The worst may be over, but a new study questions whether the newspaper industry is moving quickly enough to build new sustainable business models.
Ad revenues at U.S. daily newspapers have fallen by 50 percent in the last five years, from $47.4 billion in 2005 to $22.8 billion in 2010, the last number reported by the Newspaper Association of America.
Newsrooms have been slashed, along with other newspaper departments. Printed products have become smaller and thinner.
“The search for a new revenue model to revive the newspaper industry is making only halting progress,” says a report issued in March by the Pew Research Center’s Project for Excellence in Journalism.
Pew conducted a study of 38 newspapers from six companies that provided highly granular data about digital revenue and sales efforts.
“In general,” the report said, “the shift to replace losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want, and at the current rate most newspapers continue to contract with alarming speed.”
Newspapers making dramatic internal changes are faring better than those that aren’t, the report said, adding that the steps these papers are taking could provide signs of a path forward.
“Cultural inertia is a major factor,” the Pew report said. “Most papers are not putting significant effort into the new digital revenue categories that, while small now, are expected to provide most of the growth in the future.”
Highlights from the report include:
•Across operations of different sizes in different types of economic settings, the newspapers studied were, on average, losing print advertising dollars at seven times the rate that they were growing digital ad revenue.
•Of the 38 papers studied, seven suffered declines in both digital and print advertising.
•Some of the strongest success stories involved selling targeted digital advertising based on customer online behavior. Other newspapers reported success by building consulting services to help advertisers learn how to market themselves in the digital world.
•The growth in digital revenue is generally slower at smaller papers than at larger ones, though so is the decline in print advertising. The report suggests that even if smaller dailies aren’t changing as quickly as larger ones, they may have more time to sort out the way.
•Executives interviewed were enthusiastic about potential mobile advertising revenue, but the report added, “so far it amounts to very little.”
•“The industry is inhibited by several obstacles that executives themselves candidly acknowledge. One involves the difficulty of changing the behavior of people trained in the ways of a mature and monopolistic industry… One pervasive feeling is that 15 years into the digital transition, executives feel they are in the early stages of figuring out how to succeed,” the report said.
The bottom line? The report details an industry that hasn’t moved as quickly or as far as it needs to in embracing a business model to replace its once-thriving legacy model.
Personally, I had a good friend tell me that his newspaper company has determined it has five years or less to convert its business model to one that is earning 40 percent of its revenues from digital sources. To reach that goal, radical changes will need to be made, in both corporate culture and training.
With the Great Recession ending, the worst of the revenue declines may be over (the industry suffered a 28.6 percent dip in 2009, compared with 8.2 percent in 2010). Perhaps the economic recovery will help newspapers find their own new economic foundation.
In the meantime, the Pew study is a clear warning that legacy thinking — and an unwillingness to confront the need for change — may be the largest obstacle to finding a new, sustainable business model for U.S. newspaper companies. And that change must come soon.
(Marc Wilson is CEO of townnews.com. He is reachable at marcus@townnews.com.)
