Is it just me? Or is there a sense of Russian optimism in the air? Certainly the Q3 financial results on both sides of the Atlantic, while not reporting uplifting revenues, are certainly showing signs of stabilisation. Cost reductions are delivering strong and sustainable profits.
I’ve just updated my ongoing forecast of the US newspaper industry and, interestingly, comparing the cycle of the 2000 downturn with the current situation, the figures suggest that the industry is performing in a similar pattern this time around, relative to a far worse economic and structural environment. The big difference is the structure of advertising economics that govern our industry’s fortunes. Motors is suffering both in line with car sales, and the impact of specialist verticals in print and digital. Its share of newspaper revenues has fallen from a peak of 7.8% to a current 2.8%. In recruitment, share of revenue has fallen from 9.3% to 1.1%. Property’s share is increasing, but only because the others are declining
By 2014, these three categories will account for 5% of revenue, compared with 20% in 2000. But internet growth for publishers is showing some form of recovery in the US at least, with US newspaper digital revenues up 14% in Q2 of 2010. In addition, news media are now developing new digital revenue streams away from their traditional pillars.
There are other, more subjective signs that an optimism contagion is breaking out.
At the recent WAN-IFRA event in Hamburg, Germany, numbers were encouraging. Attendance at the IFRA Expo was 10,000 compared with around 7,000 last year. Participants at the World Editors Forum numbered 500. Not bad compared with the couple of hundred of just a few years ago. A few weeks back, I was speaking at the Inland Press Association Conference in Chicago, where attendance numbers were also very encouraging. To quote, “The association is in better shape than ever.” The mood at US conferences has been suicidal for the last few years. This year, I detected genuine optimism for the first time for a long time. Colleagues in other parts of the world are telling me that event attendances are better than expected.
New investment
Meanwhile, two major industry suppliers told me in Hamburg of their optimism and renewed interest. In Canada, the Globe and Mail has just signed a near $2 billion contract for new printing technology with ambitious vision for product quality. In an industry that is endeavouring, rightly or wrongly, to divest itself of its capital dependence, these are major signals of optimism.
While many people, understandably, worry that the cost cuts are affecting journalistic quality, a report published by Ofcom, the UK media regulator, showed that more than twice as many people agreed that “local newspaper journalism had improved” over the last two years than those who disagreed.
One of the greatest movements in the digital world is localisation.
No medium other than newspapers is better placed to deliver on the local platform, either in terms of content, or revenue generation. Hence Google’s romancing of newspaper companies (and their recent commitment of $5 million toward “journalism innovation”). While the world may be globalising, we continue to live locationally based lives. This is a major opportunity for newspapers that we must win, but if history is anything to go by, we may squander. My estimate is that a coherent community strategy could attract 7-8% more revenue top line, and 5% more profit, bottom line.
I’m finding a strong reaction to my repeated assertion that we will not be able to charge for online content. One example that was thrown in my face at the Chicago conference was an excellent presentation of ArkansasOnline, which has been charging for content for years. Their strategy is cute, and multi-layered. They point to the imperative of aggregated content from a range of sources. For once, I hope I am wrong!
And then there is the emerging impact of mobile and eReaders. eReading has certainly been hyped everywhere. Recently, the potential of eReaders for newspapers was noted by Keith Weed, the Global Chief Marketing Officer of Unilever, who said: "iPads will save newspapers, they really will.”
He went on: "The sort of guys I hang out with, the iPad idiots, we're all on them… I used to have a pile of newspapers in the morning, but now I flick through my iPad."
I’ve reported before the experience in France, that eReaders are exhibiting similar reading times and intensity to the printed newspaper. Newspaper websites are attracting visitors. Page views and visit frequency remain a challenge, but the figures are improving.
So let’s put a line in the sand. 2010 was the year when things could not get any worse. From now on, they can only get better.
