Newspaper circulations are plummeting as readers get their news for free on the internet. But some publishers are fighting back with new business models. Jody Clarke reports.
Is the newspaper industry dead?
No, but it is dying. In America, The New York Times is approaching bankruptcy, the LA Times and Chicago Tribune are already there and last week the 146-year-old Seattle Post-Intelligencer shut down its print edition and went online-only. In January more people in America got their news online for free than paid for it by buying newspapers, according to a Pew Research Centre study. Things are hardly any better here. In Britain, the Daily Mail and General Trust recently announced 1,000 jobs would go this year at Northcliffe, the company’s regional newspaper division. That’s twice as many as it expected in November, and comes on the back of job cuts at the Daily Telegraph, the Independent and the Guardian Media Group, and the closure of 60 newspapers this year.
What is to blame?
According to the industry, the internet. The availability of free news and the ability to find jobs, properties and cars on specialist websites such as Monster.com has eroded newspapers’ once-mighty capacity for reaching people. With advertising revenue falling 18% at The New York Times and 36% at the news divisions of UK regionals such as Johnston Press, the industry has been hit by a double whammy. But “to put all the blame, or even the bulk of it, on those factors is not only too convenient, but also downright deceptive”, said Bill Virgin in his last piece as business columnist for the Seattle-Post-Intelligencer last week. The internet might have hastened the death of the newspaper. But by chasing the fantasy that they could give away their most valuable product – the news – for free in exchange for online advertising, they only have themselves to blame.
Did newspapers get caught up in the credit bubble?
Yes. Nothing illustrates this better than Johnston Press. After a string of high-profile acquisitions, including The Yorkshire Post, The Scotsman and a big move into the Irish market in 2005, Johnston found itself in £700m of debt last year. Reclusive Malaysian billionaire Ananda Krishnan paid £120m to take a 20% stake in the group in early 2008, but the firm is still saddled with net debts of £477m as it struggles to survive in leaner times. Earlier this month, it revealed advertising was down 36% on last year, a shock given that this is where four-fifths of its revenue comes from. Tindle Newspaper Group, on the other hand, which “has never borrowed a penny”, according to its owner, Sir Ray Tindle, made a £7m pre-tax profit last year. It runs around 230 titles across Britain, focused on local news. “We have probably suffered less than the big boys because our advertisements come from very local shops: the butcher, the baker and so on, who realise we are the cheapest way of getting to customers.”
Should newspapers start charging for news?
As news websites for the FT and Wall Street Journal have shown, readers are willing to pay for valuable content. Paid subscriptions for the latter’s website, for example, were up 7% last year, a remarkable figure given the state of the economy. Whether people would be willing to pay subscriptions for news that was not urgent or financial is open to debate, considering websites such as The Huffington Post can provide it for free. Started in 2005, The Huffington Post is supposedly profitable, boasting as it does less than 30 editorial staff against over 1,000 at The New York Times. But as Apple has proved with its popular iTunes music program, people are comfortable with spending 79p a tune instead of illegally downloading it. That’s provided it is made simple and accessible to users. Publishers have taken note, with Amazon’s Kindle electronic reader allowing people to buy electronic versions of books and newspapers from the internet.
So is there another model?
Media groups are still experimenting, but it looks like there are two workable models. One is web-based, pioneered by such firms as Globalpost.com. It makes most of its content free, but charges for another product called ‘Passport’, which allows readers to access specialist reports and to suggest news stories and topics to its journalists around the world. The ‘in your hands’ model is being developed by firms such as Plastic Logic, a spin-off firm from a Cambridge University laboratory. It is launching a trial of its 8.5 x 11.5-inch e-reader in the next few months, which will allow readers to scroll through pages carrying a newspaper’s custom layouts and advertisements. This is significant, as web-based advertising fees are about one-tenth as large as those for print and a more print-like display may help close that gap. The FT has already signed up to a distribution deal.
Is it this bad for newspapers everywhere?
No. Newspapers might be closing down by the dozen in America and Europe, but in emerging markets sales are booming. The most recent figures only go back to 2007, but they paint a pretty solid picture. While circulations fell 2.14% in 2007 in North America and 3.46% in Britain, they were up 6.72% in South America and as much as 11.8% in Brazil, according to the World Association of Newspapers, a global trade body. This is attracting the attention of publishers and journalists from shrinking markets: The National, Abu Dhabi’s new English-language paper, is headed by former Daily Telegraph editor Martin Newland, and the FT is moving into China. But this trend isn’t going to save the industry yet. The Times of India may sell 3.5 million copies, up 10% on 2007, but each one sells for just three rupees (about 4p).