Monday, January 12, 2009

What this year holds for newspapers

IF 2008 was a bad year for newspapers, 2009 could be worse. Analysts expect ad revenue to decline even further before perhaps starting to come back in 2010, as the classified woes that have plagued the industry show no signs of abating and Detroit further slims its ad budgets. Newspapers will begin experimenting with new forms of delivery, such as eliminating print editions in favor of the web, and further cut back on outlying circulation that’s unimportant to advertisers. More jobs, too, will be eliminated, though that’s a strategy that will not continue indefinitely as papers reach a point where they can no longer cut back. In order to keep advertisers, newspapers are expected to further simplify the ad buying process, hoping to curry favor with harried print media buyers. Ed Strapagiel, executive vice president of Toronto-based market research and consulting firm Kubas Consultants, talks to Media Life about the coming year in newspapers. This is the first in a series of 2009 previews with experts in different fields of media.

What was the biggest story in newspapers in 2008?
From a newspapers point of view it would be the decline of classified advertising due to continued poor automobile sales and the real estate bust in the U.S.
And now, with a weakened economy, this affects newspapers in print classifieds and secondly in online revenue.

What is the single most important thing for media buyers and planners to know about newspapers in 2009?
I bet they already know this, but right now they can drive some pretty favorable deals. Secondly, they can do especially well if they can increase their newspaper spend. The rate of return on any additional spend can pay off huge.

How will the recession affect newspapers?
In the last two or three recessions, newspapers were the first to suffer and the last to recover. So I don’t see why that pattern should change.
The other issue is that the last couple recessions, particularly 2000 and 2001, newspapers came back at a significantly lower ratio versus GDP. Not only was there cyclical downturn but also permanent downturn.
In a recession, advertisers forget about business as usual and reevaluate on a clean-slate basis. The past couple of recessions, when newspapers did recover, it was at a level lower in relation to the economy than previously.

What are three trends to watch for in 2009 in newspapers?
Format reduction--newspapers saving some money on newsprint. If you’re an ad agency type you know a half page in smaller format isn’t as effective as a larger format, and so there will be some issues there.
Newspapers are rationalizing some of the more expensive distribution, including out-of-town copies, and that will appear to reduce circulation. But a lot of that circulation was ineffective in the first place, so we have to be careful of overreacting.
Also, a number of newspapers will try to simplify their approach to the marketplace. Buying newspapers can be very complicated, there are different sections and peripheral publications, and certainly newspapers have a reputation of being difficult to buy. I expect some work in that area but it will take a long time to completely change.
And newspapers will still work on their online offerings, both in terms of content and appeal to web surfers and usefulness and programs for advertisers.

What will be the single biggest change in the industry over the next few years?

Unfortunately newspapers haven’t really figured out the online model yet; some homepages have 100 links on them. There’s an issue of if they should have a dedicated online sales force. So there are still a whole lot of questions.
I think longer term, probably what we’ll see is a far simpler, streamlined approach to advertising selling. A smaller, better, faster, smarter and cheaper sort of thing, with much less emphasis on sales reps and custom deals and much more on online and automated pricing.
There are a few papers out there doing this now, but if you look at Google AdWords, which handles print and TV and radio, they do it all without human interaction. So looking down the road, that will have to become the way to sell. The old system where you have to talk to four different reps to get everything done just won’t work.
Having said all that, newspapers as a product will still remain very viable for a long time.

How is new technology influencing newspapers?
In some ways newspapers are seeing local classified advertising and other local advertising being eroded by all sorts of local classified sites and community sites.
Some are owned by newspapers, some are competitors, and it’s not just Craigslist. In every city there’s probably dozens of others. Some are free listing sites, but they will sell an enhanced listing. No one of these has a particularly large market share, but the sheer quantity is taking money from the marketplace.
Having said that, newspapers are trying to understand how to cope and deal with them. They’ve focused on Craigslist but they haven’t been able to exploit its weaknesses. They’re still trying to figure them out.

How many more newspapers will go to online-only at least one day a week?
That’s certainly starting to happen already. There are a couple of papers in the U.S. that have done some cutback things on Mondays, a typically low newspaper day. Also, some are cutting classifieds on certain days of the week.
So that’s all a part of pulling back, but it’s a slippery slope because one of the things about a daily newspaper is, it’s a daily newspaper. You have to be out there and consistent, as soon as you start playing with that and pulling back, you can lose your top of mind.

When will we see an end to the massive layoffs in the industry?
Particularly in the U.S. but also around the world, one expected the fourth quarter to be very poor. But what happened is retailers had already geared up for Christmas, so fourth quarter may be a little soft but not a disaster.
But going into the start of 2009, retailers have basically prepared themselves for a lower level of sales. When you get that, you don’t spend a lot on advertising. So the first two quarters of this year could be pretty terrible.
Looking ahead for this year, the industry’s expectations are at rock bottom.
We do a manual survey every November and ask what to expect for next year, and the news is very grim indeed. Going forward we expect newspapers to bring in about 10 to 15 percent less revenue than last year, or that’s the scenario they’re planning for.
And knowing that, they’re going to have to cut costs. The only way they can make significant cuts is by reducing staff, but even that process can go so far.

Will classifieds begin to turn around anytime soon, or is that going to be dwindling from here out?
I would expect them to start turning around in the second half of this year, but the recovery process will be very slow. A lot of it depends on the economy and various push-pull cycles. People will eventually have to get a new car, etc.
I do expect a bit of an upturn in the second half of this year, but in all likelihood it won’t be a sharp turnaround at all.

When will we start to see newspaper ad revenue recover?
I think it will be up in 2010 over 2009. This year could be the bottom.

Do you expect circulation declines to begin to plateau anytime soon and why?
I expect circulation to keep declining slightly. Part of it will be due to loss of newspapers in competitive markets, such as Denver.
In other cases newspapers are finding ways of crawling back and becoming more local. A lot of job losses in the business have been on the editorial staff, so you might say, “Gee, the quality of the product is going to diminish.”

But on the other hand, in the immediate past, all those journalists hadn’t made much progress in reversing the decline of readership, so what are we really we talking about here?

Source: Medialife

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