The Disruption of Newspaper Industry.

….”The internet has: …”altered the economics of media in two important ways”…”it enables nearly limitless distribution of content for little or no cost”… ; and…’it has potentially put everyone on the planet into the media business, including the sources, businesses, governments and communities’….

The improving ease of access to the internet has made logging on and retrieving news quicker and easier in all types of situations, mobile as well as static. This is having a devastating effect on the traditional (print) newspaper industry. Not since the advent of widespread ownership of televisions in the 1950’s has the industry seen such a drop in its revenues.

The impact though is far greater and commentators have suggested ‘threatens’ the very existence of the ‘Global Print Newspaper Industry’. There are a few exceptions, such as in India and China where newspaper revenues are growing. Some leading Daily and Financial newspapers have managed to build significant internet-based subscription services, but the revenues received do not match the levels they obtain for their print editions. This situation is an almost perfect example of the impact of ‘disruptive innovation’ and how it can have a disastrous impact upon an existing market.

The global Newspaper Industry has been a well-run industry, efficient and competitive since the industrial revolution. In the past it has been able to adapt itself to meet new challenges. It appears, however, the challenge it is facing today through the introduction of this disruptive technology — the internet; threatens to be terminal. Individual newspaper businesses and the Industry have yet to come up with a clear and effective strategy that will allow them to take on the challenge to adapt to new market conditions and overcome them. An example of the financial cost to the industry is the 2004 sale of the ‘San Diego Union-Tribune — for US $50 million in 2004 when it had a market value of US $1 billion.

Not only have Newspapers had the problems relating to the advent of the internet but they have also faced a series of other challenges over the last few years; these have included:

  • soaring newsprint prices;
  • slumping advertising sales;
  • loss of classified advertising to the internet;
  • massive drops in circulation;
  • the world financial crisis hitting sales, advertising revenues;
  • competition not only for readership but also advertising revenue from internet news providers;

Politics have not been slow in getting involved too. In the USA, a Bill was introduced in 2009 that would allow traditional print newspapers to restructure as non-profit corporations with an array of tax breaks named the Newspaper ‘Revitalization Act’ permitting them to operate in a similar manner to public broadcasting companies.

Revenue Matters

Newspapers with significant brand value have seen a significant rise in readership via the internet. However, many of these predict they will have to become free or implement a paywall system in order to survive. This would mean they would have to rely on advertising to fund their operations. However, income from advertising is falling and paywall revenue have been sketchy for years.

As would be expected, the expansion of advertising opportunities via the internet has had the effect of bringing down overall advertising costs — reducing the opportunities for newspapers to replace lost income. The Internet has also proved to be a far more effective tool for classified advertising particularly in the areas of: Jobs, vehicles and real estate; for the Print Newspaper industry this has become a major issue as some newspapers rely on classified advertising for up to 70% of their revenue.

The massive switch of advertiser spending from traditional print newspapers to the Internet must infer it meets the above three issues far more economically and efficiently than it has been able to do in the past through newspapers. Also, increasingly television advertising is tying in with internet advertising and creating an attractive mix for the advertiser.

The advent of the tablet, smart-phone and reading devices such as Amazon’s Kindle are also changing the methods of how consumers absorb the printed word. This problem is to some extent ‘generational’ but not in the print newspapers’ favour. Many see this as the fundamental problem facing print newspapers today or expressed another way; the game changer when it comes to print v. digital delivery and consumption of news.

Digital News Organizations

New entrants such as Medium, Mashable, TechCrunch, Business Insider, Forbes, Inc and a host of others appear to be arriving daily through the internet. These organizations or indeed individual bloggers have distinct advantages over the traditional print news industry changing the economics of news delivery completely. In delivery the internet allows for almost limitless distribution of news content at little or no cost. It has also enabled anyone to enter the industry as a publisher of news at little or no cost. Digital news also gives the reader the opportunity to be very specific about the type of news they wish to consume; be it fashion, politics, the hot news story of the moment to the general news stories similar to what one would find in the traditional press. The major problem facing online digital news media today is the level of trust the consumer can put in the news they are reading or indeed listening to.

There was a recent example of this problem in the early stages of the Syrian Conflict, when a blogger who was presumed to be based in Syria delivering news of what was happening directly from the front line turned out to be in another country. This is a direct challenge for those reputable ‘news aggregators’ such as ‘Huffington Post’, as to whether they actually deliver true investigative reporting. Such reporting often takes many months to deliver and is often very expensive and to date has not been a common feature of online news sources as they lack the structures of the traditional news media.

‘Huffington Post’ a popular online News Aggregator has indicated they will be establishing a team of ‘Investigative Reporters’ at some point in the future but in many respects, this is a ‘pin in a haystack’. This needs to be coupled with as discussed 80% of news reported by online news services originating from print based services. As the print industry declines, it follows so does the content available to online news.

Who Wins?

Normally in such a situation the existing market would ultimately fail leaving the disruptive innovation to fill the gap left. However, if the existing market fails, unless the existing internet-based news providers undergoes a radical transformation in their news collection it leaves a major issue for the new market to contend with: Who supplies the news? It seems increasingly likely what results will be a mixture of the two existing industries.

One can imagine that if the traditional print news industry can restructure itself to become a profitable internet based industry with its individual newspapers histories and the trust their readers have put in them over decades, they would be ideally placed to reassume their leading role as trusted news providers. This however assumes there is an economic model that could make such a transformation possible and ignores the trend of consumers choosing the type of news they wish to digest.

The Consumer

A lot depends on how the consumer of news behaves. If we look at the readership of the world most read newspapers today, we will see a significant change in how they are read. The consumer’s method (Habit) of obtaining their news is changing.

As far back as 2010, the ‘Pew project for Excellence in Journalism in a survey found 34% of respondents said they had read news online within the last 24 hours as opposed to 31% who favored (print) newspapers. A full 41% said they got most of their news online against 30% who got theirs from a newspaper. For the 18 to 29-year age group unsurprisingly the web was most popular with 65% saying the Internet was their main choice for news.

If we look at the above figures coupled with the widespread use / adoption of the ‘Tablet’ in all its forms by consumers across the world and the introduction of the ‘Smartphone ‘it can be argued that: Future readership of newspapers will be online through such devices. An example of how ease of access to the internet is driving this change is: In the UK for many years now, commuter train lines have been WiFi enabled; allowing commuters to source their news and other material online as opposed to buying a newspaper to pass the time. This is not unique to the UK. Contrast this with the late 1980’s, when commuter train carriages would have been filled with commuters reading their newspapers.

Today, no matter what city you are, there are bigger chances that the person sitting beside you on the train, bus or ferry is browsing his phone to catch up with the latest — than looking endlessly into the pages of a newspaper.

Such is the power of disruptive innovation.

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