Newspaper distribution channels in modern times – Part 2

In this two-part post, I am exploring the changing dynamics of the newspapers industry and how over time their channels of distributions have changed. In Part 1, I introduced the industry, compared the business models of the traditional newspapers and the disrupters and outlined a few reasons why the traditional banks are struggling to adapt. Here, I will be looking into how the newspapers can sustain their businesses, and how their business models could evolve in the future.

How could the incumbent’s future-proof their businesses?

Amidst this tumultuous time, the incumbents have woken up to a reality for which a majority of them were unprepared. Pundits have been predicting the end of newspapers as we know them due to such uncertainties. There have indeed been some closures and large-scale layoffs in the past decade. A few newspapers such as the US News and World Report have now closed their print arms and have become pure-play digital players.

A clear strategy is needed for the incumbents to survive this massive change to the industry. Underlying any such strategy are the following two considerations – how to be relevant and more importantly, how to monetise news.

How to be relevant?

Online presence

This used to be a question of whether or not. However, that line of thinking is irrelevant now. Nowadays, it is a must to have a digital presence to be relevant and trustworthy. Exhibit 6 presents a unique insight into how the players have woken up to the mantra of a digital presence in the past decade. As of February 2016, around 78% of all US newspapers had a digital subscription model, and the numbers are steadily increasing.

Exhibit 6 – Source – Statista, US Census

Focused content

One characteristic of the online world is its changing dynamics. Readers tend to be less loyal and incredibly volatile. Before, readers chose a paper not only on its merit as a quality journal but also on its uniqueness in terms of titles, style of writing and content. However, with a volatile reader base, these characteristics must now be adapted to the what the readers expect. So, unless it is the New York Times or Guardian, instead of being a generalist jack of all trades, it is beneficial to be the master of some and focus on those specifically. Doing so is a novel blue ocean strategy that not only creates a niche but also ensures that competition is less severe, compared to general news. Newspapers that have successfully adopted this strategy include financial behemoths such as the Financial Times and Wall Street Journal and the technology publications such as Nature and Science.

Speed and frequency

To be relevant, another major requirement is to be omnipresent. This takes advantage of availability heuristics to make sure that readers are always presented with something new to indulge in. In absence of this, volatile readers would tend to deviate away from the newspapers, which directly translates into a loss of potential revenues.

Interestingly, the most well-established newspapers with substantial online presence are playing this game rather well. A recent report in the Atlantic (Exhibit 7), highlighted that the Washington Post publishes an average of 1200 stories, graphics and videos per day. That’s more than one story every two minutes.

Exhibit 7 – Source – The Atlantic

This number not only includes the 500 stories produced by the editorial staff but also includes wire stories, written elsewhere, that the Post transmits. The whole idea is to keep the consumers engaged at all times.

Availability channels and reach

Online news presents its own sets of challenges in terms of the user interfaces and distribution platforms. News is increasingly being consumed on various media such as PCs, mobile smartphones, tablets, etc (Exhibit 8). The titles, style of writing and content now must be adapted to the various user interfaces online. According to research, “neither excessive scrolling nor clicking is regarded as desirable in terms of design and usability”.

Exhibit 8 – Source – Ofcomm

Moreover, as Exhibit 9 shows, video has emerged to be the most popular format through which potentially paying customers prefer to consume news. Thus, newspapers would need to get into the production of rich media even more than before. Video, audio and news style formats, that are short and to the point, would take precedence over traditional written articles.

Exhibit 9 – Source – AudienceProject Insights 2017

Furthermore, newspapers are now available to readers outside of national boundaries and the storytelling needs to be adapted to that. Studies of successful newspapers that have been able to bridge the online-offline gap tactfully have indicated that their online editions carried more international news compared to their hard copy editions.

Social media and social partnership

Managing the social media channels well is vital to the success of any digital publishing house. According to Exhibit 10, based on surveys conducted by Pew Research in the US, there has been a gradual increase in the number of adults who get their daily dosage of news from the social media sites.

Exhibit 10 – Source – Pew Research Centre

Currently, about 47% of the adults surveyed showed a bias towards using these sites as a basis for them to get news. This trend is on a continuous rise and some channels are preferred over others regarding this. As seen from Exhibit 11, newspapers and online digital publications would be better off making sure that their focus remains on the following channels.

Exhibit 11 – Source – Pew Research Centre

Moreover, the online platforms have opened new forms of content for both the readers and the writers. The technological capabilities allow online publishers to customise and tailor their content based on the reader’s needs. On the flip side, readers are only attracted to content that appeals to their own individual needs. Consequently, a new breed of content producers known as citizen journalists has emerged. Online newspapers would do well to tap into this vital resource by offering citizen journalists platforms to engage and contribute.

How to monetise news?

Advertisements

One of the biggest issues that newspapers face is how to monetise the content. As can be seen from Exhibit 12, over an 18 years period from 1999 to 2017, net advertisement spend in the UK has almost doubled from £10 billion to £19 billion. However, by the early 2017s, the newspaper brands were together receiving just 11% of this money, a drastic decrease from around 50% in 1999.

