Going Under?

According to a Pew study and the Wall Street Journal, in the last ten years:

§         Local daily newspaper circulation went down  
   7.5%.

§         Readership dropped more than 13%.  

§         20% of local dailies went out of business.

And things are going to get worse. Fast. An April, 2006, Nielsen report shows that almost as many people now get their news from web sites as from local dailies. And media-planning giant Carat projects internet ad revenues will pass newspapers in 2008.

The audience is dying off.

Newspaper readership peaks at 60% among people over 65, drops to 52% in the 50-64 age group, drops again to 39% of people 30-49 and plummets to 23% of people 18-29. And there's no cohort replacement going on here. People aren't picking up newspapers as they age into the next demographic segment.   

When a BrainPosse member informally polled people 18-29 about their primary source of news, every single one named the internet. Not surprising. Except they all worked for newspapers.

Of course it's not just the kids. In an informal poll at a recent corporate meeting of a major newspaper publishing company only 75% of senior editors and managers cited newspapers as their primary source of news.

It's old news.

A story that's on the internet this morning is on a cable news network simultaneously, the local broadcast network affiliates' afternoon news and in the newspaper the next morning. By which time it's not news, it's history.

Newspapers are losing credibility.

In less than ten years the number of people who rated newspapers "highly believable" dropped from 24% to 17% in the Pew Biennial News Consumption Survey. The number who said they cannot believe newspapers went from 8% to 12%.

And the problem started before Jayson Blair, Judith Miller and Jared Paul Stern made news by making up news.

Is that a problem?

OK, so circulation is down, readership is down, only old folks read newspapers, it's old news by the time they publish it and no one believes them anyway. Is that really a problem?

Well, no, not until now.

Newspapers exist to make a profit for their owners, and until recently they made money as if they were printing it on their own presses. Losing readers didn't matter, because according the Phillip Kunkel, Dean of the University of Maryland College of Journalism, "... income from subscriptions and newsstand sales barely covers the cost of attracting and keeping readers."

It's all about the ads.

The only thing newspapers need readers for is to bring in ad dollars. And until recently local dailies brought in more and more dollars even though they've been giving advertisers fewer and fewer readers. But that's over now.

Newspaper advertising generated $47,408,000,000 in 2005, about 1.5% more than the year before, though still below the level in  2000, newspaper's revenue peak. But The Newspaper Association of America reports all in-paper newspaper advertising down 0.2% in 2^nd-quarter 2006, at a time when advertising is up 5.1%. (Nielsen Monitor Plus shows local newspaper advertising up 0.7%.)

National advertising: 17% and mad.

National advertising is ads for brands of products or services rather than for local stores.  They represent 17% of newspapers' total advertising, but a lot of that is in the national dailies like The Wall Street Journal and USA Today.

National advertisers are mad at local daily newspapers for two reasons.

First, rate card prices for national advertisers are often more than the price of a same-size local ad.  

Second, Jayson Blair wasn't nearly as big a scandal for advertisers as the recently exposed circulation fraud. Newspapers self-report their circulation to an audit bureau that can't possibly go out and count every reader. The numbers some newspapers reported were bogus. So advertisers were paying for a lot of readers they weren't getting.

According to the Newspaper Association of America, national advertising was down 2.15% in 2005. Look for it to drop like a rock this year.

Retail advertising: 47% and variable.

Retail advertising is the stuff local stores and dealerships run. (local branches of national chains qualify, too). You know, the ones with a big starburst somewhere on the ad saying "Save 50% this week only!"

A lot of local advertisers are taking a close look at newspapers' cost-benefit equation as rates keep ratcheting up and readership drops.

Retail ad revenue was up less than 1% in 2005, but so far this year newspapers report declines in food, drug, electronic and department store ads. How bad is it? In July Editor & Publisher reported that newspapers' share of auto dealer ads crashed from 58% to about 30% in the last year. And in early August Federated Department Stores announced that they're  switching $425 million out of local daily newspapers into other media.

Classified: 36% and very, very vulnerable.

Classifieds are under attack from all directions. Monster, Craigslist, AutoTrader and others have taken $3 billion out of newspapers' classified revenues. That's 14.8% of the classified total.

$2 billion of real estate advertising is moving to the Web this year. By 2010 real estate advertisers will spend more on the internet than in newspapers.

In a recent test a major employer stopped all newspaper employment classified ads without changing anything else. There was no difference in the number or quality of applicants they attracted. So a multi-hundred-thousand dollar classified budget was scrapped.

And now some states are pushing to put legal announcements online instead of in newspapers. That's another $800 million that may disappear from newspapers' classified advertising income.

Losing money. Losing hope.

Newspaper companies' bottom lines look pretty bleak. McClatchy Co., New York Times Co. (The Times itself is a national paper, but it owns 16 local U.S. dailies), Tribune Co. and Knight Ridder have all reported big declines in profit recently.

Just about every corporation that owns local daily newspapers is diversifying into other media as fast as possible: E.W. Scripps developed its successful lifestyle cable TV networks, HGTV, DIY, Food Network and Fine Living; News Corp has invested in web-based products; Knight Ridder just sold itself for a bargain-basement price so stockholders can cash out their declining investment.

Companies that used to buy ink by the barrel are now buying barrels of pixels instead.

Fewer people are buying newspapers, fewer are reading them and fewer believe them. All three main advertising revenue streams are in trouble. Next time an editor yells "Stop the press!" the next sentence may be "And the last one to leave the building please turn out the lights."

Or Still Going Strong?

Local daily newspapers don't just have a future. They have four of them. 

