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Picard

ISOJ 2006

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Picard

  1. 1. Robert G. Picard Shorenstein Center, Harvard University Media Management and Transformation Centre Jönköping International Business School Jönköping University, Sweden Cash Cows or Entrecôte: The Influence of Interdependency on Physical and Virtual Newspapers
  2. 2. A Bit of Context Percentages of Total Global Value Created by Various Media Internet Service 20% Cable Subscription 19% Motion Pictures 15% Newspapers 10% Books 10% Television 7% Radio 2% Videogames 5%Audio Recordings 5% Magazines 7% PricewaterhouseCoopers, 2005
  3. 3. Newspapers are a mature industry • characterised by stagnant markets and cost concerns • newspaper markets are being disrupted by electronic media and new digital media – audience and advertiser behaviors toward these media are the driving forces of change in the newspaper industries • environment requires thought about how newspaper companies will survive and grow in the future
  4. 4. 5 most important trends/issues • erosion of the audience base • erosion of the advertising base • online and broadband capabilities (fixed and mobile) and digital television are creating changes in information and advertising choices • employee morale has eroded and stress is rising • owners of capital see more opportunities for asset growth and sustained profits in other industries
  5. 5. Factors Affecting Sustainability Production Forces availability of raw materials capital costs labour costs energy costs taxes transportation/distribution costs Social Forces environmental demands political/legal demands cultural/social demands Market Forces consumer demand advertiser demand total revenue available demographic and psychographic changes competition Technological Forces availability of technology user adoption of technology Sustainability Managerial Forces organizational effectiveness productivity financial control innovation responsiveness to change labour relations reinvestment Protectionist Forces problems with substitutability customer resistance to change structural control of resources
  6. 6. • audiences are at the heart of change in print media • audiences for print media are growing older • readers are reading fewer publications • readers are spending less time reading • income and education levels of print audiences are rising Biggest challenges come from newspaper audiences
  7. 7. Increasing choices and use patterns reduce time spent with newspapers • newspapers are just one of many choices for news/information and diversion/entertainment available • audiences increasingly view all media as having same functions • increased competition for audience attention • younger people use media differently than older persons
  8. 8. Readership used to be a function of age, now it is a function of generation 0 10 20 30 40 50 Generational Reading Gap % reading
  9. 9. Newspaper readership over time 1700 1800 1900 2000 2100 industrial revolution urbanisation literacy television How must the business model change to permit survival? ?
  10. 10. • newspapers have one of the largest shares of advertising expenditures – In many developed nations it is still number one • newspaper share of total advertising is declining – real expenditures for newspapers are rising but have slow growth rates • the primary sources of newspaper advertising revenue are shifting --retail advertising is not as important as in the past --classified advertising is driving growth Advertiser choices are critical to newspaper industry developments
  11. 11. Changes in Global Ad Expenditures 1995 and 2004 0 10 20 30 40 50 60 Print TV Radio Cinema Outdoor Internet 1995 2004
  12. 12. Global Online Advertising • About 3 percent of total advertising expenditures • Limited use by most traditional advertisers – 10 companies provide 74% of global Internet advertising – 50 companies provide 97% of global Internet advertising • Biggest use by computer and software firms, financial services firms, and direct mail retailers • Biggest users are not direct competitors to newspaper advertising • Migration of classified advertising is removing the source of growth for newspaper advertising – Especially employment, real estate, and automobile advertising
  13. 13. majority of newspapers Declining Market Share Increasing Market Share High Market Growth Low or Negative Market Growth growth management service quality management innovation strategic planning diversification increased marketing product development innovation/new product development diversification planning for market exit or capital withdrawal some newspapers Strategic Choices in Changing Market Conditions
  14. 14. Product Development Activities • improvement of existing products/services – redesigns, content changes • reposition existing products and services – brand development, features contrasted to television, online • additions to existing product/service lines – online newspapers, mobile services, cross media • establishment of new product/ service lines – free newspapers, speciality newspapers • market introduction of completely new product/service – syndication, advertising services, new distribution services
  15. 15. Protection Core Newspaper Readers are Not Migrating to Other Media • TV network news viewing is half what it was 20 years ago • Cable TV • Less than 10 percent of Internet use involves news and most news use involves reading headlines on portals • Core readers are supplementing print with online
  16. 16. Protection Primary Source of Advertising is Dependent Upon Newspapers • Retail advertising is the most important category of advertising • Retail advertising is linked to specific localities • Retail advertising messages require types of content not easily conveyed by other types of media
  17. 17. Protection News Production Globally is Dependent Upon Newspapers • Physical newspapers are the base of the business model for all news agencies • Newspapers are the primary provider of news and information for news agencies • Internet and mobile news is dependent on agency or newspaper provided news
  18. 18. New Understanding of Online, Mobile and Other Opportunities • Not longer seen as freestanding, competing news operations • Not seen as necessarily requiring profitability in short term – Not product extension as in creating a separate free standing product – Potential for new revenue stream • Limited, some advertising but not with potential of print, cross subsidized and consumer funded • Consumer funding requires more than mere mirroring of print content; requires some uniqueness and exclusivity • Trend toward blending of print and online newsroom operations • Creation of additional new online and mobile services not linked to the newspaper core – Usually not co-branded with the newspaper
  19. 19. Newspaper advertising shares are declining in developed nations • but the advertising pie is growing larger • patterns in nations with multiple commercial media indicate that average newspaper share of advertising will be less than 20 percent share in 20-25 years • current lack of additional television frequencies limits significant growth of TV advertising • growth of interactive advertising media – special threats from searchable online classifieds and notification services
  20. 20. New technologies are all threats to the newspaper industry • CD-ROMs • web publishing • information services • wireless applications • interactive television all provide substitutes for some communication functions of newspapers all are nibbling away at the reader and advertising bases
  21. 21. How soon will new media seriously harm the newspaper industry? • as soon as readers and advertisers switch in large numbers – numbers are not too damaging now but are increasing steadily • incremental changes in use and funding can be expected – no “sudden” shift • will require changes to newspaper company business models and strategies – changes need to begin now
  22. 22. Consumers are being asked to make new expenditures for media and ICT • hardware: DVD players, computers, Internet access, widescreen TVs, interactive digital television, digital audio broadcasting, mobile Internet, etc. • software: DVDs, software, ISP payments, pay-per-view, phone charges • to purchase the range of options currently available will require at least tripling household expenditures for media and ICT
  23. 23. Newspaper firms cannot “grow” out of the situation and must find transition strategies • need to adjust to the new environment • continuing defence of strong position as advertising providers • transition strategies – defensive movement into new media to keep others from dominating – offensive movement to seek new media business opportunities built upon the print core – gradual erosion of newspaper financial base can be replaced by growth in new media and ICT operations • transition time will be shorter for national and metropolitan newspapers than for smaller local newspapers
  24. 24. The key question for publishers How does one keep from sacrificing a firm that will produce revenue for many years by changing too rapidly into a firm that will produce limited results for many years
  25. 25. Calling in the butcher a financial model costs from combined operations revenue from new media operations costs of the print operations revenue from combined operations revenue from print operations Conventional point for taking the cow to the abattoir
  26. 26. robert.picard@ihh.hj.se

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