Wednesday, 14 April 2010

Online! The Future of the Newspaper Industry

The newspaper industry faces soaring newsprint prices, slumping ad sales, the loss of much classified advertising and precipitous drops in circulation. In recent years the number of newspapers slated for closure, bankruptcy or severe cutbacks has risen—especially in the United States, where the industry has shed a fifth of its journalists since 2001. Revenue has plunged while competition from internet media has squeezed older print publishers.

The debate has become more urgent lately, as a deepening recession has cut profits, and as once-explosive growth in newspaper web revenues (i.e. from advertising) has leveled off, forestalling what the industry hoped would become an important source of revenue.

In the UK, in late 2008, The Independent announced job cuts. In January the chain Associated Newspapers sold a controlling stake in the London Evening Standard as it announced a 24% decline in 2008 ad revenues. In March 2009 parent company Daily Mail and General Trust said job cuts would be deeper than expected, spanning its newspapers, which include the Leicester Mercury, the Bristol Evening Post and The Derby Telegraph. One industry report predicts that 1 in 10 UK print publications will cut its frequency of publication in half, go online only or shut in 2009.

The question is whether the newspaper industry is being hit by a cyclical trough, or whether new technology has rendered newspapers obsolete in their traditional format.

While television's arrival in the 1950s presaged the decline of newspapers' importance as most people's source of daily news, the explosion of the internet in the 1990s and the first decade of the 21st century increased the panoply of media choices available to the average reader while further cutting into newspapers' hegemony as the source of news.

Both television and the Internet bring news to the consumer faster and in a more visual style than newspapers, which are constrained by their physical form and the need to be physically manufactured and distributed. The competing mediums also offer advertisers the opportunity to use moving images and sound. And the internet's search function allows advertisers to tailor their pitch to readers who have revealed what information they're seeking – an enormous advantage.

The Internet has also gone a step further than television in eroding the advertising income of newspapers, as – unlike broadcast media – it proves a convenient vehicle for classified advertising, particularly in categories such as jobs, vehicles, and real estate. Free services have decimated the classified advertising departments of many newspapers, some of which depended on classifieds for 70% of their ad revenue.

Press baron Rupert Murdoch once described the profits flowing from his stable of newspapers as "rivers of gold." But, said Murdoch several years later, "sometimes rivers dry up."

Instead of perusing general interest publications, such as newspapers, readers are more likely to seek particular writers, blogs or sources of information through targeted searches, rendering the agglomeration of newspapers increasingly irrelevant. Power is shifting to the individual journalist from the news outlet with more people seeking out names through search, e-mail, blogs and social media.

Where once the ability to disseminate information was restricted to those with printing presses or broadcast mechanisms, the internet has enabled thousands of individual commentators to communicate directly with others through blogs or instant message services. Even open journalism projects like wikipedia have contributed to the reordering of the media landscape, as readers are no longer restricted to established print organs for information.*

The technology revolution has meant that readers accustomed to waiting for a daily newspaper can now receive up-to-the-minute updates from web portals, bloggers and new services such as Twitter. The expanding reach of broadband internet access means such updates have become commonplace for many users, especially the more affluent, an audience cultivated by advertisers.

In 2005, The Guardian offered a free twelve part weekly podcast series by Ricky Gervais, thus appealing to its younger middle class demographic.

But these new revenue streams, such as that from newspaper web sites, are often a fraction of the sums generated by the previous advertisement- and circulation-driven revenue streams, and so newspapers have been forced to curtail their overhead while simultaneously trying to entice new users. With revenues plummeting, many newspapers have slashed news bureaus and journalists, while still attempting to publish compelling content – much of it more interactive, more lifestyle-driven and more celebrity-conscious.

"As succeeding generations grow up with the Web and lose the habit of reading print," noted The Columbia Journalism Review in 2007, "it seems improbable that newspapers can survive with a cost structure at least 50% higher than their nimbler and cheaper Internet competitors." The problem facing newspapers is generational: while in 2005 an estimated 70% of older Americans read a newspaper daily, fewer than 20% of younger Americans did.

As the demand for news has exploded, so have consumers of the output of newspapers. (Both and, for instance, rank among the top 20 global news sites) But those consumers are now reading newspapers online for free, and although newspapers have been able to convert some of that viewership into ad dollars, it is a trickle compared to previous sources. At most newspapers, web advertising accounts for only 10–15% of revenues.

* Somewhat ironically, this is taken from

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