Posted on 07/19/2007 4:51:37 PM PDT by Milhous
There's more bad news about the newspaper industry, this time from The Wall Street Journal, which notes that total ad revenue was down 4.8 percent in the first quarter. The Journal quotes longtime industry analyst Edward Atorino predicting a whopping 4.3 percent drop in ad revenue this year, hitting pretty much across the board. (Alan Mutter has predicted that the annual decline could be as much as 4.6 percent.) "Right now, you've got a perfect storm," Atorino says.
Yep, and it's a real blower. I'd rate it as a Force 10, heading pretty quickly toward a Force 12, which the Beaufort Scale warns can cause "considerable and widespread damage to structures." The day is rapidly drawing nearer when those structures are going to start to collapse.
But all the newspaper industry seems to be doing, still, is battening down. Layoffs, cutbacks, a secondary newspaper closing or two--those aren't going to get the Good Ship Newspaper out of the perfect storm.
What's needed is some radical thinking--a new course, to further torture the nautical metaphor. Merely slapping ads on front pages and section fronts just ain't gonna cut it. Nor will raising prices or launching interesting but timid new products.
All the links here are from just a day or two of Romenesko postings--a real indicator of the fear gripping the industry and, unfortunately, the unimaginative responses to it. As analyst Atorino says in another recent story, newspaper companies now "get it. They are all trying to play catch-up."
Getting it (finally!) is good. But catch-up is not enough, not anymore. What's needed is some real vision and leadership. I've ranted about this previously, but there still doesn't seem to be much progress. With a couple of small exceptions, everybody in the newspaper business still seems to be working off the same playbook. And the ship keeps getting battered by the perfect storm, taking on water, and in danger of sinking.
Where's the innovation? Where are the bold steps? Where's the industry leadership? Are senior newspaper managers--as some insiders and many outsiders whisper--too conservative, too scared, too naive, too hellbent on clinging to their fancy lifestyles and within-grasp pensions to really cut loose and take chances to save the news business for the people who will come after them? The future may not be in print, but that doesn't mean today's newspaper companies can't emerge as leaders in new media--if they move quickly and aggressively.
Take some chances! Try something new! Don't keep recycling the same tired ideas and tiny steps.
Here are a half dozen radical suggestions for change (with a few more here):
* Truly accept that the Web and mobile devices are your primary publishing platform, not the printing press. Stop paying lip service to that concept and do it. Leadership on this has to come from the very top, and it requires significant reorganization and reengineering of the newsroom and business side--not just designating an editor or reporter or two to write Web updates. And the Web is not just about words anymore. Make a solid commitment to telling stories (and selling ads) through video, audio and other multimedia.
* Get local. Very local. Does every paper really need to have the AP story on Iraq or Bush or Paris Hilton on Page One? That news is available all over the place. Bring your readers something they absolutely can't get anywhere else--news about what they care most about.
* Embrace user-generated content and bring readers into the conversation. They know an awful lot about what's going on in the world they live in, and want to share it. Tap into that knowledge. Embrace it. They won't bite. You've got bloggers in your community covering your community and local subjects better and more interestingly than your own reporters. (Oh yes they are.) Bring them into the tent, give them a wider forum, share with them a little revenue they can't get on their own.
* Understand that your readers are a community and give them social networking tools to help that community interact and flourish, under your banner. A little learning exercise: If you're not a member of Facebook, get there now, get some friends (and some widgets), and learn about the power of social media to connect people and to get them to do your marketing for you.
* Find ways to make your company essential to your advertisers' businesses by providing them with non-advertising services--inventory tracking, price searching, new connections to customers--that create new forms of revenue. Leverage your sales force by having them sell ads for other media. The old advertising-based business model is increasingly broken. Get to work replacing it.
* Stop printing the newspaper altogether and move entirely to the Web (Jon Fine of BusinessWeek has a good rant on this). What does your business model look like without presses, trucks and production workers? Or at least cut the newspaper to a minimal product for the aging audience that still wants print edition and make a true commitment to publishing online. (Outsourcing printing's not a bad start.)
