The revolutions transforming the media economy continue apace. In the year since I published my five part series on these changes (beginning here and ending here) we have seen more evidence of the overall direction of change. Reviewing my notes from 2010 here are some of the standout developments to date:
1. Things remain grim for traditional newspapers
Global newspaper circulation continued its downward trend, declining by 0.8% in 2009. A survey covering 223 countries by the World Association of Newspapers and Newspaper Publishers showed that newspaper circulation significantly declined in Europe and North America, although it increased marginally in Asia.
2. Advertising revenue continues to plummet
Advertising revenue is the core of the traditional newspapers business model, and it is falling globally too. Ad spend declined in most of the regions – North America (25 per cent), Western Europe (13.7 per cent), Central and East Europe (18.7 per cent), Asia (9.6 per cent) and South America (2.9 per cent), but remained fairly stable in the Middle East and Africa. In the United States, newspaper advertising revenues are likely to dive to a 25-year low of approximately $26.5 billion, or 47% of the record $49.4 billon in sales achieved by the industry as recently as 2005.
Online advertising is becoming much more important, with the web poised to overtake newspapers as the second largest US advertising medium by revenue behind television. While there is some absolute growth – and the Guardian has reportedly seen a 100% annual increase in digital revenue – this change in relative status is also a function of the collapse of print advertising.
3. Paid content strategies show few signs of success
At the beginning of this year a US survey showed that amongst the handful of domestic newspapers that had erected paywalls, only a tiny proportion (2.4%) of print subscribers were willing to hand over money for access. In the UK, the decision of The Times to go behind a paywall has led to the loss of 90% of the site’s users and scared off advertisers – meaning that any additional revenue from the small number who sign up will easily be offset by lost advertising. The experience of the Belfast-based Irish Times, which attracted only 1,215 paid subscriptions from its 45,000 circulation, suggests the limits of paywalls are apparent in a variety of markets.
4. The disruptive power of the Internet continues to grow
The decline of legacy media has been underway for a very long time and predates the Internet and the web. However, the expansion of a technology that collapses the cost of distribution means industries predicated on the control of distribution are losing their base.
In June this year Cisco forecast that global Internet traffic would increase more than fourfold by 2014. This amount is the equivalent of 10 times all the traffic traversing Internet Protocol networks in 2008. Driving the growth is the expansion of online video, which will make up 91 percent of global consumer IP traffic by 2014.
For an example of what this means in practice, consider the recent observations from the online video rental firm Netflix. Founder Reed Hastings revealed the economics of digital distribution: “It costs us about a dollar, round-trip, to send DVDs by mail. It costs us less than a nickel to deliver by streaming.” That means a switch to video streaming – which is coming – would reduce distribution costs by 95%. Given that Netflix spends $600 million a year on the postal service and pays for hourly labor checking DVD quality, that is a considerable saving (except for those working in the postal service or checking the DVDs). This means, as Ken Doctor explained, that “in the new world the costs evaporate — and quality and timeliness improve. For news publishers, the switch to digital media offers huge savings, at least 60% and probably more.”
However, it’s vital to remember that the Internet is not a universal facility. The number of global users has expanded dramatically in the last decade to 2 billion, but global penetration covers only 29% of the world’s population.
5. The end of print is now conceivable
Publishers and editors of major newspapers are now speaking about a time when their publications will no longer be printed. Last month Arthur Sulzberger told a seminar that “we will stop printing the New York Times sometime in the future, date TBD.” Both the Guardian and Times editors think their current printing facilities will be their last, and that the life-span of these is “telescoping quite dramatically,” while the Financial Times is already reducing some print output.
6. There are no game changers leading to a shiny new business model
Many responses to the revolutions in the media economy have been framed by the desire to find the ‘game changer’ that will ‘save journalism,’ with the iPad being the device that in 2010 has most often borne these hopes. As a proud new owner of said device, I can see the appeal of some the better apps. I think it opens up new possibilities for the creative presentation and distribution of information, and I’m looking forward to more and better efforts to produce compelling multimedia for this format. But a number of available studies suggest that even if the revenue from magazine apps on the iPad exceeds a billion dollars, that will not resuscitate an entire industry given that is what Time Inc. (of which Time magazine is just a small part) made in a little over one quarter.
More importantly, though, we have to see devices like the iPad as another mode of distribution among the many channels for information now available. And we need to understand how the ecology of the iPad is one of a closed economy, cut off from the open web where things are easily linked and always searchable. There is little doubt the app economy is significant, and Chris Anderson and Michael Wolff (not to mention Jeff Jarvis) are right to call attention to the way it differs from the browser-accessible web, though it is just a bit early to proclaim the death of the open web.
Those who want to place the future of their entire industry in the iPad’s basket are surely heading for a fall. To get a better return from publisher’s apps, a group of twenty US-based photo agencies recently formed an alliance to press for higher fees based on additional usage. That’s not an unreasonable notion in principle, but the logic behind their position was stunning for its ignorance of the dynamics of the contemporary media economy. One of the agency bosses behind this alliance told Press Gazette:
We all strongly believe that this platform as a walled garden could be the saviour of declining legacy print publications. A lot of the publishers think so too…we see this as a way to work with the publishers to work on a business model that works for both parties.
In a nutshell you have an example of the thinking that has perpetuated a large part of the contemporary crisis – defend declining outlets, have faith in a walled garden that limits accessibility, and think about business models is in terms of a single business model tied to an established mode of distribution. But – the disruptive power of the Internet continues to grow because of the way it has solved the problem of distribution, so no business model predicated on control over a mode of distribution can succeed.
7. The future is bright
Despite the downturn and the persistence of legacy thinking, the future for the production and distribution of compelling stories and important information is bright. The creative possibilities enabled by digital technologies, the open web and the app economy – in association with those legacy publications now looking to a future beyond print – are being continually enlarged. If we pursue multiple modes of distribution and make them serve the modes of information, then, in conjunction with new ways of thinking about business models, we are in for an exciting if bumpy ride.
Featured photo: Bsivad/Flickr, used under a Creative Commons license