Why profitability is an uphill struggle for newspaper publishers
The last couple of weeks have seen two of the UK’s biggest newspaper groups announce their half-year results, giving a chequered view of the state of the newspaper industry with The Guardian nursing a £68.7 million loss and Trinity Mirror Group celebrating £66.9 million in profits - up 42% from last year, and propped up largely by its acquisition of local newspaper group Local World. The fact that the Guardian saw a £2 million drop in online revenues and Trinity Mirror’s like-for-like advertising sales actually dipped by 7.8%, gives a sense of how tough newspapers are finding the transition from print to digital.
The growth of digital advertising doesn’t come close to the steep and continual decline of print ad budgets. Since 2003, spend on print ads has fallen from £30bn to a little more than £11bn. Yet, at 82% of newspaper ad revenue, print is still top dog.
The stark reality for the news itself is a much prettier picture: it’s easier than ever for people to read high-quality journalism.
So, what has caused this disparity? To answer this question it's worth examining both how the newspaper industry reached its current nadir, and why there’s still hope in the future of news.
A simpler time for news
Growing up, most Brits didn’t have much choice in how they got their news. To stay in the know about local happenings, the choices were The ____ Mail or ____ Express.
Breaking news? The best way to find it was the next morning. Looking for a new job? The listings were right there. Want the score from the Chelsea game? Turn to the sports section. Want to have your ideas heard? Submit an op-ed.
But newspapers didn’t (and still don’t) just contain news. The additional trappings of comics, sports scores, and classifieds translated into more sources of revenue beyond the purchase of individual issues or subscription fees.
The cost of starting a newspaper was prohibitively expensive — and still is, if you’re going into print. The result was a scarcity of competition and a small but captive audience. Newspapers were all but guaranteed high quality, lengthy reader attention and therefore top dollars from advertisers.
News on TV and radio had chipped away at this share, but those weren’t a perfect substitute for the written word.
The unbundling of the newspaper
“There are only two ways to make money in business: One is to bundle; the other is unbundle.”
Jim Barksdale, former chief executive of Netscape
Today, there are fewer and fewer people relying on their local newspapers for the non-news functions. Nearly all of them have been replaced by internet services.
Craigslist replaced the classifieds.
Facebook replaced community announcements like weddings, births and obituaries.
Dilbert and Garfield live online through Yahoo News and other dedicated comic sites.
Many of the revenue streams for newspapers have been unbundled by Internet services, leaving newspapers in the lurch for their transition to digital formats.
A lower barrier to entry
More importantly, though, local newspapers are competing not against single newspapers, but all content publishers online.
Put another way, the potential audience for The ____ Mail is effectively infinite — there’s no geographical limit to which readers they can reach. But the same is true for every other publication that aims to reach the same audience.
When anyone with internet access and an idea can publish an article through WordPress or Blogger, audience access is no exclusive: The Times has the same opportunity as a blogger.
Compounding this effect is how easy it is now to publish content. Not only is it easier to write a virtual page (see: WordPress, Blogger, Medium, Tumblr, etc.), but there are no paper restrictions on how many pieces can be published in a day. There’s no printing press to buy. There’s no limitations on writing to fit a 12″ story. The Internet has completely obviated the physical limitations of newspaper, which previously made it difficult to create and distribute content to a wide audience. The friction it previously took to generate one edition of a newspaper doesn’t exist online, and this means there’s more content than ever for readers to choose from.
Quality reigns supreme
For any given internet user, more news is amazing. It has never been easier to access and read high quality content, and this is reflected in how users now discover content.
Google searches for a topic will show a selection of the most relevant news results. Twitter users can easily surface interesting articles to their followers. Facebook users share and like their way to the highest quality content in their News Feed.
The challenge is how readers can find the most relevant, most engaging content for their own tastes.
Benedict Evans, a well-known media and tech pundit who recently joined Andreesen Horowitz, explains this concept succinctly:
“I sometimes tease my Xoogler colleagues by suggesting that if [Google] PageRank Really Worked, SEM wouldn’t exist — if the links were always the right answer then no-one would click on search advertising. Until then, though some companies can make it entirely through organic search or Facebook virality, most cannot. For the rest of us, that means marketing. In effect, by removing all other constraints, the internet makes advertising more important than ever.”
It’s important to note, however, that simply being viral or search-savvy isn’t enough — publications need to generate high quality content if they want to build and sustain an audience.
While most people wouldn’t count listicles as high-brow, quality — like beauty — is in the eye of the beholder. The traditional newspaper audience is no longer captive to the scarce amount of words that were delivered by print on a daily cadence. Readers are demanding and able to access the best news and entertainment online, whenever they want.
Content economics for the internet era
Ultimately, the fears and challenges for traditional newspapers making their way on the Internet lead to two questions:
- How can a newspaper compete with the high quality content that all readers have access to now?
- How can a newspaper make sure their content is found and consumed?
The ultimate fate of news organisations who can’t compete effectively on these fronts is irrelevance on the Internet, which is even more worrisome if advertising is their main source of income.
The internet has flattened all of the moats of print publishing, and all else being equal, higher quality news wins the battle for a user’s attention every time. So what happens to average content? Can it still survive in the digital age?
There’s a certain exasperation for newspapers having to compete in an arena with which they’re woefully unfamiliar. While the current state of digital publishing is all but a dream for the readers, it’s nothing short of a nightmare for traditional news organisations.
News is no longer scarce — but a sustainable business model for publishers is still a work in progress.