Again: This is a perfect storm. Considerable and widespread damage to structures is at hand. Don't hunker down and hope to ride it out--there is no riding out this one. Get behind the wheel and steer a course to open, clear water and a new future. Or else you're going down with the ship.
Thomas Andrews: The pumps will buy you time, but minutes only. From this moment on, no matter what we do, Titanic will founder.
Ismay: But this ship can't sink!
Thomas Andrews: She is made of iron, sir. I assure you, she can. And she *will*. It is a mathematical certainty.
Yes. Including the AP War In Iraq Body Count.
It must be part of the affiliate contract.
The reason Potts’ advice is too little, too late is that he’s not diagnosing the right problem. The problem is not only that people don’t read the articles or buy the paper... it’s that they aren’t reading the ads, either. The papers can’t charge as much for blue-sky advertising if their circulation is declining. Web-based advertising pays a lot less, and its effectiveness can be tracked a lot more easily than general quarter-page ads in the Sports section. So the ad rates have killed the papers, along with the Internet.
Good bye and good riddance to most of them.
BUMP! (Thanks for the ping, Milhous.)
Doesn't stop it. Note that in Cincy, the conservative paper lost out. Same in Philly.
Newspapers Report Q2 Advertising Slump
Newspaper Publishers See Big Declines in Advertising As Web Steals Readers and Ad DollarsNewspaper publishers reported sharply lower advertising revenues for the second quarter on Thursday, and two of them laid part of the blame on a drop-off in real estate advertising in key markets.
McClatchy Co. and Media General Inc. both reported steep advertising declines and lower profits, while Dow Jones & Co., publisher of The Wall Street Journal and the target of an acquisition bid by Rupert Murdoch's News Corp., had lower profit because of a charge but higher revenue and operating income.
McClatchy, which owns The Miami Herald and several newspapers in California, including The Sacramento Bee and The Fresno Bee, had a 9.8 percent decline in advertising revenue across its 31 newspapers, with the biggest drops coming in Florida and California. McClatchy is the country's third-largest newspaper company, behind Gannett Co. and Tribune Co.
McClatchy attributed much of the weakness in those markets to economic factors including the slowdown in the formerly hot housing sector. With real estate playing a key part of the local economies, other ad categories such as autos and employment also sagged, McClatchy Chief Executive Gary Pruitt said.
Media General Inc., a regional publisher based in Richmond, Va., had an 11 percent decline in advertising, including sharply lower results at The Tampa Tribune newspaper, which reported a 36.7 percent drop-off in classified advertising.
Media General, which also owns the Richmond Times-Dispatch, Winston-Salem Journal, 22 daily community newspapers and 23 TV stations, had net income of $5.1 million, or 22 cents per share, compared with $20.2 million, or 85 cents per share, in the year-ago period.
Its Income from continuing operations in the second quarter in 2006 was $18.3 million, or 77 cents per share, which excludes the sale of four CBS stations.
McClatchy earned $39.9 million in the quarter or 49 cents per share, beating analysts' expectations as operating cash flow rose 4.4 percent on tighter cost controls. Its shares rose 13 cents to $26.41.
In the year-ago period, McClatchy earned $44.1 million or 94 cents per share. The per-share results swung widely because McClatchy issued 35 million shares last year as part of its purchase of Knight Ridder Inc.
The addition of 20 newspapers from Knight Ridder also resulted in McClatchy revenue more than doubling to $580 million in the quarter versus $212 million in the same period a year ago.
Pruitt, the McClatchy CEO, said in a statement that cyclical factors represent "a significant portion of the current advertising downturn," and that he expected California and Florida to be "strong performers" again.
However there are some doubts about how much real estate advertising would come back to newspapers even after the housing market recovers, given that classified advertising for jobs, cars and real estate -- a very profitable business for newspapers -- are increasingly migrating to the Internet.
