4 June, 2012Business model innovation: The Danish newspaperindustry’s response to the decline in traditionalmarkets Anna B. Holm, John P. Ulhøi, and Anastasia Uliyanova 10th World Media Economics and Management Conference, Thessaloniki, Greece 23-27 May 2012 *This research has been funded by the Danish Council for Strategic Research, 09063245 (“Digital Urban Living”). The usual disclaimer applies. pRÆSEN TATION
The business environment of the Danishnewspaper industry is changing• Changes in consumer preferences, i.e. news reading is moving online and becoming increasingly mobile;• New types of competitors, e.g. news aggregators, internet providers, content providers, specialised websites and portals;• Technological innovations, particularly general purpose technologies such as Web 2.0, mobile broadband Internet connection, new types of personal communication devices;• Novel sources of news, e.g. blogs, forums, and online social networks;• Public subsidies go solely to printed national dailies, while online editions and e-papers are subject to value added tax and receive no subsidies. 2
Newspaper circulation in Denmark (1989-2009) By August 2011, none of the Danish daily or morning newspapers had a circulation of over 100,000. Source: Danish Newspaper Publishers´ Association 3
Research purpose 1. To analyse the existing business models of the Danish newspaper industry. 2. To discuss how changes introduced during the on- going development of digital platforms have affected the dominant business models and their core elements. 3. To investigate how leading Danish newspapers are responding to the challenges. 4
The business model framework Value proposition Value creation Factors related to the • Key resources offering • Key activities • Key partners Value delivery Value capture • Customer segments • Costs • Distribution channels • Revenue model • Customer relationship Source:… 5
Method and data› Qualitative research design based on interpretive methods.› Two largest media groups in Denmark: JP/ Politiken and Berlingske Media.› Data sources include: • In-depth, face-to-face, semi-structured interviews with editors-in-chief, CEOs, and other newspaper managers. • Professional presentations from Danish and WAN-IFRA media conferences. • Newsletters and other archival data, e.g. annual reports.› Inductive data analysis, with initial data reduction based on the business model framework. 6
The initial response of the Danish newspaperindustry- Industry consolidation through mergers and acquisitions to achieve economies of scale;- Cost-cutting initiatives and business restructuring, such as lay-offs of journalists and the outsourcing of non-key activities to optimize operations;- Adjustments in paper formats, content and circulation to match market demand and customer preferences;- Free distribution of content – online newspaper editions and free-sheets to attract readers and advertisers;- Redefinition of competition and co-opetition with traditional rivals to cope with increased competition from non-traditional rivals, e.g. Google, Yahoo, etc. 7 NO INNOVATION IN BUSINESS MODELS!
The delayed response of the Danishnewspaper industry- Review of value propositions for different customer groups, i.e. readers, advertisers and marketers, and adding new value propositions as well as customer segments;- Dismantling the traditional business model based on a single delivery channel, i.e. the printed newspaper, and managing multiple business models with multiple distribution channels based on digital (Internet) technologies;- Creation and acquisition of online firms, portals, classified databases, etc., to deliver value to traditional customers;- Non-core profit-generating activities, e.g. e-commerce. 8
However… Danish newspapers are still faced with a declining readership and the prospect of further declining revenues. One of the many explanations lies in their current business model configurations and a disruption of the logic of the existing business model. 9
Disruptive changes in the business model (1) Value proposition • The offer of “free” content; • New types of content, genres and media types and media convergence; • Support of the overall brand, not the printed newspaper per se; • New, specialized, niche online products and apps for the web, smart phones and tablet computers. Value delivery • Fragmentation of the reader segment; • New multiple business-to-business customers; • Multiple delivery channels instead of one, i.e. the printed newspaper; • Lost ownership of delivery channels and distribution of content through third-party channels. 10
Disruptive changes in the business model (2) Value creation • New organisational structures for producing and publishing content on printed and digital platforms; • New IT resources required; • Need for journalists and communication workers with new skills; • New key partnerships with information and communication technology (ICT) companies. Value capture • Increased unit costs of printed newspapers; • Changes in the revenue structure; • Continuous experimentation with pricing of digital products; • Dependence on revenues from non-core activities. 11
Conclusions› The media groups in the study initially dismissed the need to innovate because of long-term success with their traditional business model.› The first real innovations in their newspapers’ business models only occurred around 2006-2007, when the media groups changed their focus to better serve customer needs.› However, they still need to reconsider the extent to which their existing businesses are efficient as well as effective, and to determine which strategies to adopt to help them cope with today’s challenges.› Adopting technological innovations and adjusting business models is a never-ending process – although adopting new technology seems ‘uncomplicated’ compared with adopting a new business model. 12 .
Implications› Business model innovation is imperative for the newspaper industry in Denmark.› At the same time, the industry needs new approaches to business model innovation in general. These can include: › Establishing a special business model innovation function or task force in order to design and test new business model configurations before they are incorporated into the main business model; › Launching new value propositions as spin-offs before they are finally adopted by the company; › Involving customer groups in business model innovation, i.e. user-driven innovation.› Further research should focus on the business model innovation process, approaches and needs, rather than studying business models of the industry in general. 13
THANK YOU!If you are interested in this research, don’t hesitate to contact me: • Email: email@example.com • Twitter: @annabholm • LinkedIn: http://dk.linkedin.com/in/annaholm 14