Tuesday, June 13, 2006

Newspapers: The Wave of the Future

For years until six months ago, I spent $9.50 a week on the New York Times. Now I only buy the Sunday edition and I wonder how long even this will last. For me, and many others, the NYT website is excellent and more than a replacement for the paper version. Of course, The New York Times and many other newspapers have a problem because increasing numbers of people like me are migrating to the web for free.

Many have written off the newspaper industry as just another – perhaps more spectacular – victim of the internet age. They were saying that five years ago during the first internet boom but it still hasn’t happened. While subscription revenues and advertising numbers are off, many newspapers continue to operate near monopolies in their local markets and the larger metropolitan newspapers are finally starting to proactively incorporate new content and new delivery mechanisms into their web offerings. The NYT is just one example of the integration of traditional reporting and video, audio and extended coverage that is becoming routine. The one aspect of the web site versus the print is that I actually miss seeing the display ads in the print. In a weird way there is a ‘community’ aspect of the newspaper delivered by the local advertising that I don’t get on the web site.

The NYT doesn’t require a fee for access to their site – other than for some premium content and the archive - no doubt the newspaper companies still have to go through that “valley of death” where revenues migrate from the legacy model to the new internet model but the new world on the other side will offer many more opportunities.

If my survey of one is typical with respect to revenues, why do I think that newspapers have a future? Firstly, the World Association of Newspapers recently reported that global advertising revenues increased 5.7% driven by growth in China, India and SE Asia. Newspapers are still a valued part of the media landscape. In the past several years, the NYT has expanded its presence in Europe with the purchase of the International Herald and a number of UK newspapers have announced they will launch US versions of their papers. The WSJ has long had a successful Asia edition of their newspaper. According to the WAN the global advertising market for newspapers was only marginally lower in 2005 versus 2004. While the UK market fell 3% the revenues in the rest of Europe pulled the overall up over 4% versus 2004. In the US circulation was down over 2% but due mainly to evening newspapers. Another report from the Newspaper Association of America, indicates that online newspaper advertising rose 35% last year; the eighth successive year they did so.

While these numbers are hardly compelling enough to run out and buy a newspaper company the numbers are also not catastrophic as some predict. Many commentators have documented the decline in classified advertising – cars, real estate, etc. – as the harbinger of extinction for newspapers which brings me to my next point. Most local newspapers have both a virtual monopoly and strong brand identity in their markets. They are in most cases high margin low capital operations with high customer loyalty. As is becoming clear, and some newspapers are leading the way, search and discovery is increasingly more local. Newspapers are integrating the types of services – mash-ups even – that are familiar to web search users and classified searches are integrated with mapping, video and social networking like user recommendations and reviews. In many local communities, it was the newspaper that helped define the locality – citizens identified with it and what it stood for. I see this continuing as newspapers rebuild an electronic version of their franchise and also extend their revenue model beyond what the print could offer them.

Not to be overlooked is the filtering function that Newspapers can offer. In providing editorial oversight to classified advertising the newspaper can act as an additional layer of ‘protection’ for their users. This is something which free classified ad sites like craigslist.com are unwilling to do. While ads and the local community will drive revenues this is not to forget that the newspapers can continue to deliver the local audience to national advertisers at a very narrow level.

Many newspaper companies have been experimenting/participating with the web for many years and have had reasonably advanced sites for a while. With the integration of video and the rapid deployment of broadband access these newspaper companies will be in a strong position to challenge local television for media dollars. As mentioned above these companies are not cash poor and have ample resources to continue to invest and build their local presence. A good time to be in the newspaper business.

1 comment:

bar-codes said...

I read over your blog, and i found it very interesting. You will find many links and interesting info about bar code here - http://bar-code.usbizsys.com/metrologic-bar-code-scanner.html