Financially viable future for the press?

This article, posted as a discussion piece, is the content of a seminar given by Professor Richard Pichard at Oxford University Reuters Institute for the Study of Journalism, on 6th May 2009.
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Many in the news industry appear to have forgotten that “making a profit” is still the most important rule in the business – everything else is secondary. And while this was not an issue during the good times, the present economic crisis is concentrating the minds of audiences, and hence those of the news media, on news value.

Hay was made while the sun shone
During the period 1960-2000, making money was easy, as advertising spending increased in real terms by 300% over the period. Advertising clients were not selective, and editors had few problems attracting the advertising to fill ever expanding editions.

However, the industry was already sowing the seeds of its own destruction. The practice of dumbing down content to maximise the number of additional readers began to have a negative effect on the regular readership. News writers and editors began to lose contact with the needs of their regular readers as they focused more and more on the needs of advertisers.

Cover price again becomes significant to revenue
This model of maximising revenue from advertisers at the expense of the regular reader made sense in boom times, but has much less validity as market conditions have changed. Now, the advertiser is no longer the chief source of revenue for many publications; rather it is the regular reader.

This means we are seeing an end to the era of cheap or free news, and sadly for many of the industries’ decision makers it means the end of the old certainties of the past. The truth for many publications means shutting up shop for ever.

What the industry must do to survive
The media industry must adopt a new business model if it is to survive. News organisations will need to become more aggressive in developing and maintaining other revenue streams. They could do worse than adopt the I-Tunes business model from the music industry, which ensures that users pay for content. Innovations such as blogs should be treated as fresh opportunities to create new revenue streams for the business.

Increasingly, the only real rivals to commercial news enterprises will be the free media funded by public services, pressure groups or as part of the marketing efforts of commercial organisations. “Real” news organisations need therefore to focus on providing unique value-added content. A strategy of just regurgitating freely available copy will fail. Instead the future lies in providing content that has “news value”, perhaps in the form of expert comment and analysis for the time-starved reader who has no inclination to research the topic.

It is worth noting that in a recent study of seven American newspaper chains that had got into financial difficulty, the primary cause of fiscal troubles turned out to be poor decisions made at the corporate level. Despite corporate profitability issues, the individual subsidiaries tended to remain profitable, making a return of at least 12.5% net.

And the future?
In the future, print editions of newspapers are likely to have more limited numbers of pages, focus on fewer subjects and cost at least €4 each. New newspaper enterprises will arise out of the ashes of today’s fires. They will most likely be owned by local businessmen such as estate agents or developers, who are anxious to maximise their political influence amongst local decision makers, as was the case in the 19th century for many local papers.

© Nicholas Newman, 6th May 2009

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