Newspaper industry market overview and problem analysis

PUBLISHprotocol — Newspaper industry market overview and problem analysis

In our last article, we looked at our past achievements and goals moving forward. In this article, we take a look at the current state of the newspaper industry and explain why the newsrooms are facing an existential crisis.

Digital advertising, subscriptions, and newspapers

Digital advertising, the lifeblood of newspapers, is a market expected to reach $335 billion by 2020, an increase of approximately 46.4% compared to 2017. However, the market is dominated by just a handful of giant social network services and search engines that produce little original content of their own. For instance, according to Facebook’s 2017 annual report, digital ad revenues amounted to $39.9 billion — 98% of the company’s total revenue. Google took up an even larger slice of the digital advertising market with ad revenues of $95.3 billion — 86% of the company’s total revenue.

In a market dominated by this Google-Facebook duopoly, however, we find that with the exception of a few large-sized newspapers, the newspaper industry is failing to keep up with the transition from print to digital modes of consumption.

For the small- to medium-sized newspaper newsrooms that represent the bulk of the landscape, there has been an overall drop in revenues led by diminishing revenues from print products, which are still the mainstay of the newspaper business. According to an analysis of publicly traded newspaper companies, advertising revenue for 2017 was $16.5 billion, a 10% drop compared to 2016. Subscription revenue grew by just 3% to $11 billion over the same period.

Estimated advertising and circulation revenue of the newspaper industry

Large-sized publishers like the New York Times, the Washington Post, and the Wall Street Journal are faring somewhat better.

According to the NYT’s 2017 annual report, total revenues increased 7.7% to $1.7 billion compared to 2016. This was primarily driven by a significant increase in digital advertising and subscription revenues and only partially offset by a decrease in print advertising revenue.

Advertising revenue in the same year was $558.5 million (33.3% of total revenue), a 3.8% decrease compared to 2016. This was led by a 13.9% decrease in print advertising revenue, which was only marginally offset by a 14.2% growth in digital advertising sales, print advertising still being more important than digital advertising.

Subscription revenue increased to just over $1 billion (60.9% of total revenue) in 2017, a year-on-year increase of 14.5%. While its print newspaper saw a decline in circulation, this was completely offset by an increase in digital-only subscriptions, thanks in part to heavy discounting and attractive subscription bundling.

Being internationally respected publications with readerships to match, however, the NYT, the Post, and the WSJ may be regarded as outliers in the sense that they are able offset lost revenue from their print business by offering steep discounts on digital products. For these outliers, the strategy of selling more for less is a viable option, but the same may not be said for local or niche newspaper newsrooms, most of which do not enjoy the same economies of scale.

In line with eroding newspaper revenues, newspaper closures are up and the number of employees in the sector is down. According to a PEW research report, from 2008 to 2017, newspaper newsroom employees working in the print news sector decreased by 45 percent, from about 71,000 to 39,000 workers, a loss of 32,000 jobs over the period. The digital sector fared far better with jobs increasing by as much as 79 percent, from approximately 7,400 in 2008 to 13,000 in 2017. However, in absolute terms, this modest increase of just 6,000 jobs did not offset the more significant job losses seen among legacy publishers relying on print news.

But what’s behind this downwards trend? We’ve already suggested one problem: poor digital adoption relative to online substitutes like Facebook and Google. In the next section, we identify other pain points for publishers.

Problems

Fragmented readership

Today’s readers do not opt for a single publication. Instead, they navigate to news articles via shared links on mega-platforms and curation sites like Facebook and Google that produce little editorial content of their own. In fact, according to a 2018 survey conducted by the PEW Research Center, more than two-thirds of US adults at least occasionally get news from social media platforms, with as many as 43% getting their news from Facebook.

The problem with this is that publishers have little choice but to promote their brands and content on these platforms. News content distribution has become centralized, and readers tend to consume content from within these platforms, only occasionally visiting the website of publishers.

Misinformation and disinformation

Perhaps more worryingly, however, is the fact that these mega-platforms have enabled bad actors to distribute low-quality content to the masses.

Results of a recent public consultation on fake news and online disinformation conducted by the European Commission show that as many as 99 percent of those surveyed claimed to have been exposed to fake news, most instances of which originating from social media platforms. The same survey revealed that such disinformation is often viewed as harmful to society and as targeting areas related to politics, immigration, health and security.

The internet has effectively enabled any individual, from well-intentioned citizen journalists to ill-intentioned producers of fake news, to become publishers without any meaningful qualifications or reputation. As Warren Buffet would say:

It takes 20 years to build a reputation and five minutes to ruin it.

But unlike an established newspaper newsroom, a bad actor has little reputation to lose.

As a result, the public has become distrusting and weary of the media more generally.

Increased competition from corporate media

During the 1980s, a new deregulatory view was brought into the conversation by the Reagan administration, and the Telecommunications Act of 1996 signed by Bill Clinton officially reversed the long-held stance against deregulation of media consolidation.

The Act allowed near unlimited corporate acquisition and ownership of media companies, and thus began the capitalistic frenzy of mergers. The majority of US media was held by just under fifty corporations in the early 1980s. Today, as few as six corporations own over ninety percent of the entire US media industry.

The concentration of ownership within the media industry pre- and post-deregulation.

Independent publishers simply do not stand a chance to make it on their own in the face of increased competition from corporations chasing economies of scale through acquisition after acquisition.

So what?

The purpose of journalism is to provide the public with the information necessary for them to make the best possible decisions about their livelihood, societies and governments. While every medium offers a particular voice and perspective, corporate media and consolidation enforce conformity and suppress views that fall short of a specified range of interest.

Good journalism also presents a voice for the marginalized and exposes injustice, thereby working to hold those in power accountable. But when the media is run by business leaders in place of journalists, the pursuit of objectivity and truth is generally not a priority. The longtime mainstays of high-quality journalism, such as investigative journalism that has played a crucial role in driving major social changes, are shunned as they are seen cost-ineffective. Clientelist relations dictate what is published, turning the media into a convenient instrument for particularized interest. Publishers have effectively become mouthpieces for their respective owners.