The Newspaper Decline – The Side We Don’t See

We’re generally quite happy to say it’s the online revolution that’s killing print media. Sure, it’s had it’s effect, but the truth is that there’s (as there generally is with all things) more to the story.

You see the downturn for print also came at a time when big print publishers (aka “newspapers”) were starting to get a whole lot more information to deal with. They had invested in systems that allowed them to get into some very extensive data modeling which allowed them for probably the first time to get a real picture of their subscriber base (readers) and that understanding caused them to do what any prudent business owner would do, prune out the non-profitable distribution means and concentrate on the most profitable areas.

What happened was that the papers realized that the increased cost of distribution for outlying areas wasn’t worth it, due to the fact that these areas tended to have a much higher cost of reader acquisition (the cost the paper incurs getting you to sign up) and a much higher Churn Rate (the rate at which customers drop subscriptions).

There’s been a lot of mastication on this issue around Blogykistan, but I can tell you this as a point of fact: newspaper system vendors put a lot of time and money into developing newspaper circulation business intelligence systems, and they did play a roll, no matter what anyone says to the contrary. I was a witness while I worked at Atex. It was the grand plan to “high grade” the readership and “treat your best customers best.”

Deep inside this is the real motivator: as time goes on, it becomes harder and harder for newspapers to make a profit delivering papers. Fuel costs rise, unions push for more money and slowly, it becomes economically unfeasible to to deliver to more and more areas. Meanwhile, they have pressure from the web where there aren’t the same costs. If gas costs go up, they have a more subtle effect, via energy costs (and believe me, data centers use energy) as well as the pressure for employee cost of living raises.

As Ken Doctor notes in his blog, the newspapers he dealt with:

offered the “cutback to quality circ” argument and said they’d cycle through that within a year or so. In Year Four, it seems like less compelling a reason. Just how much how low-quality circ is out there, anyway, or is the definition of it a rolling phenomenon?

Welcome to the brave new world, the newspapers are going to be riding that horse into the ground. You see, once you start making decisions based upon certain metrics, it becomes incredibly hard to stop.

So really, it isn’t just online that’s managed to hurt newspapers, its a confluence of many factors. Think of it as a “Perfect Sh*t Storm.”

One place it looks like they’ve actually made the transition is at IDG, where their trade magazines have made the transition from print to online. From the NY Times:

Across the company, the remaining print publications still typically play a vital role, but a lesser one — physically smaller and financially diminished. In 2002, 86 percent of the revenue from I.D.G.’s publications came from print and 14 percent online. These days, 52 percent of the revenue is from online ads, while 48 percent is from the print side.

Last year, print and online publications accounted for 70 percent of I.D.G.’s $3 billion in revenue, with the rest coming from its conference business and its technology research firm, I.D.C.

Of course, numbers can be made to lie, and the statements they don’t make leave an awfully big whole in the story.

  1. Has overall media revenue increased, decreased, remained the same?
  2. What’s the comparision of Ebita for the past few years?
  3. What’s the net affect on employment – more or less jobs (I’m guessing less…)?
  4. In short, is I.D.G. really doing better now than they were in say 2002?

I don’t mean to sound snarky – I am really and truly hoping this is working as well as the NYT would have us believe. Yet, it doesn’t offer a complete roadmap for newspapers, as I.D.G. is really in the tech news sector, and let’s face it, none of us are willing to wait over 30 days for a full print cycle to get our tech news. We want to get it now, and that’s why they’ve got to deliver online.

David Churbuck has a good take on what’s going on at I.D.G. on his blog.

What I saw was a company in the throes of a difficult transition from decades of print excellence to the more ephemeral but pressing world of online news. Print and online dichotomies were tough, but in the end it was the red ink that pushed the print legacy to one side (InfoWorld went online only) and broke down the old artificial barriers between print and online editorial staffs.

(Disclosure: I was webmaster for Atex, a leading system supplier for the print industry for 7 years where I worked with top minds in circulation and data modeling like Nettie Angotti, Betsy Hofflin and Arnie Korshin, and did contract work for I.D.G. subsidiary CXO Media)

6 thoughts on “The Newspaper Decline – The Side We Don’t See”

  1. Nice post, you ask the critical question.. how much has revenue declined in the transition to digital. I’ll bet the business is 50% of what it was… or smaller.

    (disclosure, I competed against IDG for 10 years while at Ziff Davis)

    jim

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