Newspapers have been struggling for years after a long “life of abundance” and a seemingly growing advertising market. The turmoil within the news media affects not only print media but also newspapers, which are most at risk.
The signs were there for a while, but it wasn’t till the global economic crisis in 2009 that the concerns about the future of the industry began to surface. Industry leaders, although cautious, were confident that the downturn, as in the past, would be brief. Newspapers recovered more slowly than other media, but overall, advertising rebounded the following year.
For the first time, television surpassed the newspaper industry as the medium that commanded the largest advertising share. Newspapers lost ground for years to come. In 2012, online advertising surpassed the newspaper industry in terms of market share, relegating it to third place.
State of the Newspaper Industry in Australia 2013 NMRC using data from CEASA Reports
The Report on the State of the Newspaper Industry in Australia was released recently by the News and Media Research Centre of the University of Canberra. The study looks at the changes in the structure and performance of the newspaper industry from 2000 until today to provide context for the current economic situation as well as prospects.
The report does not focus on individual papers or firms but rather on the industry at large. It presents a case study to illustrate Fairfax Media’s responses to online developments over the period under review.
Online Threat Underestimated
The industry underestimated the threat of online competition. While several newspapers were early adopters of online presence, these initiatives were more to supplement their traditional activities than to be strategic to reposition and boost their competitiveness in a rapidly changing environment.
Newspapers have restructured in recent years to try to limit the impact of this threat. They have concentrated their efforts in two areas: restructuring publishing operations to align production costs with lower revenue and trying to convert online readership into earnings.
Internet news and advertising are becoming more diverse, changing the relative comparative advantage of traditional media. The adjustment process has a major impact on existing structures. Newspapers have experienced both positive and adverse effects.
Newspaper websites have a large following online, which is much greater than their offline readers. Newspapers haven’t been able to capitalize on their online popularity in a significant way. The move to charge for frequent online visitors has had limited success. Early indications indicate a slow growth of online subscriptions.
Due to the fact that the internet has unbundled much of the advertising content from other content, there hasn’t been a commensurate increase in advertising revenue. Unbundling allowed online specialists to make inroads into markets like classified advertising, where newspapers used to be dominant.
More readers, less value
Newspaper sites are some of the most popular on the internet. News sites are visited infrequently. Australian data on the time spent on news sites is very limited, but it does not suggest that local experiences differ significantly from those in the US and UK.
Google’s Chief Economist Hal Varian reported in 2010 that, on average, an American spent 38 minutes per month reading online news. This is over 70 seconds per day. Comparatively, Americans spend about 25 minutes a day on average reading a newspaper.
The average offline reader spends a third more time reading a paper in just two days than an online reader would in a month. In a more recent ComScore report, a similar picture is painted for the UK. According to the same information, visitors spend an average of 38 minutes per month on newspaper websites.
Advertisers are less interested in online newspaper readers because of the short time they spend reading online news. The rates of online newspaper advertising are only a fraction of those of print.
The Paywall Experiment
Newspaper initiatives and strategies for monetizing online popularity have mixed results. Paywalls have been the main strategy so far to restrict access to content. Some of the major newspapers in other countries have successfully implemented successful models. Fairfax Australia and News Corp Australia recently put much of their content behind paywalls, but there is little publicly available data about their experience.
Finkelstein Inquiry has received some interesting data on people’s willingness to pay to access news online, which is a problem for newspapers. According to a presentation by Scott Ewing and Julian Thomas at the ARC Centre of Excellence for Creative Industries and Innovation, seven out of ten respondents said that they would not pay for an online version of a paper.
Less than 1/10 of those willing to pay anything were willing to pay $1.50, the typical cover price for a hard copy. More than half of those who indicated a price were willing to pay 50 cents or under.
Most of the traffic on online news sites comes from casual visitors who are primarily looking for one or a few items of interest. Often, the reader is interested in current news that may not be exclusive to the website visited. If a website wants to charge access, then the person will go elsewhere.
Many sites offer undifferentiated stories for free, such as ABC, ninemsn, and Yahoo! 7. Readers who are less casual and want to access more differentiated content will be more willing to pay a reasonable price for it. Newspapers have a greater chance of gaining digital subscribers with these readers.
The size of the market is limited, and it will depend heavily on the price. The large difference in demand between free-to-air TV and pay TV is a good example.
The current print edition subscribers represent the opposite end of the spectrum in terms of their willingness to pay and interest. They are loyal readers and will not discontinue their subscriptions in the near future.
Between, the situation becomes more complex. Print readers with a “marginal” price sensitivity may be drawn to the cheaper cost of online access. Some frequent online visitors will pay less for online news than they would a print subscription. The online paywall strategies are primarily aimed at these latter readers.