Thad McIlroy - The Future of Publishing

The Elevator Pitch for the Future of Newspapers

 

Page Index

• Newspaper Industry Overview
• Newspaper Circulation, Readership and Advertising
• Going Deeper
• Seeking Equilibrium
• The Unsteady March of Newspapers to the Web
• The Global Newspaper Industry

Newspaper Industry Overview

"Newspapers in this country are not dying, they are committing suicide."
      - Samir "Mr. Magazine" Husni

"It's nice to see that the printed word is still, at least for now, the most powerful medium for reporting on the death of the printed word."
      - From The Onion, May 1, 2008, in a spoof titled "Dying Newspaper Trend Buys
        Nation's Newspapers Three More Weeks"



The illustration above appeared on the cover of the August 24, 2006 edition of The Economist. The subhead was "The most useful bit of the media is disappearing. A cause for concern, but not for panic." The article is essentially optimistic. A key paragraph states: "The usefulness of the press goes much wider than investigating abuses or even spreading general news; it lies in holding governments to account-trying them in the court of public opinion. The Internet has expanded this court. Anyone looking for information has never been better equipped. People no longer have to trust a handful of national papers or, worse, their local city paper. News-aggregation sites such as Google News draw together sources from around the world. The website of Britain's Guardian now has nearly half as many readers in America as it does at home."

Is the picture so rosy?

On the surface, the future of newspaper publishing in North America appears to be in big trouble; but then, the newspaper industry been in ever-increasing trouble for a long time.

When I first began this study nine years ago, I offered this slide (based on a data source I can no longer locate - blush).



Beyond that figure is one reported in The New York Times on March 26, 2007: "Newspaper circulation nationally reached its peak in 1984, when there were 1,600 morning and afternoon paid dailies with a circulation of 63 million....Today there are 1,450 paid dailies with a circulation of 53 million."

An article from late 2006 in the American Journalism Review takes the newspaper circulation data a step further in pointing out that "in 1950 there were 1,772 dailies with a total circulation of 53.8 million and 549 Sunday papers with 46.6 million. But since 1980, the number and circulation of dailies has declined fairly steadily, slipping to 1,452 last year, with circulation down to 53.3 million - below where it was 55 years ago, despite nearly a doubling in the size of the national population." (Italics mine.)

Clearly this is a troubled medium. Equal clear is that the problem in newspaper circulation pre-dates the Internet by some years. Theories abound. Radio and television must surely shoulder some of the blame; just as likely is that changing lifestyles impacted newspaper readership regardless of competing media.

The Audit Bureau of Circulations (ABC) self-refers as the "Gold Standard in Media Audits" and is the place to go if you want to find out current U.S. newspaper or magazine circulation figures. Unfortunately, you have to be a member - they're not giving this "sensitive" information away - and so it's impossible for the public to get up-to-the-minute newspaper circulation data. You can find out the "Top 200 Newspapers by Largest Reported Circulation," but not what those circulation figures actually are, and how they're trending...no, delete that. Since my last revision of this Future of Newspapers article the site is getting more and more protective of its data. That link is no longer valid. There actually is nothing of value on this badly-designed Web site to anyone interested in newspaper trends. Shame on them! It just makes it look like they've got something to hide (and perhaps they do!).

But the ongoing decline in newspaper circulation in North America is not a well-kept secret, and if the ABC won't spill the beans, others will.

According to a February 2007 article in Media Life Magazine, "in the U.S., the circulation of paid-for papers dropped 4 percent from 2001 to 2005, hitting 53.3 million. It also dropped 2.3 percent in 2005 compared to the year earlier."

A May 2005 article in The Washington Post reported that "circulation at 814 of the nation's largest daily newspapers declined 1.9 percent over the six months ended March 31 compared with the same period last year...The decline continued a 20-year trend in the newspaper industry as people increasingly turn to other media such as the Internet and 24-hour cable news networks for information."



As the chart above makes clear, the downward newspaper circulation trend continues. This chart was accompanied in the report The State of the News Media 2007 with the following remarks:  "For the six months ending September 2006, industry circulation was down 2.8% daily and 3.4% Sunday, compared with the previous year. The top 50 in circulation lost even more - declining an average of 3.6%."

