually finds its place alongside an existing technology,” he told a Power of Print conference in Barcelona in June 2009. O’Reilly was confident about the future of newspapers because advertisers wanted to reach stable and reliable demographics. WAN noted that worldwide newspaper circulation in total had risen in 2009.
A close look at the figures shows that rises in Asia boosted the total, despite falls in Europe and North America. At this stage we need to distinguish between debt-ridden media companies versus recession-hit companies. Many debt-ridden companies – those that borrowed hugely during good economic times – will perish because they cannot manage high levels of debt and interest repayments. But media companies that ride out the recession will flourish again. Earl Wilkinson, executive director and CEO of the International Newsmedia Marketing Association (INMA), said recession-hit companies were in pain because the recession of 2008 and 2009 was worse than the combined impact of the previous two global recessions. But that pain was bearable, he said. INMA is a non-profit organization with more than 1,200 members in 82 countries worldwide. In an article published on the INMA web site in April 2009 headlined “Separating truth from fiction about newspapers in this recession,” Wilkinson said many debt-ridden companies could not transform themselves fast enough and were in trouble. Some of the corporations that owned newspapers would disappear, but the newspapers they owned would survive, Wilkinson said. “These corporations own newspapers that remain operationally profitable, but must restructure debts amassed in a business culture that encouraged highly leveraged ownership consolidation on the back of a harvesting strategy that may have gutted newspapers as much as today’s recession.”
For a recessionridden company, the downturn was irritating “but business will return and the only mystery is about how much cash to conserve and for how long”. Wilkinson offered a schematic to distinguish newspapers whose business models meant they would be “less affected” or “more affected” by the economic downturn. Less affected newspapers were subscription-based; paid newspapers; distributed in a tight geographical area; received less than 60 per cent of revenues from advertising; had low reliance on classifieds in the advertising mix; had low debt; were non-union; had capital expenditures not tied up in print operations; and operated in cities with low broadband Internet penetration. More affected newspapers were the opposite. They produced only single copies; were distributed for free; operated in a broad geographical area; received more than 60 per cent of revenues from advertising; had a high reliance on classifieds in the advertising mix; had high debt; powerful unions; major capital expenditures tied up in print operations; and high penetration of broadband Internet. Many of the newspapers that closed in the United States in 2009 were the weaker publication in two-newspaper markets, bogged down with huge debt.
Slate, the online-only news magazine founded in 1996, offers an example of new possibilities for news organisations. Jacob Weisberg was editor from 2002 to 2008 before he became editor-in-chief of the group. In that time Slate moved into profit. In an interview with The Economist published 11 July 2009, Weisberg said web-only journalism was viable because it did not have print’s huge fixed costs. “The marginal cost of distribution is zero. Most of what we spend at the Slate Group goes into creating original content.” Weisberg said web advertising could support big newsrooms if they escaped some of their “legacy” costs. “The test I’d most like to see is of a well-financed, for-profit, web-only “newspaper” with no printed version. The problem is that the leading news organizations have a stake in web-only newspapers not working because they will accelerate the decline of the large, if faltering businesses that revolve around print.” What about future revenue sources? Weisberg said The Economist had become the envy of all serious media because of the way it had developed multiple revenue streams over a period of decades. “Slate’s secondary sources include syndication and licensing, charging for Slate on mobile devices, book publishing, and affiliate fees for referrals to Amazon. I like the model of a free website, but paid mobile applications.” The huge cost of buying a printing press and establishing distribution chains limited the number of newspapers and effectively created a monopoly or duopoly for anyone who could afford those costs. Now the metal and money in those presses has become an anchor that limits development.
Jonathan Knee, who directs the media program at the Columbia Business School in New York, said the high barriers to entry the newspaper business once enjoyed in an offline world simply “did not exist in an online world”. Because digital start-ups have low costs it is easier for them to reach profitability, provided they generate revenues. Knee suggested generations of monopoly profits had dulled newspaper managers’ senses. Many had avoided their responsibilities to force journalists “to think harder about what their readers want, rather than what they want their readers to want”. The recession and economic imperatives have driven the decision to go digital at newspapers such as the Christian Science Monitor and the Seattle Post-Intelligencer. Editorial managers must seize the future, and choose digital and wireless delivery, rather than wait for outside forces to make those choices.
VG’s CEO Pedersen calculated that at least 55 per cent of the cost of publishing a newspaper could be eliminated by going online. The main issue is the tipping point of the savings from going online versus the loss of advertising revenue. In a speech on the future of journalism at the National Press Club in Canberra on 2 July 2009, News Ltd CEO John Hartigan highlighted the dilemma traditional media faced, anchored by high investments in printing presses. “An online reader generates about 10 per cent of the revenue we can make from a newspaper reader. So, for every reader we lose from the paper we need to pick up 10 online.”
In their June 2009 report Moving into multiple business models: Outlook for newspaper publishing in the digital age, Marcel Fenez and Marieke van der Donk of PricewaterhouseCoopers concluded that print remained the largest source of revenue generation for newspaper publishers. It would “continue to be so for some time” though they did not nominate a time frame. The pair also acknowledged the “huge potential” for growth online, and noted that it was unlikely newspapers in the future would appear either in the formats or volumes seen today.
Clay Shirky, who writes about the social effects of Internet technologies, believes organizational forms perfected for industrial production like the newspaper need to be replaced with structures optimized for digital data. “It makes increasingly less sense even to talk about a publishing industry, because the core problem publishing solves – the incredible difficulty, complexity, and expense of making something available to the public – has stopped being a problem.” It is time for innovation, Shirky said, and each experiment would seem “as minor at launch as Craigslist did”. “No one experiment is going to replace what we are now losing with the demise of news on paper, but over time, the collection of new experiments that do work might give us the journalism we need,” he wrote on his blog on 13 March 2009. We believe people will pay for news and information they perceive will add value to their lives. The “content is king” argument is dead because the web produces so much content.
Valued and quality content are the new royalty. The issue is finding the resources to produce that content, and then connecting that content with the right audience. Success will come to media houses that embrace innovation, creativity and an entrepreneurial spirit, and hire people with those attributes. It is time to go forth wisely into a brave new digital future.
Categories: business models, newspapers, Not home
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