The Future of Print

Online Or Bust: Why 2009 May Be The Nail In Newspapers’ Coffins

Posted in Doom by futureofprint on January 4, 2009

2009 will mark a shift from seasonal, sensible belt-tightening to the long-term shrinking of the newspaper industry in Britain. Here’s why…

—The old business model is broken: The olde worlde of small, local newspapers with a reporter in every district, high circulation and a steady stream of advertising revenue is simply over. Now that they’re faced with oncoming recession and an advertising slump expected to last until 2010, until there is a scaleable business model for online news, Gannett’s Newsquest, Johnston, DMGT and the rest will simply continue to lower their exposure to a failing market. Don’t expect an upturn – newsrooms emptied of staff in ‘08 are not going to be re-filled if the advertising situation improves down the road. Trinity Mirror (LSE: TNI) CEO Bailey may assure investors the advertising downturn is cyclical, but these cuts are permanent. Newspapers used to monetise a physical, geographic network and monpolised the publishing activities of entire towns and cities. Now that the network is online and unconstrained by geography, it’s Google that dominates, taking more than half of UK web advertising spend.

Print advertising is evaporating: The likes of Northcliffe Media and Trinity may have invested heavily in transforming their newsrooms for the online age, but the truth is they remain intrinsically tied to the 200-year-old model of classified ad revenue from homes, cars, properties and funeral notices. Media owners can only blame recessionary factors for so long – thanks to the web and media proliferation in general, their business models have been under threat for years. The deterioration peaked in ‘08. Trinity’s income from 26 June to 26 October was 11.4 percent down on the previous year, dragged by a slump in regional print ads with property ads down by nearly half, cars by more than a quarter. Johnston Press fared even worse, its income from print ads down 17.8 percent between January and October from the year before thanks to a halving in property ads. For the nationals, print ad revenue is expected to drop another 21 percent in 2009 according to Enders.

Digital is still small, and stalling: All of this would be fine if digital revenue was growing to meet the shortfall, but current growth rates are not nearly enough. DMGT-owned Daily Mail (LSE: DMGT) publisher Associated Newspapers nearly trebled its online income to £9 million in the year to September, while regional stablemate Northcliffe made 42 percent more at £17 million. Impressive, yes; but it didn’t stop profits falling nine percent overall to £262 million. Even publishers that haven’t made online pay might have at least hoped a continuing online advertising boom would grow their online wins by default – but now the economy is taking that away, too. Enders Analysis says UK digital ad spend’s annual growth rate will slow from 20 percent in ‘08 to just 2.1 percent next year. Some analysts argue that newspapers should seriously consider giving online-only a shot, but not even Guardian.co.uk, with 25 million unique online users worldwide, is considering scrapping its loss-making print edition – such is the Catch 22, multimedia publishers feel compelled to hang on to the dead trees.

Synergies wanted, apply within: Few in the industry would argue that more newspapers will close in 2009. But many will merge with papers in the same group and many editorial and commercial teams will be combined or outsourced to agencies as publishers look for ways to knock off unnecessary overheads. Last week Newsquest merged its two Wiltshire titles and Independent News and Media was forced to move its two national papers into DMGT’s offices to cuts costs, even after making 90 job cuts. DMGT’s local division Northcliffe Media is considering outsourcing the majority of its national sales staff to the Mediaforce agency. One media company that may fare well 2009 well is Press Association: the agency was represented at a meeting of Johnston Press executives to discuss the possibility of out-sourcing all subbing duties for the Yorkshire Post and Yorkshire Evening Post, although at least one foreign company is thought to have pitched at the meeting too.

via Online Or Bust: Why 2009 May Be The Nail In Newspapers’ Coffins | paidContent:UK.

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