Mark Panus, spokesman for Realogy Corp., the nation's largest residential real estate services company, said in an e-mailed response to a query that newspaper classifieds are "not a cost-effective or efficient way" for real estate brokers to market listings.
Panus, whose company owns Century 21, Coldwell Banker, ERA and other real estate franchises, said Realogy has made "a considerable shift" from print to online advertising, which now accounts for about 15 percent of its total advertising, up from less than 5 percent as recently as three or four years ago.
Dow Jones, meanwhile, reported earnings of $21 million or 25 cents per share, down from $28.8 million or 34 cents per share in the year-ago period.
Without charges in both periods, however, operating income rose 28.2 percent to $66.3 million from $51.7 million in the same period a year ago, driven partly by the acquisition of the other half of news database Factiva that it didn't already own.
Even without the effect of acquiring the rest of Factiva as well as another business, the U.K.-based eFinancialNews, Dow Jones still reported a 0.9 percent increase in revenue.
Operating income benefited from a 41.7 percent increase in Dow Jones' indexes business, which includes a number of well-known stock market indicators as well as the Dow Jones industrial average.
Dow Jones' growth in the quarter was offset partly by a 6.8 percent decline in print advertising revenue in the U.S. edition of The Wall Street Journal, Dow Jones' flagship property, and a decline of 8 percent in advertising revenues at its community newspaper group.
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Richard A. Smith, president of Realogy Corp., dropped a bomb on the newspaper industry this week when he told Bloomberg News that the Coldwell Banker and Century 21 branding budgets for newspapers will shrink by as much as two-thirds next year from 2006. The company intends to slash its newspaper advertising budget to 70 percent of its home-sale ad spend by 2010, down from 84 percent this year, Bloomberg reported, as it shifts more ad dollars online. Realogy is the largest real estate brokerage company and franchisor, with company-owned and franchise brands including Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sotheby's International Realty. The move should come as no surprise to the newspaper industry, which has struggled with waning advertising revenues in each of its classified categories -- real estate, automotive and jobs. According to the National Association of Realtors, more than three-quarters of consumers now start their home searches online. Real estate brokers are increasingly partnering with Web services to market their listings to a wider audience. Research company Borrell Associates found that online real estate advertising grew from a $1.2 billion market in 2004 to a $1.7 billion market in 2005, increasing in its share of ad spending from 10.3 percent to 14.7 percent. And the company projects online ad spending to grow to a $3.1 billion market by 2010. Realogy dropped hints last year of its intent to move more ad dollars away from print when television commercials started airing in which a real estate agent emphasizes the Internet to a couple asking about newspaper ads. The 30-second television commercial was developed by NRT, a Realogy subsidiary, for it's more than 1,000 company-owned real estate offices operating under the banners of Coldwell Banker, ERA, The Corcoran Group, Sotheby's International Realty and the Sunshine Group. (See Inman News story.) *** |
Tuesday, May 23, 2006
By Jessica Swesey
Inman News
 Peter Zollman, Classified Intelligence |
A couple meeting with their Realtor to discuss selling their home asks, "Which newspapers will our home appear in?" The Realtor doesn't address the specific question, but instead replies that 54 percent more people today use the Internet over newspapers to look for homes.
The agent says that she'll use multiple photos and detailed information in the home's online listing, which will appear on at least four Web sites, and says the brokerage company partners with leading search engines to ensure greater exposure.
The situation appears in a 30-second television commercial developed by NRT for it's more than 1,000 company-owned real estate offices operating under the banners of Coldwell Banker, ERA, The Corcoran Group, Sotheby's International Realty and the Sunshine Group. It shows how the future of real estate advertising increasingly points to the Internet.
The print newspaper stronghold on classified advertising has undergone dramatic change. And while the real estate category for newspaper classifieds has shown year-over-year increases in the last decade, dot-com advertising is picking up market share at lightening speed. In just a few years the number of online classified services has mushroomed, creating a new fragmented market where newspapers are still trying to find their place.