Of course the dinosaurs  will get mired in the tar pits of "the way we've always done things," and become extinct.  But smarter, more agile, papers are busy evolving into organizations that will survive in the new media era. They probably won't look much like a local daily today, but they'll still be around. Here are three ways they're evolving, and one strategy that doesn't require any evolution at all:

1. Be a brand, not a product.

The national dailies are already doing this.

A BrainPosse member reads The Wall Street Journal's ink-on-paper version. His wife reads it online. But either one might say "Hey, did you see the Journal piece about..."  Because the Wall Street Journal isn't a broadsheet or a bunch of pixels, it's a brand of information. Whether that information is strewn across the breakfast table or delivered on a laptop screen, in a cell phone text message, on a Blackberry RSS alert or flashed up on a plasma screen in an airport is immaterial. What's important is that the folks at the Journal understand that they have to get their brand of information to consumers in the medium those consumers prefer. And they have to get paid for doing it. They're doing precisely that. More than 2,000,000 subscribers buy the ink-on-paper edition and 768,000 pay for the pixels.

The New York Times recently teamed with Microsoft to develop the Times Reader, a new stand-alone digital reader that delivers a reading experience like the printed page – but more versatile and interactive.

Local dailies are beginning to cash in, too. Local media sites generated $5.8 billion last year, and newspapers' share of that was 41%. With their virtual monopoly on in-depth coverage of local news and sports, local dailies can be the 800-pound gorilla of local information sites.

Developing a strong and profitable online news and information product – obviously with as much repurposed existing material as possible – can be a key to survival and success. 

2. Become a digital provider.

This isn't just putting the paper on the web or posting an online version of the classifieds. It's reaching out to new audiences with products and programs that don't have anything to do with the paper's usual content.

The Record, in Hackensack, New Jersey, is completely revising its online offerings to deliver useful information to people with little or no interest in the news.

When Gannett, the Tribune Company and Knight Ridder teamed up to create CarreerBuilder.com they didn't just aggregate their local employment classified ads online. Instead they built a comprehensive national job board. The site's 19.7 million monthly unique visitors is almost exactly equal to the circulation of the three chains' combined 139 local daily newspapers. (That's not counting the 2 ½ million readers of  Gannett's national daily, USA Today.)

Tribune Co. owns ForSaleByOwner.com, Dow Jones has CareerJournal.com, News Corp owns the web's most visited site, MySpace.com, and they just invested in Simply Hired.  

The opportunity for local dailies is to create free-standing sites that don't draw on their existing editorial, and that don't aim at their present readers. And to build enough revenue into the model to pay for the original content. 

3. Lighten up.

Not all newspapers have to be conventional local daily broadsheets.

Several publishers have launched free metro tabloids alongside their traditional papers.  Red Eye, from the Chicago Tribune, Quick from the Dallas Morning News and Express from the Washington Post all target younger readers. The Orange County Register is trying to reach that demographic with a paid tabloid, the OC Post. (That may be a long shot. The other recent attempt to get younger audiences to pay for a paper, the Patriot by the Harrisburg Patriot-News, folded in four months.)

Or how about a free-standing free daily churned out with a skeleton staff? The Baltimore Examiner will be distributed at no charge to 250,000 households – about 3,000 more than the venerable Baltimore Sun. The Examiner's newsroom staff of 20 will be a tiny fraction of the Sun's 340 reporters, photographers and editors. The  publishers have so much confidence in the free, cheaply-produced business model that they've trademarked the Examiner brand in more than 60 cities.

4. Go with strength.

Trying to dress up an ink-on-paper daily to appeal to kids is like putting a 70-year-old lady in a miniskirt. It doesn't make her attractive, it makes her ridiculous.

All the "newspapers in classrooms" programs and special teen sections in the world won't turn kids into newspaper readers. Newspapers simply aren't part of their media universe. So blow the kids off and concentrate on newspapers' strengths. Focus everything – columns, features, even news coverage – on the interests of newspapers' existing core audience.

Target local dailies to affluent, educated people 50+.

There are 76.9 million boomers. Add folks 60+ and you've got more than 40% of the entire population. You've also got more than 70% of the nation's wealth. This is the biggest, richest, most important market in America.

§         Cars? People over 50 buy half of the new ones.

§         Clothes? Boomers spend $47 billion a year. More than double teens' $20 billion.

§         Travel? 38% of people 50+ booked a leisure trip in the  last year.

§         Financial services? Pharmaceuticals? White-tablecloth dining? People 50+ are the prime market for all of them. 

The best part is 50+ educated affluents are already newspaper readers!

§         52% of people 50-64 read newspapers. 60% of people over 60 do.

§         57.5% of college graduates read dailies.

§         61% of people with household incomes of $75,000 and above read newspapers.

Once advertisers understand that newspapers are a mass and class medium they'll flock to buy space in them.

A friendly environment for ads.

People actually like ads in newspapers. They were the preferred medium for advertising for 52% of all readers in a recent Advertising Age report. In one survey, some readers mention ads as their favorite part of the paper! No other medium can offer advertisers that kind of receptive environment for their messages.

The national media can't compete.

Local dailies can't deliver national or international news to compete with online information destinations or national news channels. But the web and news channels don't have the city council debate or high school football scores.

20 good years.

Going with strength can give newspapers twenty highly profitable years before boomers start dying off. Which is plenty of time for any intelligently-managed local daily to pursue one or more of the three other options and evolve into an information source that will thrive in the new media era. Like the dinosaurs which are happily chirping in the trees right now because they were smart and adaptive enough to evolve into birds.