Newspaper Industry Faces $20 Billion Revenue Shortfall

[DKW 86 7,440]

http://www.tekrati.com/research/News.asp?id=7632

Want to know why the papers are geting more and more strident? Why are the writers even more bitter? It is because they are being squeezed to get circulation up and they know it will only fall. As they cut costs, there will be fewer and fewer jobs.

Newspaper Industry Faces $20 Billion Revenue Shortfall by 2010, Says OutSell, Inc.

Outsell, Inc. - August 15, 2006

Information industry researcher Outsell, Inc. is projecting a cumulative $20 billion revenue shortfall for the newspaper industry by 2010. "The estimated shortfall is even larger than newspaper executives have acknowledged," said Outsell lead analyst Ken Doctor, who headed the latest in this series of market studies. Outsell says current strategies of cutting the workforce are insufficient to meet the accelerating financial challenges: the newspaper has five years to reinvent itself.

The forecast is based on analysis of national industry data that Outsell was first to aggregate publicly. The data ties together the mature businesses of circulation and print advertising, and the emerging online ad business, assembling revenue trending for the next five years.

"The perfect storm of print circulation decline, accompanying pressures on print advertising, and the rapid growth of lower-revenue-producing online news media is eroding the industry. The business of news faces an unprecedented transformation as these trends likely accelerate over the next five years," said Doctor.

Outsell analyzed historical and current revenue trends by advertising type; expense information; key cost structure issues; and current industry margins. The company then built three possible scenarios applying those trends, and projected the likeliest outcome.

Research highlights

The decline of paid circulation revenues for print newspapers will speed up as key 18-39-year-olds continue their online migration, undermining newspapers' traditional mass market claims. In Outsell's worst case, Hit the Wall scenario, 2010 circulation of daily papers will drop to 43.9 million, 19.5% less than 2004. Sunday circulation will take a greater hit at 45 million, 22% less than 2004.

Newspapers' online ad revenue growth rate of about 30% masks the larger problem that online revenues aren't replacing lost print revenues fast enough. Only by generating new top-line growth and by negotiating better revenue-producing agreements with the search aggregators (Google, Yahoo, MSN) will news companies transform themselves in time.

News companies must consider lowering their operating margins from an average of 21% to levels more commonly seen (averaging 12.8% among the Outsell 100(SM) roster of public information companies). Only by lowering margins and strategically cutting the core will news companies be able to both maintain their competitive content-producing muscle and invest for the future in new online products and services.

About the market research study

Outsell's 47-page report, "HotTopics: Deadline With Destiny: Newspaper Industry Faces $20 Billion Gap " (August 4, 2006) by Ken Doctor, is based on an analysis of previous primary research including Outsell's in-depth study of 2,810 news readers and detailed interviews with key executives in the online news trade. Outsell also used data from organizations such as the Newspaper Association of America and Editor & Publisher magazine, as well as company annual reports and SEC 10-K filings.

[TexasTiger 13,017]

It's all that bad news.

[Ranger12 46]

Okay, we all can figure that online editions kill paper circulation. So, if that is hurting your business, then why offer an online edition for free, like most local newspapers do? They are just hurting themselves, so I feel no sympathy for them. I don't even subscribe to the Decatur Daily anymore because they post just about their whole paper over the internet for free. The only reason to subscribe would be to get all the sales ads and coupons. But even with sales ads for major retailers these days, you can get on their websites an bring up their weekly sales circulars.

So, if the industry is hurting, there are two simple solutions. Either 1)Quit putting your paper online for free or 2)charge for access to your online edition for those that prefer to get their local news that way. Problem solved.

[DKW 86 7,440]

Craig, it wont work that way. The cat is out of the bag. 18-39 yo are going to get their news off the net and they will likely never go back to print. They en masse refuse to pay for internet access. So I say "Watch the online version EXPLODE with ads."

I have been telling you guys that as an environmentalist I was not happy with some trends etc. We do burn too much gas, we need to get away from the Mid-East oil dependence. I would really support raising gas taxes and I mean .50-1.00 a gallon or more to get our independence back.

Well, I see this as a potential boom to Env. As print use goes down, tree numbers go up. The price to work on your home or for a new home will drop at some level too. It would drastically hurt the paper industry, but it would not kill it.

I would like to see the news PRINTING industry regulated more. Tax the news PAPER itself. Raise funds for job traininig for the paper industry, etc. Think of all the landfill space we would save. Maybe we should also tax the junk mail industry as well. There is something in me that wants anything committed to paper to be something that doesnt have an expiration date on it, something that will be relevant tommorow as well. Do you guys see what I mean?

[otterinbham 0]

Well, as a marketiing guy, I can tell you another huge part of the problem: Newspapers have essentially refused to brand themselves. Instead, they've continued to act with all the arrogance of a public utility.

Sure, they'll throw out subscription offers every once in a while, but they won't attack the core problem of identity: Why should I subscribe in the first place? Anybody who knows marketing will tell you that branding and promotion goes hand in hand. Branding builds value in the eyes of the consumer, while promotion capitalizes on perceived value to prod customers into buying.

Yet newspapers have relied exclusively on the 13 weeks/$13.99 offer for years, without telling people why it's important to have a subscription at all. So they're the marketing equivalent of heroin addicts, goiing after one fix after another, while their overall health spirals downward.

So what should their brand positioning be? It's really simple: Nobody can report local news better than a local newspaper. Want to know what's happening in your town? What the local politicans are up to? Then read the local newspaper. Because television news isn't going to run a story unless there's blood involved. Or that cute little human interest story that everybody loves so much.

But newspapers steadfastly refuse to get the word out. And so they continue to hemorrhage readership.