Exhibit 12 – Source – GroupM

During the same timeframe, a new breed of digital advertisement platforms has sprung up. These now take the lion’s share of the advertisement spend, which in 2017 stood at 55%. Thus, depending on just online advertising sales is a faulty proposition. Online advertisement revenues are alone not enough to support a full-fledged news corporation.

Paywalls vs Freemium

There are many strategies that the newspapers are employing to monetise their content. Primary among them is the freemium model, where the newspaper allows open access to all its contents and stories to a global audience. The Guardian is a prime example of this, with a daily audience of 8 million and a firm focus on developing its online audience. Such a strategy relies on not just the advertisement revenues but also on a whole sleuth of other sources such as mobile apps or event organisation.

Some newspapers put their contents behind paywalls to restrict access. Subscribers pay per month or sometimes per article/story to access the content. Washington Post is a great example of newspapers employing such restrictions.

However, there are inherent problems with the paywall model. The Sun in the UK had 30 million users as of 2012. In an attempt to monetise this large swath of users, they tried implementing a paywall, which backfired grossly, with the readership falling to 117,000 right after the implementation. Owing to huge losses, the Sun had to withdraw its paywall in early 2015, and move into an advertisement linked model.

Hybrid Model

A more successful strategy that has emerged recently is that of a hybrid model. This is based on the segmentation of the consumers into heavy users and casual browsers. Newspapers maintain a premium paywall but allow some free articles per user per month. This allows the newspapers to build interest in their online offerings, while not completely stopping the casual users from accessing the news.

In parallel, it is important to print newspapers and keep the circulation going. A lion’s share of the advertisement revenues still goes to display ads on printed newspapers. This is because, online ads are deemed less effective, as people tend to ignore them. The subscribers of the print newspaper also get access to the full online version of the newspaper.

Among the newspapers who are employing this hybrid approach, the number of free articles that are available per customer varies a lot depending on the circulation size of the newspaper. Exhibit 13 highlights this fact.

Exhibit 13 – Source – American Press Institute

Two prominent examples of newspapers that have employed this hybrid approach are Arkansas Democrat-Gazette and the New York Times. The Democrat-Gazette has been using the paywall since 2002, whereas NYT started using the paywall in 2011.

The general consensus among the proponents of this hybrid approach is that the economics are still with the printed newspapers. Instead of scrapping newsprint and giving it all away to online distribution channels, the formula for profitability is to keep printing the newspaper and charge for the website.

How would the players evolve their services in the future?

For the new players, especially for the technology companies, news collection and dissemination is just a by-product of information collection. However, where they stand out from the incumbents is the ease with which they are able to present this to the users. In the coming years, I believe that they would be able to further evolve their services by augmenting the channels in the following manner:

Personalisation

Already, companies such as Facebook and Google present news in a very personalised manner to the users. This trend would increase further, as these companies gather and process more information on their user’s behaviours and preferences.

Augmented news articles

Through the use of web crawlers, the disrupters are able to gather news stories from a wider variety of sources. With more information on the users, these players would be able to augment their offerings with multimedia content such as videos, augmented or virtual reality and other such content.

Quality journalism

With the advent of citizen journalism and the prevalence of post first, verify later, post first, correct later, the quality aspect has suffered. This is especially a bigger problem for the new players as automated solicitation of articles by these players take the human editor out of the loop and increase the risk of inferior quality articles. Through the use of Artificial Intelligence and Machine Learning, in the future, we would definitely see a tighter control of what sort of news gets published.

Conclusion

The future of print journalism and particularly newspapers remain uncertain. On the one hand, some newspapers have reinvented themselves and tried to remain relevant in the times of social media and augmented reality. On the other hand, there are scores of newspapers closing shop on a yearly basis – some due to lack of readership and revenues and others due to increasing competitive pressures on scarce resources.

Though the hybrid model seems to be working for most successful media houses, one reason they are able to use it is because of their muscle power. This might not work for all and instead of treating the new breed of disrupters as threats, the incumbents would need to work with them to make sure that their futures are secure.

An example of such symbiotic relationship is the recent announcement by Google that it will discontinue its ‘first-click-free’ policy, which allowed a limited number of subscription only items for free. It was deemed a discriminatory practice because newspapers depended a lot on Google for traffic and not subscribing to this policy meant, disappearing from searches. This is a ray of hope for digital publishers as paywalls will now find more visibility and this might lead to more people willing to pay for news.

Challenges remain galore and the fast-changing technological landscape makes it doubly difficult to predict what form the newspaper industry would take. In whatsoever way this industry evolves, it is safe to assume that the business of news would never go away. There might not be newspapers in hundred years, but there will be news, and there will be journalists. It is in the publishing industry’s interest that they start preparing for that future, sooner rather than later.