"We all acknowledge the fact that the newspaper listing has a short shelf life compared to a listing on the Internet," said Judy Reeves, chief operating officer of NRT Inc., the largest brokerage company in the nation. NRT has been investing more money online in things like search engine marketing and on technology that facilitates a prompt agent response to an online consumer inquiry, she said.
Plenty of big brokerages are leveraging their online options in favor of print. Ohio-based Real Living pulled $1 million in advertising from Sunday newspaper classifieds in 1997, company officials have said.
While NRT hasn't pulled the plug on print classifieds, the company recognizes where consumers are going first. "We don't say we are pulling dollars from one (medium) and pushing to another," Reeves said. "We are watching the trend and putting dollars where we feel they need to go."
Newspaper classifieds 10 or 15 years ago were the only way consumers could find out about agents, Reeves said, and that has changed. "Now we know the data is available to everyone. Data is not the only connection to a salesperson anymore; the classified ad is not the only connection to the salesperson anymore," she said.
Annual newspaper real estate classified ad expenditures reached $4.6 billion in 2005, continuing a period of 11 year-over-year increases, according the Newspaper Association of America. Despite the positive growth, newspapers may be losing market share as total advertising dollars increase, said Charlie Diederich, director of marketing and advertising for the association.
"This concern of losing market share – it's always been that way," he said. "The problem with newspapers is compounded by the fact that their customers are changing just as rapidly (as the medium)."
Peter Zollman, founder of Classified Intelligence, pointed out two major shifts underway in classified advertising: the medium and the business model. "There's a fundamental structural shift underway from old advertising methods, which include newspapers, to new ways of reaching your audience and that's primarily the Web," he said.
"There's also an ongoing shift from advertising based on just reaching a generalized audience to advertising that is clearly based on payment for performance, and that is a profound shift as well," he said.
Zollman said most newspapers now recognize the need to change what they do and how they do it, but the question is whether they will make the change fast enough.
The recent housing boom provided a boost to real estate advertising and that may have masked a larger shift in ad dollars from print to online, according to Bruce Murray, CEO of New York-based Corzen, which tracks online real estate listings.
"We expect and are seeing the migration of advertising from print to online," Murray said. The shift has been dramatic in the jobs category, he said, and then moved to autos, with real estate taking the longest of the three.
As interest rates climb and real estate sales slow, Murray expects that brokers and agents will seek more efficient and cheaper ways to advertise and the Internet will provide that.
"People don't move overnight from one medium like print to online," he said. "But once it happens, it doesn't go back."
There's about $9 billion in total annual real estate ad spend, according to Corzen, and of that, the company says about $4.5 billion is in daily newspapers, $1.5 billion is in homes magazines, $1 billion is in TV ads, $400 million is online, and about $2 billion is tied up in things like broker promotional activities.
In five years, Corzen expects brokers' ad spend will actually shrink to $5-6 billion because online advertising is cheaper and that share is expected to grow.
 Greg Sterling, Sterling Market Intelligence |
Where do newspapers fit into this migration of ad dollars? Newspapers have a number of strengths and advantages, says Greg Sterling, principal of Sterling Market Intelligence. They have strong local brands, existing advertising relationships and existing sales forces, he said.
"Also newspapers deliver a better lead to an advertiser in many cases than a broader site would," said Sterling, who studies local media trends.
Next: The classified market is changing, so what can newspapers do to leverage what they already have to stay relevant?
This was done by the local paper the Kingsport Times News that claims a very large local area. They occasionally put the AP on the front page
This has often put them in a rather embarrassing position where they are praising efforts of local units in Iraq, or coming or returning. Meanwhile, inside there are AP stories continuously whining about the war.
Some would say fair and balanced, but it comes across as wisheywashy.
Thanks for the ping.
Trouble is, even the papers focusing locally are dying out. People want news nuggets about Paris Hilton, not articles about her.
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