Friday, January 30, 2009

To avoid ending with whimper, publishers must tout printed product

Nobel Prize winner T. S. Eliot likely hadn’t a clue as to the versatility of the last verse of “The Hollow Men.” Not only is it a possible description for the world’s end but it also illustrates the potential closing stages of the daily newspaper industry:

“This is the way the world ends,
not with a bang but a whimper.”

Consider: On any given day there’s a publisher ordering his paper’s management team to cut back further on the printed edition because, as the annual and quarterly reports say, print revenues are down, online revenues are up. While that strategy, if you can call it that, might improve profits in the short run, this pathological behavior only diminishes the paper’s revenues, competitive stand¬ing and its future.

This self-destructive practice won’t kill the newspaper business next year or even in 10 years. If it continues, based on current run rates of circulation and advertising losses, it could take decades before the daily newspaper industry col¬lapses, echoing Eliot’s last stanza.

The Newspaper Association of America reports trends that everyone in the daily newspaper industry knows: Over the last 23 years, newspapers’ daily circ has fallen by more than 11 million; the last time the daily newspaper industry experienced a circulation increase was in 1987, when it sold 300,000 more cop¬ies than it did in 1986.

Daily newspapers peaked in 1973, when there were 1,773 titles; more than 300 newspapers have since stopped pub¬lishing. Newsprint consumption is half of what it was in 2003, meaning newspa¬pers are sizably smaller today.

Same story

Advertising revenues tell the same story: Print advertising revenues peaked in 2005 at $47 billion; since then, reve¬nues have dropped by more than $5 bil¬lion and even when online advertising revenues are added in, the newspaper industry’s ad revenue is down by more than $4 billion from 2005.

Tribune, the latest company to an¬nounce cutbacks, will soon sell news¬papers that offer more maps, graphics, lists, ranking and statistics.

Tribune owner Sam Zell and Randy Michaels, the chief operating officer, announced that they are planning to produce newspapers with a 50-50 ratio between ads and editorial content and reduce the news content, across all of the company’s newspapers, by as much as 500 pages a week.

Finding efficiencies and creating a newspaper that readers and advertisers will buy makes perfect business sense.

But while it is too early to tell if Tri¬bune’s latest initiative will lead to growth in revenues and profits, it appears as if this move is more of the same — simply cutbacks — and it can’t help but make one wonder what Tribune’s stable of dai¬lies will look like if this venture fails.

The answer

Is there any way up?

Yes. A newspaper is both a consumer product and an advertising vehicle. The latter’s success hinges on the former. So if publishers want better results, they had better find a solution to the one part of their business that no other media wishes to duplicate — the daily printed newspaper.

This requires a print strategy. This is, presumably, what Messrs. Zell and Michaels have crafted. Because if Tribune and its fellow companies fail to formulate a plan to own the one thing that no other media outlet, including the “demonic” Craigslist, is interested in producing or duplicating — a daily printed newspaper — publishers face a grim future indeed.

The results of the daily newspaper industry’s two practices — publishing a newspaper that it struggles to sell, more often than not, in a monopoly market, and updating its Web site, which is freely accessible and appears to be easier to sell to advertisers than the printed edition — has made many publishers mis¬takenly believe that the online edition doesn’t require the sales support of the printed edition.

Carries the day

But the printed product still carries the day in terms of revenue and profits and it remains a highly effective promotion vehicle for the newspaper’s Web site.

About two years ago, Netcraft, an Internet monitoring company, announced that there are 100 million Web sites, a number that’s no doubt higher today. If you‘re a newspaper publisher, take note: If you’re struggling to sell ads in a monopoly market, how are you going to effectively compete against 99.9 million other Web sites?

Here is how Harvard Business School Prof. Michael E. Porter views the competitive landscape. In his book, “Competitive Advantage: Creating and Sus¬taining Superior Performance”, Porter wrote: “A firm that engages in each generic strategy (cost leadership, differ¬entiation, cost focus or differentiation focus) but fails to achieve any of them is stuck in the middle.

“It possesses no competitive advantage. This strategic position is usually a recipe for below-average performance.”

The daily newspaper industry can differentiate and stand out from all other media by creating a printed product that people want to read and advertisers find attractive.

Consumers are overwhelmed with media choices and their time is short, so publishers need to overcome resistance to their product. One solution? Give away the paper free to consumers and adopt a print format that readers find easily ac¬cessible: the tabloid. This might better be called the Examiner model as produced in Washington, D.C., Baltimore and San Francisco.

Ultimately, the daily newspaper industry is responsible for its own health. Either it demonstrates to advertisers and readers its strength as a printed product or it lives out T. S. Eliot’s last verse.

Correspondent's note: This article orginally appeared, by the same author as this blog, in the July 2008 edition of Newspapers & Technology magazine.

1 comment:

BettyR said...

Ruth, this is Betty Rotman and I'm trying to reach you to share comments with you. I'm following your blog at the request of Joe Bracken and myself. Let us hear from you!