GUEST POSTING: Despite Murdoch’s woes, shifting from print to web won’t save newspapers
An over-reliance in advertising is just one of the reasons for newspapers’ problems, says Stephen Quinn
News Corp’s announcement on Friday that earnings will fall 30 per cent this year because of depressed advertising demand reflects the continuing problems that media companies face, especially those based in the United States. Rupert Murdoch’s company suffered a huge second-quarter operating loss of $US7.6 billion ($A11.6 billion).
For more than half a century, newspapers and commercial broadcasters have relied too heavily on advertising for their revenues. By the end of the twentieth century, for example, America’s newspapers derived 80 percent of their total funds from advertising.
Classified advertising, which produced 40 per cent of the industry’s revenues and more than 40 per cent of its profits in 2000, generated only 23 per cent of newspaper revenues in the first nine months of 2008, according to the Newspaper Association of America.
Mr Stephen, very clarifying article.
I understand all the problems on the migration of the business from one channel to another and the negative financial outcome.
Your approach on this is all about fresh news – breaking news, and I agree with your position. It’s not easy to migrate people from their rituals.
I think most of the printed news media is trying to identify where and how they are/will be using the technologies that make up web2.0.
We created a culture of Free information with Web, however I believe (and theres a lot of discussion on it) that revenues still can be made.
How about the massive inventory from the news papers?
How about upsell/crossell products as Research p.e.?
Product Life Cycle it will hit everyone unless you hit it first.
2 Articles:
– http://sethgodin.typepad.com/s.....e_sue.html
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http://futureobservatory.dyndns.org/9435.htm
Lucio Ribeiro
twitter.com/lucio_ribeiro
Stephen, you fail to discuss the other key revenue stream for major paid-for newspapers: circulation.
In marketing speak, this is the ‘P’ for price in the marketing mix. In my opinion, newspapers represent great value – typically a dollar or so for a comprehensive package of news and entertainment.
Maybe Crikey’s Eric Beecher is right: perhaps the longer-term future of some newspapers might require more expensive cover prices in order to offset the declining (classifed?) ad revenues.
Price elasticity is an obvious factor to consider here – at what point the paper is perceived as ‘not worth it’. Which all comes back to the content …
In this context, my question to you is: how can jounalism drive a business model where consumers are willing to pay a premium for a printed newspaper?
How can journalists like yourself convince readers that a higher cover price is still a small price to pay for your collective work?
Adam makes a really good point. Why is it that people will pay three or four bucks for a capuccino, yet the Australian can only charge half that.
For the reader, a newspaper is tremendous value – I actually can’t think of another product where you get more for less.
Given the choice between a coffee or a paper, I know which one I’d take to a desert island.
Maybe the biggest challenge isn’t the changing business dynamics, but simply one of persuading punters to pay a fair price.
While I agree with most of what was written – particularly the comment that a large proportion of online revenues are from up-sells – I’d like to add a fact that wasn’t covered.
According to MediaPost (Thu Feb 5 2009), the Q2 09 News Corp loss was USD $6.4b. However, incorporated in this was a USD $8.4b write-down an assets.
Doesn’t this mean that operationally there was a USD $2b profit wiped out by the CFOs’ asset write-down? That is, even though there have been undeniable decline in ad revenues (TV and print in particular) that if there was no asset revision things would have looked pretty darned good! So, the CFO takes the hit for past mistakes in one tranches – look for good Q0309 results from News Corp.
Hi JG,
As the Fin points out today, Murdoch has played a blinder in the PR game – far fewer of those nasty headlines about job cuts than Fairfax. And things are certainly set up for headlines about News’ magnificent recovery after one tough quarter. Much better to get all the accounting pain out of the way at once.
That said, I’m aware that there are those among the troops at News Ltd who feel frustrated that they haven’t been told straight what’s going on.
I guess it comes down to a choice on which is the more important audience – external or internal.
I was also thinking over the weekend about the analysts who complained a few days before that News Corp was lacking strategic direction.
I wonder if Murdoch didn’t give some of that away on Friday. To be sitting on a bigger pile of cash than rivals, so when the pain is over, the company is poised to pounce. It’s a simp,e strategy, but suddenly it’s looking quite smart.
Cheers,
Tim – Mumbrella
There is massive waste in duplication when every media company sends reporters and crews to locations to report news. Why don’t they cut costs by sharing on the ground resources? On the online side, local bloggers are undermining the advertising business model of commercial sites by providing content for free. Not for profit bloggers are efficient bad competitors and will destroy the commercial value of information while increasing its intrinsic value through abundance and contextual relevance. Advertising as a business model is dead.