Can Newspapers Create New Revenue Stream with 'Digital Malls'?

Newspaper consultant Jim Chisholm has looked five years into the future and sees the industry's best bet for vitality in digital shopping.
Updating a futures report he did 18 months ago for the Newspaper Association of America, Chisholm predicts nominal growth for the industry (3.4 percent, probably less than inflation) through 2014 in its current lines of business. That is a bleak forecast -- unless an infusion of new revenue comes to the rescue.
Chisholm's concept is "a digital news hub," combining traditional and nontraditional content, that would be the equivalent of a flagship store that draws people to a bricks-and-mortar mall. The key would be getting them to stay on newspaper websites much longer than most do now.

Shoppers would be lured by a critical mass of discounts and links to local stores and national retail sites. The newspaper mall sites eventually would get into direct transactions, taking a small cut of the proceeds.

For all this to work, Chisholm concedes, the typical newspaper website would need a higher level of functional technology (for mobile, for instance). The idea has more potential if the industry can unite on common platforms or sales initiatives. However, newspapers often have a hard time working together in business ventures, even as they try to stave off their new digital competitors.
My own take is that newspapers are edging toward this model, first cousin to the Newspaper Next concept of reorganizing as a local information utility. Local shopping looks like a hot prospect. As an example, newspaper organizations are rushing to partner with Groupon, Shoutback and other deal-of-the-day vendors.
I asked Chisholm whether newspapers have a meaningful competitive advantage compared to the many independent services like Yelp, TripAdvisor and Expedia. Chisholm replied via e-mail: "Good point. ... News is an opportunity generator, not a revenue generator. ... The only way that newspapers are going to fight the pure plays is by having their own branded verticals. Some of them, like CareerBuilder, will be industry partnerships. Others might be locally built. Some like Groupon will be partnerships" between a vendor and newspaper.
"Newspapers still have a window of opportunity with the local/hyperlocal card," Chisholm added, "because they can contextualize and link the mall boutiques, in a way that the pure-play verticals cannot." Newspapers have existing relationships with hundreds of clients; the wave of digital, independent ventures tend to be narrowly focused.
Chisholm said that his mall proposal is loosely modeled on the success of Norwegian publisher Schibsted, which shifted the majority of its revenues and an even larger share of profits to digital. The company has five of the top 10 sites in Scandinavia, he said, including a weight-loss club. Another good example of a shopping site "underpinned with fast technology," he said, is, affiliated with The Irish Times.
I'm skeptical of plans that turn on newspaper organizations being fast with technology. They are better at it than they used to be, but they continue to move much more slowly than narrowly focused Internet startups.
Still, newspapers do have a big foothold in retail, both national and local. You could regard that thick sheaf of preprinted inserts in the Sunday paper as the low-tech (and still effective) version of the deal-of-the-day movement Groupon is leading.
Besides the mall proposal, Chisholm's full report (available on NAA's site but only to members) includes a detailed study of recent performance and forecasts for 2014 and 2017. Chisholm sees very uneven prospects for current categories of revenues.
For instance, he sees print classifieds between 2009 and 2014 falling 74 percent more in employment and 33 percent more in auto, after the already huge losses of recent years. Some of that will move to online, which he expects to grow from 7 percent of total industry revenue now to 15 percent by 2014 and 23 percent by 2017.
On the other hand, he expects the real estate category of classified to stabilize, given the local nature of the business. And Chisholm predicts that "other" classifieds such as obits, legal notices and general merchandise will grow 17.5 percent over the five next years, a positive trend I have highlighted in previous Biz Blog posts.
Chisholm's original NAA report criticized American newspapers for underpricing print subscriptions and single copies, especially in comparison to European and Asian titles. Many newspapers did raise prices aggressively in the 2008-2009 recession, and some are now showing modest circulation revenue gains year-to-year (lower volume, but at a higher price). Chisholm sees only modest growth in circulation revenue, though, over the next five years.
On the expense side, Chisholm analyzed survey data from the Inland Press Association and found that editorial salaries fell even faster in 2009 than staffing numbers -- 25 percent compared to 20 percent. He attributes the 5 percent difference to "more senior figures ... departing" in the waves of cuts.
In sum, Chisholm's report is a detailed version of a consensus industry view that I share. Print is not dead, nor likely soon to be. However, the industry needs a new revenue surge on the digital side to remain a vital business and to support even the much-reduced news effort remaining after the crash of 2008-2009.


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