Newspapers struggle for advertising dollars

TV viewership reached a record 188 minutes a day (all 5yrs +) for the 11 months to the end of November 2008 - a marked contrast to newspaper readership which plateaued at 49% (all 15yrs +), down from 60% in 1995. This was reflected in advertising revenues, with television up 3% (to 55% market share) and newspapers down 4% (to 19% market share).

The long-run downturn in newspaper readership and advertising sales is something newspaper proprietors have been grappling with, largely unsuccessfully. Total Media notes that while the slide in newspaper hard copy readership is being offset by on-line usage, proprietors have no clear strategy on the positioning of the two mediums or how to make money from their huge on-line investments.

Finding such a strategy is now urgent. Former NZ Herald managing director Michael Horton told the National Press Club last month that the two major newspaper conglomerates operating in New Zealand - Fairfax and APN - have massive debts and if these can't be refinanced "are facing disaster".

Fairfax is $2 billion in debt, its shares have dropped from $A4 to $0.75 in 12 months and has minimal asset backing. Horton says John Fairfax has personally lost $600 million on personal transactions to buy out his siblings' interest in the business.

Independent News and Media, a global media business that owns more than 100 newspapers including - through APN - the NZ Herald and other NZ newspapers, has a debt burden of E1.4 billion, or $US1.8 billion, a chunk of which is due to be refinanced in May. Attempts last year to flog off APN were unsuccessful - apparently no potential buyers wanted the NZ operations. Equally fruitless have been the company's attempts to revive the group's flagship paper, the UK daily The Independent, which has been haemorrhaging both readers and red ink.

In Horton's opinion, the group's chairman Tony O'Reilly is "finished". His personal investment of $US800 million in Wedgewood will probably be written off following that company's collapse. His shares in Independent News and Media may also suffer the same fate - they have plunged from E2.10 to E0.15 in nine months.

Horton believes the Fairfax and APN titles will sooner or later end up back in NZ ownership - where any profits are more likely to be injected back into bolstering their brands, rather than servicing massive debts overseas.

Regardless of where ownership eventually rests, the challenge will remain - how best to make money from the news gathering and analysis services provided by the traditional print-based media.

In the introduction to Pew's sixth annual report on the State of the News Media in the United States, the point is made that the problem facing American (read ‘western world') journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem -- the decoupling of advertising from news.

"The old media have held onto their audience even as consumers migrate online. In 2008, audience gains at sites offering legacy news were far larger than those for new media. But audiences now consume news in new ways. They hunt and gather what they want when they want it, use search to comb among destinations and share what they find through a growing network of social media.

"And the news industry does not know ... how to convert this more active online audience into revenue. In newspapers, roughly half of all classified advertising revenue has vanished ...

"In the last year, alternative news sites have continued to grow, including those produced by journalists who have left legacy newsrooms, but their scale remains small [and] few, if any, are profitable or even self-sustaining."

In a recent speech, "The Future of Newspapers: Moving Beyond Dead Trees" global media magnate Rupert Murdoch hit back at those who see doom for newspapers in these trends.

Murdoch, the Australian-born chairman and chief executive of News Corp, said people now were "hungrier for information than ever before" and that papers have an edge over bloggers and other newcomers because they are more trusted by readers.

He said newspapers would have to evolve from the physical item to "news brands" that are delivered in a variety of ways and are flexible for readers.

"I like the look and feel of newsprint as much as anyone," he said. "But our real business isn't printing on dead trees. It's giving our readers great journalism and great judgement.

"In this coming century, the form of delivery may change, but the potential audience for our content will multiply many times over ... the challenge is to use a newspaper's brand while allowing readers to personalise the news for themselves and then deliver it in the ways that they want."

To capitalise on online opportunities, Murdoch said The Wall Street Journal was planning to offer three tiers of content online - free news, a subscriber-level service, and a third "premium service" of reader-customizable "high-end financial news and analysis."

Whether this model will work in New Zealand is another matter. The Otago Daily Times and Stuff (the Fairfax website) both charge subscription fees for readers wanting access to their archives. In contrast, the NZ Herald provides free access to all, in the expectation that on-line advertising to a massive on-line readership will be a more lucrative source of revenue.

The relative profitability of these two approaches is not publicly available, but with on-line ads having only 2% market share, the revenues clearly aren't sufficient to compensate for falling print advertising.

Media commentator Julie Starr says the challenge for news companies is not to replicate themselves online but reinvent themselves online. "What's required is a new model of newsgathering and delivery adapted to online ecosystems. More of the same won't do." 

To date, there is precious little evidence that either APN or Fairfax are doing this in New Zealand. Instead, their main focus appears to be on cutting costs - particularly by spending less on the "great journalism and great judgement" that Rupert Murdoch claims is their main asset.

Their daily and Sunday papers are trying to attract younger readers by shifting the mix of their stories towards entertainment and urban lifestyle subjects in an effort to make their content more relevant to people's daily lives. It is also reflected in a ‘feminising' of the news, both as a deliberate strategy aimed at capturing the loyalty of those who have greatest influence over household spending decisions, and as a reflection of the news interests of the growing number of female editors and reporters.

So far, this activity looks unlikely to save them. Indeed, as The Economist observed in an article on 24 August 2004,  it is the papers in the middle of the market - neither highbrow, nor entertainingly populist - that are likeliest to fall by the wayside.

The "few titles that invest in the kind of investigative stories which often benefit society the most are in a good position to survive, as long as their owners do a competent job of adjusting to changing circumstances. Publications like the New York Times and the Wall Street Journal should be able to put up the price of their journalism to compensate for advertising revenues lost to the internet-especially as they cater to a more global readership."

Where that leaves the Fairfax-owned Dominion-Post or The Press, or APN's NZ Herald, remains to be seen. But for so long as they are owned by financially shaky risk-averse international media conglomerates the prognosis can hardly be positive.

[ends]

- Trevor Walton