A November 6, 2007 article in The Wall Street Journal reveals the very latest figures: "According to the...Audit Bureau of Circulations, average weekday circulation at 538 daily U.S. newspapers reporting figures for the six months ending Sept. 30, 2007 declined 2.6% during (the) period."



Not surprisingly advertising revenue growth is mirroring newspaper circulation trends.

Newspaper Circulation, Readership and Advertising

As with other periodicals where advertising is a substantial source of revenue, there is constant conflict between newspaper circulation, readership and advertising.

According to a March 2007 article by John Chisholm in Newspapers & Technology, "Benchmarks show that on average newspapers are left with around a third of their circulation revenue after costs are deducted (however) in the United States where churn levels are high and subscription rates are low, (circulation) costs can exceed revenues."

A recent study from First Research claims that "almost 70 percent of (newspaper) industry revenue comes from sales of advertising space...and only about 20 percent from subscription and single-copy sales..." (I can't see in the abbreviated newspaper industry report where the other 10% comes from!)

If circulation is not the answer to the newspaper industry's profitability, obviously advertising is, and newspaper advertising rates have traditionally been based on total readership, rather than circulation alone. The theory has more merit in the magazine industry: that more than one person might read a copy of a particular issue. The newspaper industry found gold in the concept, and with its partner-in-numbers, ABC, began to measure total newspaper readership as an adjunct to circulation.

As Rick Edmonds points out in a 2002 article on PoynterOnline, "The good old days of 70 to 80 percent penetration, households with two parents and 2.2 kids, and a dad who came home from the factory at 4:30 to read the Evening Bulletin are long gone. Editors have been forced to take note of that growing share of audience that is on-the-fly and only sometimes attentive."

He offers the following chart to show how newspapers illustrate total readership vs. circulation (with the help of ABC):



As he correctly ponders: "Why are people passing the paper around briskly in Fresno but not so much in Louisville?"

I would argue that pass-along readership is generally overstated, and often offset by "incomplete readership" - the many who find time to look at only a portion of the newspaper, missing perhaps the bulk of the ads (or having no time to absorb the advertising message). When it comes to the newspaper industry, circulation is the more reliable figure.

Hence newspaper ad rates are increasingly focused on the latter figure, rather than on the very difficult to verify "total readership" number, particularly as the Internet makes the practice of audience measurement and response more of a science than a black art.

Going Deeper

There's no question in my mind that the single most authoritative report on the state of journalism is The State of the News Media 2007, published by Project for Excellence in Journalism, a non-political, nonpartisan research institute that is part of the Pew Research Center in Washington. (The report is available here in sections, with excellent interactive features. The full report is comprehensive, totalling more than 160,000 words.) The report covers most key media: newspapers, television, radio, magazines and online journalism. It also identifies trends, marks key indicators and notes areas of further inquiry.

The easiest way to access the full findings is via the Executive Summary. It is relatively brief, and certainly incisive. I will highlight just a few of the conclusions concerning the publishing industry here (in a different sequence than they appear in the report).

1. "...the math suggests (that publishers) almost certainly must find a way to get consumers to pay for digital content." The summary continues: "...the notion that the Internet is free is already false. Those who report the news just aren't sharing in the fees."

This suggestion of course remains anathema to many publishers and most Web users. All of the newspaper trends we've been recently witnessing point to advertising footing the bill, not users, per se. The New York Times recently abandoned revenue from over 200,000 paid subscribers in favor of an ad-only model (there were nearly 750,000 total users, but about two-thirds received access as part of a print subscription).

Advertising is still a largely workable model for many publishing media. It is suffering, but far from dead. Are we certain that advertising can actually continue to fund the enormous content treasures which lie on the Web?

Today's fad is tomorrow's dumb idea. Or as The Economist stated differently a few years ago, "A tradition is only an innovation that worked."

2. The summary points out (as we've seen elsewhere) that "the signs are clearer that advertising works differently online than in older media.... The consequence is that advertisers may not need journalism as they once did, particularly online."

