The newspaper is dead! Long live the newspaper!
Newspaper journalism may be on its last legs but analyst Ken Doctor is optimistic that our major mastheads can survive the digital crossover. Story by Julian van der Zee.
“I think that when we talk to our children and grandchildren in 2020 … and describe to them this world where people used to get a printed daily newspaper delivered to their doorstep or their drive-way, seven days a week, it’s going to seem like something out of 1850 to them,” said Ken Doctor, speaking at the Pacific Area Newspaper and Print Association’s (PANPA ) Future Forum in Sydney.
Coming from a man who has worked as a journalist for American newspaper company Knight Ridder for 21 years, and then as a news industry analyst for the past seven years, it’s a bold and damning statement.
Unfortunately for those invested in print, the current body of evidence supports Mr Doctor’s claim that the vast majority of newspapers will have vanished in around decade.
“When you look at the economics of it, the environmental impact of it, the trends in advertising, the trends in reading, the generational trends, it [print newspaper production] is plainly going away,” said Mr Doctor.
For the most part, this dour forecast is attributed to the rapid deterioration of the newspaper business model. The advertising revenue streams traditionally relied upon to fund news production are being redistributed to cheaper and more frequently accessed online sources.
The extent of this trend was realised for the first time in Australia when a report from the Commercial Economic Advisory Service Australia showing that, from January 2012 to June 2012, online advertising expenditure ($1.63 billion) had surpassed newspaper advertising ($1.5 billion).
“Most publishers I talk to now… have said to me, ‘We realise it’s one way and that’s what we’re preparing for. There’s no going back.’”
The trend is global and the figures speak for themselves. In 2005, the total international revenue of newspapers was $134 billion. Last year it was $93 billion – a staggering loss of $41 billion dollars.
Mr Doctor estimates global revenue will have dropped to “probably $87 billion” by the end of this year.
The reluctance of newspaper owners to put a price on digital content has further compounded the problem.
The publishing mantra, ‘If you don’t charge them, they won’t pay,’ may seem obvious, yet convincing a generation accustomed to accessing their news online for free to suddenly begin paying for it is half the challenge.
“If you think about that for a minute it kind of drives you crazy but for 18 years or so publishers [of online news] didn’t charge,” Mr Doctor said.
In October 2011, News Ltd commenced a plan to position digital content from The Australian newspaper behind a pay wall.
In June this year Crikey reported on a Nielson poll showing traffic to the News website had declined by 27 per cent – with internal reports at News now suggesting the current pay wall system is in need of review.
CEO of Fairfax Media Greg Hywood announced in June that Fairfax’s newspapers would move content behind pay walls starting sometime next year. In August, after announcing a company loss of $2.7 billion, Mr Hywood explained that the daily metros would be preserved “for just as long as it is profitable, providing our growing news digital business with time to mature.”
Over the past three years more than 1000 jobs have been lost from both News Ltd and Fairfax in an attempt to stem the loss of revenue and prepare for what could soon be a complete transformation into digital content.
“I described it as a forced march to digital, and a forced march that is unlikely to work,” said Mr Doctor. “Others have said ‘It’s like burning down half your house to try to save your house.’”
A new digital model
While Fairfax lays claim to the largest online news audience in Australia, difficulties arise when it comes to monetising this circulation.
One of the main difficulties in securing digital revenue is that these days online advertisers are not only focusing on the ‘quantity’ of their audience but also their ‘quality’.
The recent Journalism at the Speed of Bytes report conducted by the Media Entertainment and Arts Alliance cites a recent study by The Los Angeles Times which showed that, despite the masthead’s massive average online circulation of 100,221 people per day, each unique visitor only saw an average of six pages in a month.
For this reason, Mr Doctor has suggested advertising revenue cannot be relied on as the primary source of profit. He said the Western press’ “rule of thumb” for revenue breakdown – 80 per cent profit from advertising revenue and 20 per cent profits from circulation revenue – will have to be reconfigured.
Where once circulation revenue would have had to account for “all of that physical stuff,” including the cost of news production, printing the paper, and transport, in a digital environment these costs are no longer required and circulation revenue can become profitable.
Using The New York Times as an example, Mr Doctor explained that while the print format is structured under the classic revenue model, 53 per cent of all digital revenue now comes from circulation, “with this figure expected to increase.”
“The business model is really simple, it is all access, it is saying to consumers pay me once and I’ll get you your stuff wherever you are … if you do this right in the newspaper world, you can get close to a 10 per cent rise in revenue.”
Mr Doctor suggested that newspapers should appeal to tablet and smartphone owners by providing unique and deep content and a high-quality mobile experience, fleshed out by a well-conceived pricing framework.
Having these elements are in place, Mr Doctor said, will create the 10 per cent revenue increase, albeit with some “complex pricing” and “customer satisfaction” factors to take into account.
Quality journalism’s uneasy future
One of the most successful online news sites of the moment, AOL-owned The Huffington Post, is frequently criticised for its advocacy style, shallow coverage of issues and tabloid gossip ‘fluff’ pieces.
Of the major online American newspapers ranked in the July 2012 American Customer Satisfaction Index, The Huffington Post finished last.
At the end of last year Business Insider published a revealing leaked PowerPoint presentation from an AOL master class session titled ‘The AOL Way’.
The document revealed a number of strategies to make online news content profitable, including combining advertorial and editorial offices into a single entity to best determine the content that will attract traffic and ensure “content creators” were “mindful of the bottom line.”
With the preoccupation on developing a new digital revenue model, preserving quality journalism can sometimes end up as a lower-ranking priority. Indeed, given the job cuts from both Fairfax and News Ltd, it is all too easy to be sceptical as to whether hard journalism can be ensured in the future.
The Journalism at the Speed of Bytes report revealed that while the 73 per cent of senior working journalists surveyed believed that quality journalism is important in keeping a newspaper profitable, only 38 per cent thought the current quality of Australian newspaper journalism was “excellent.” 34 per cent said it was “average” and 28 per cent rated it “poor.”
The challenge, said Mr Doctor, is to maintain the success of a site like The Huffington Post while still providing high quality journalism as part of the overall package.
If this can be achieved in spite of current difficulties, then maybe the notion of ‘high-quality digital journalism’ will not be considered such a contradiction of terms in the future.