What lies ahead of media industry in the 2009?
October 11, 2008 by marek.miller
“The nearest future is not too bright for newspapers, but there is no need to be too pessimistic about that. After the economical slowdown in 2009, the year after that will be beginning of recovery,” says Earl J. Wilkinson, the Executive Director of INMA.
Mr. Wilkinson gave his annual outlook report at the INMA European conference in Vienna, October 1-3, 2008.
The forecast
Newspapers are in crisis – it is a popular statement nowadays, but Earl J. Wilkinson has proof for saying that the situation of the newspaper industry is not too good:
- 78% of market value has been lost by the US publicly traded newspapers companies
- the classified verticals collapsed
- the retail advertising marketplace is shrinking
- the circulation declines of newspapers circulation not only happen in all of the countries, but are also accelerating (from 1% annualy in 1990s to 3-5% today)
- the latest banking crisis can only prolong the downturn
Along with economic slowdown two other factors are predicted for 2009: the long-term share shifts from advertising to direct marketing, PR, events and promotions as well as a structural shift in advertising from one-way to two-ways communications, what will have a negative impact on the newspapers. Two trends can be noticed next year:
- Possible positive trends: acceleration of online revenue growth, higher prices from online advertising, faster rebound in job growth, and stable newsprint prices.
- Possible negative trends: acceleration of readers’ migration to the internet, under-performing job growth and retail sales, further decline in circulation volume, a faster than expected raise in newsprint prices, and lower profit margins of media companies resulting in lower access to capital.
The expansion of the internet is unstoppable. What publishers should be always aware of is that they do not need the digital to replace the print, but they need digital to fill in the empty space left by the declines in print. According to PricewaterhouseCoopers, the digital (mobile) distribution sums up for 5% of media industry spendings (projected to be 11% in 3 years). So in the mid term, in 2012 the driving force of the growth will be non traditional media, while traditional media will be paying bills for such transition.
Circulation and news consumption habits
Below is the chart showing how the circulation of the newspapers has dropped since 1995:
There are, of course countries such as Brazil, India, South Africa, Indonesia, and China, which somehow managed not to fall into the declining trend. But Earl J. Wilkinson has an answer for that as well. Circulation in some of the countries grow due to the fact that:
- such countries have aspirational societies, and newspaper is linked to aspiration,
- all have rising middle classes,
- all have low advertising rate as a percentage of GDP.
Also, the news consumption habits are important. While between 1945 and 1970 evening was the time to read newspapers, that habot changed for the next 30 years when the most popular time for reading was morning hours. Now the news consumption lasts basically all day long, with most people reading in the morning, lunch and evening hours. The multiplicity of available news platforms forces newspapers to adjust.
How to keep the audience?
There are three strategic suggestion from Forrester Research (June 2008):
- Aggregate content to bring the audience to the newspaper first (using all non-newspaper sources possible).
- Syndicate and engage audiences wherever they are (ex. newspapers using YouTube video channels).
- Use social technologies to reach audiences (connect newspaper readers with each other, and allow readers to create blogs).
There are also twopossible models for the future of print. The first one is the quality model, when audience migrates from print to online what ends with the raise of the newsstand price of the newspapers (that way quality audience will be sold to quality advertisers). The second model is the quantity model, when, like in the first example, the audience migrates from print to online but that results in lowering the newsstand prices to keep the readers until the paper becomes free (that way the quantity of readers will be kept on the highest possible level).
According to the INMA newsprint survey:
- 65% of publishers worldwide said, they would use less newsprint in 3 years,
- 89% of North American publishers considered gradual format change vs. 33% of all other respondents,
- 42% of North American publishers considered changing the publishing frequency vs. 20% of all other respondents.
Earl J. Wilkinson suggests that finding a hidden asset of the company could be crucial. This is something that not necessarily had to be central to the past strategy of the company. Among hidden assets could be:
- Audience, brand-loyal readers who were never treated and have never seen themselves as community.
- Journalists, valued journalists trained only for broadcast communications.
- Money (immense cash flows and capital budgets.
- Distribution – infrastructure second only to the postal service
- Advertising sales force, focusing on “feet on the street” that are still a threat, even to Google
- Service
Among the fundamental changes of the media companies will be innovation process which has to satisfy the needs of readers to consume the news on many platforms. The advertisers chase the consumers across all platforms, so the key issue will be to reinvent the newspapers and change them to multi-media companies. Possibly some new business models will emerge among many publishing companies.
Interview with Earl Wilkinson: the key issue for newspaper managers in 2009
”We’ve moved beyound the era of sell-more, produce-more. I think we need to have a smarter conversation. Our theme for the year [2009] is converting bandwith, cultural bandwith into innovation. I want to talk more about how companies can create a bridge to the digital age”, says Mr. Wilkinson.
”We think right now as an industry that we are creating the digital age. But we are like teenagers, we don’t have an idea really where it is going to go, where we’ll be in the middle of the next decade.
What we have to do is create management processes, get the right people in, for whatever scenario unfolds in the next four or five years. Where is content, where are distribution channels. We’ve got to be ready for a world of all print, all digital, all mobile or some hybrid. And developing that management foundation is the key to 2009,” he explains.
”Big cultural changes in media organizations are not bottom-up processes. They have to be driven by charismatic CEOs,” adds Mr. Wilkinson.
Watch full video interview with the executive director of the INMA:
(Interview made by Artur Karda, multimedia reporter at Media Regionalne, Polish part of Mecom Group.)
Join the debate
Do you agree with Mr. Wilkinson that only CEOs can drive innovation and big cultural changes in media organizations? Who is the change agent at your own company?
Tagged: conference, INMA, innovation, Outlook 2009
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