I think this is probably the most startling observation in the entire report. The notion that journalism, per se, as we've known it, is losing import as a direct result of the media transition to the Internet is a radical proposition. As shocking as this may be to hundreds of thousands of journalists and the support personnel that make journalism available and accessible, the evidence is compelling.

3. "While journalists are becoming more serious about the Web, no clear models of how to do journalism online really exist yet, and some qualities are still only marginally explored." Another trenchant observation. Is the failure of journalism's transition to the Web more a factor of point #2 above, that journalism as it has been known, on television and in print, no longer compels, or more that journalists have not learned how to make online journalism compelling in this new medium?

Seeking Equilibrium

A fascinating and important article from The New York Times ("Why Big Newspapers Applaud Some Declines in Circulation," October 1, 2007) puts an entirely different spin on the problems facing the future of newspapers. The lead to the article states its argument clearly: "As the newspaper industry bemoans falling circulation, major papers around the country have a surprising attitude toward a lot of potential readers: Don't bother." The article's author, Richard Pérez-Peña, continues, "The big American newspapers sell about 10 percent fewer copies than they did in 2000, and while the migration of readers to the Web is usually blamed for that decline, much of it has been intentional (emphasis mine). Driven by marketing and delivery costs and pressure from advertisers, many papers have decided certain readers are not worth the expense involved in finding, serving and keeping them.

Pérez-Peña points to a trend consistent with advertising in all media: certain customers are worth reaching. But big numbers, by themselves, no longer impress. The Internet has magnified a publishing trend that probably first flowered with controlled circulation magazines: identify the customer, and deliver the right ad to the right customer at the right time in the appropriate medium.

The Newspaper Association of America is quoted in the article offering the figure that "the average cost of getting a new subscription order, including discounts, was $68 in 2006, more than twice as much as in 2002." And most of these new subscribers disappear after the promotion ends. "So (according to Pérez-Peña) the industry is accepting that circulation will fall and hoping to find a level that can be sustained with little effort. As a result, the subscription churn rate - the number of people who drop their newspaper each year divided by the total number of subscribers - fell to 36 percent last year from 54 percent in 2000, the newspaper association says."

The Unsteady March of Newspapers to the Web

A September 2007 article in eMarketer points out that "The Newspaper Association of America has reported double-digit growth for the last 13 consecutive quarters of online newspaper advertising spending, which reached $795.7 million in the second quarter of 2007."



The newspaper industry has struggled as hard as most publishing industries to find the right way to balance their traditional print product with an appropriately compelling and complementary online presence. They struggled even harder to figure out how to make money from the effort.

Newspapers most easily flourished in the local online ad markets, but "according to Borrell Associates, (while) newspapers controlled more than 35% of all locally spent online advertising in 2006 but that dominance is declining: Online newspaper share decreased 8.2 points over a two year-period." (Reported in Editor & Publisher.) As a result newspaper companies are teaming up either with Yahoo or Google in complex cooperative deals that should benefit both sides, whether from ad revenue sharing, increased exposure or competitive positioning (both for the newspapers and the fiercely competitive search engine companies.)

Optimists increasingly sense that the newspapers companies are finally starting to "get it" when it comes to the Web, and that they're not too late to the party. Pessimists worry whether the very rapid decline in newspaper circulation and ad revenue can be offset sufficient through successful Web programs.

The Global Newspaper Industry

In the midst of this gloom, the February 15, 2007 issue of The Economist reported that in India there are some 300 big newspapers, and they experienced a 12.9% increase in circulation last year. Newspaper competition is fierce, and profits substantial.

The article also made reference to a key factor that may explain this bright news: Internet access is available to only 1.2% of Indians over the age of 12.

I remember some 15-years years ago at a DRUPA trade show in Germany (DRUPA focuses on the printing business) meeting Naresh Khanna, the editor of Indian Printer & Publisher magazine. That year everyone was speculating about the possible impact of the Internet, but Naresh said to me: "Oh, we don't care very much about the Internet in India. We're just excited that we'll soon have color pictures in our newspapers."

The global newspaper industry is continuing to grow because of emerging economies like those of India and China, even while the future of the newspaper industry is seriously threatened in the mature (largely Western) countries.

References