State of the News Media 2013 shows how industry is responding to ‘continued erosion’ of resources
Newspapers' fortunes, admittedly from a rock-bottom base, have been looking up lately -- Warren Buffett and others have bought papers, digital pay plans are boosting circulation revenue, and new lines of business like digital marketing services are taking root.
But the Pew Research Center's annual State of the Media 2013 report, which came out this morning, suggests the industry's fundamentals are still somber:
- Print advertising fell again, and not by a little -- down $1.5 billion in 2012 to dip below $20 billion for the first time since 1982.
- Classifieds losses are no longer the culprit. National advertising, already weak in 2011, fell by roughly 10 percent. That suggests that the shift of budgets to a range of digital marketing options is accelerating. The exception is preprinted inserts, for now still an essential part of the marketing mix for major retailers.
- Digital advertising, its rates ever lower, grew very slowly (3 percent) and came nowhere close to covering print losses (one dollar gained for every 16 lost in print). Audience for smart phone and tablet news reports continues to grow quickly, but accompanying advertising is largely a no-show.
Reading across the wide-ranging report, I found variations of the same kind of malady in other media and the same effect --- "a continued erosion" of resources.
Magazines had an off year for advertising, caught in the same shift of national marketing budgets. Magazines have a good presence in digital apps, but their ad results are a modest success at best. Single-copy sales are suddenly plummeting, off 16 percent for six news magazine in 2012, now that grabbing a magazine is no longer the default option for having something to read. Because subscriptions are deeply discounted, it takes away from the most profitable slice of subscription revenue.
First alt weeklies lost their rich classifieds, then national advertising slipped away, now local merchants are finding other options. The upshot -- just like newspapers, the business has gone from easy and lucrative to very challenging. Just last week, the Boston Phoenix announced it's closing.
The boom year in political advertising in 2012 masks a big loss in audience over time for local television. Cable television remains prosperous, but the major networks are shifting their mix to more talk and interviews and less reported news. Only a handful of cities still support all-news radio stations, though NPR -- relatively successful in digital formats -- remains a strength.
The toughest news comes in the digital chapter, where Pew researchers found that the big dogs -- Google and Facebook -- have staked out the growing ad segments of mobile and video. Google is now the leader is digital display advertising as well as search.
And if, as analyst Gordon Borrell and others predict, the next big thing is local advertising targeted to preferences revealed by a person's Internet choices, one has to believe Google and the others have awesome artillery in hand.
The report summarizes the dilemma, this way:
As readers and advertisers dive headlong into the mobile era, the outlook for news companies remains difficult. For much of the past 15 years, news organizations have been forced to trade print dollars for digital dimes, as revenues from print and television evaporated far faster than digital revenues have grown. Now, things may get even worse: News may be entering the era of mobile pennies.
The diminishing outlook stems from a host of forces that have been building for years but are hitting with increased fury in the mobile age. "First, the intensifying competition from automated advertising networks – which operate as middlemen, connecting marketers who want to place an ad with websites that have space to sell – together with the low quality of many mobile ads (particularly on smartphones, where the tiny ads can be hard to read and navigate) are driving digital ad rates even lower. Rates for Web ads are sinking and those for mobile were minuscule to start with. The combination is further straining news organizations’ already stretched finances – one reason that publishers like The New York Times, Time Inc. and The Cleveland Plain Dealer began 2013 with new rounds of layoffs.
"A lot of the challenge is in rebalancing the company,” says Marc Frons, chief information officer of The New York Times. “How do you shrink expenses on the print side enough so that you have more money to devote to digital growth?'”
At the same time, news remains a tiny player in a digital market dominated by Apple, Amazon, Google, Facebook and a handful of other tech giants that are far stronger financially and, in many cases, technologically. Even as their revenue picture darkens, news organizations have little choice but to invest time, personnel and resources in the proliferating spate of digital and mobile platforms their readers are using.
So looking forward, newspapers have a clear agenda for the next year, and many of the same principles apply for other media (including digital start-ups, not closely covered in the reoport, seeking sustainability):
- Be present on the mobile platforms where news consumers are headed. Try, try again on advertising or related revenue possibilities. Find money to support development of new apps and experimentation, but pace the spending since today's hot technology yields quickly to tomorrow's.
- Get reader/users to pay a share. Digital subscriptions and print + digital bundles have been the industry's biggest success story of the last several years. The report found that 33 percent of the country's 1,380 dailies "have started or announced plans for some kind of paid content subscription or paywall plan." Of course, a corollary to asking readers to pay is giving them a news report that's worth it in an era where free options are abundant.
- Continue to develop "other" efforts -- digital marketing, events, contract printing and sponsored content. And measure it -- first indicators are that newspapers may be covering as much as half their print ad losses with circulation revenue increases and income from these new ventures.
- As the new business models become established, focus on the net income they generate. Halting, or at least slowing revenue declines, has been the first order of business. However, New York Times Co. executive James Follo raised the relevant caution late last year: the margin on new circulation revenue and other activities may not be nearly as good as on selling more print advertising.
This being the 10th of the State of the News Media reports, I turned with trepidation to our inaugural effort in 2004 to see what we were saying then. Not altogether embarrassing. While we found newspapers "financially strong," the erosion of audience had already started along with digital challengers to the classified business and the first glimpses of newsroom cuts.
My colleagues presciently observed that investments were shifting into dissimination of news rather than production.
For newspapers our conclusion was a little vague but on point:
"In time, something must give. It is possible that newspapers will have to change a great deal more than they have or their financial health will not be sustained.
My colleague Andrew Beaujon breaks down some of the report's other findings here.
Amy Mitchell, acting director for the Pew Research Center's Project for Excellence in Journalism, will elaborate on the report's findings in a News University Webinar this Wednesday.