These next few posts will detail the development of our team’s case analysis concerning the newspaper industry’s traditional business model which has been upturned by disruptive technologies, an inability of key industry players to change their mindsets, and a lack of investment into research and development. This first post will provide a summary of our analysis and will define the key issues and critical success factors. The next couple of posts will detail our strategic options and our final recommendation. Our focus has been on an established general-interest urban newspaper with a total circulation of around 500,000; however, this analysis is applicable to any established medium to large newspaper publisher or a company considering entering the market.
The mission of today’s print newspaper is to provide news summaries for readers who may not be reading online, to provide analysis and interpretation for subscribers who read both online and in print, and to provide a source for advertising and other supplements that readers still seek and want. The newspaper industry has experienced a 12% decline in circulation since 1985. As of 2008, industry circulation stood around 50 million with circulation decreases expected to continue at a rate of 2 – 3% per year. Advertising revenue is fairing just as poorly. In 2008, ad revenues decreased 16.4% to $37.9 billion, as compared to 2007. While this decrease was greater than previous years, ad revenues have been consistently declining over the last 15 years.
Newspapers must be made relevant. Philadelphia ——- should be a unique, local enterprise that offers distinctive content to the Philadelphia region. A strong case can be made that there is currently no compelling reason to read the print version The ——-. A general-interest mass circulated daily print paper and its affiliated website do not reach consumers drawn to resources that focus on narrow, specialized content. However, ——- is the only genuine mass media outlet throughout the region and many consumers continue to turn to ——-newspapers regularly for information. For many advertisers, the local paper is still the most efficient way to reach the largest number of people. Ignoring this core business would be detrimental to the bottom line and provide an opportunity for competitors to further penetrate the local market.
Having only two revenue streams, subscriptions and advertising, has hampered the newspaper industry’s growth, especially during recessionary periods. As the migration to the Internet for news and information continues to increase, especially among young readers, the current business model of ——- is not sustainable. Ad rates for online exposure are a fraction of what they once were in print[1]. Online readership is increasing 40% annually; however, the revenue from online exposure accounts for just 3 – 6% of newspapers’ total revenue. Subscription-based fees, or micro-payments, have generally proved unsuccessful throughout the industry. Consumers see news outlets that have been successful in initiating a subscription-based online model, such as WSJ, as providing relevant and practical information. Without this perception, it will be difficult to charge users for content without alienating them.
Currently, local newspapers do not have the infrastructure to conduct ongoing new product development. There are opportunities to be realized by creating better strategic alignments between people, processes, and technology. There is also a general need to create operational efficiencies in the development of both ——- print and online products. For example, the advertising sales channels have been stretched thin selling complex core products such as zones, online up-sells, and special sections. Streamlining the advertising sales channel and developing new revenue streams, either through new product development or harnessing current technologies will be crucial to ——- long-term growth.
There is an ongoing debate about who the customer of ——- is and whether to focus on developing products for the advertiser or for the consumer. Each of these “customers” have fundamentally different objectives and being able to satisfy each party while remaining profitable is a concern throughout the entire newspaper industry. Developing a model that successfully aligns both groups’ objectives will involve a fundamental shift in the way newspaper publishing has traditionally been conducted.
——- has been successful in keeping up with technology; however, there are data management challenges due to the volume of content that is generated on a daily basis. Determining how to re-vamp the gathering, storage and internal distribution of news between departments, including both print and web, should be analyzed in order to develop more efficient processes.
Furthermore, strictly from an online perspective, ——- should be a local community resource for everything Philadelphia. ——- has been over-engineered and we feel that it has overshot the needs of the average consumer. Focusing on less engineered solutions and rethinking the design of the website to appeal to what is desired for the average consumer will also help to capture value.
In summary, the critical success factors for ——- will be its abilities to produce compelling content, increasing its customer base through capturing both the non-reader and the non-advertiser, selling relevant and appealing advertising space, and realigning toward innovation-driven growth. ——- must leverage its strengths such as brand name, rich content, and local knowledge in order to refine its approach to both its core business and disruptive innovation opportunities to realize long-term prosperity.
[1] “… each unique reader [New York Times] is worth $22.40 annually in online advertising revenue (a far cry from the 1 subscriber = $1000 which is what it was before the arrival of the internet)”; http://www.metaprinter.com/2008/12/the-fundamental-problem-of-newspapers-on-the-internet-the-krugman-paradox/
Tags: custom publishing research and development, newspaper publishing, publishing
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