“The old model of newspapers is dying. The newspaper industry is trying to innovate as much as possible and it just hasn’t struck gold yet and figured out what will work best. It’s a serious problem for them and they may not solve it at all because it may turn out that less and less people want to buy newspapers in the future.”
This is a quote from Ed Butler, a Senior Analyst with IBISWorld. He is quoted in an article published by ad industry journal B&T speaking about the turmoil at Fairfax following the ‘resignation’ today of CEO David Kirk and the sacking yesterday of Alan Oakley as editor of the Sydney Morning Herald – are evidence of the challenges of newspapers. These changes have been brought about on the back of a considerable drop in Fairfax share price, staff retrenchments earlier this year and other major changes.
Newsagents are experiencing changes in their dealings with Fairfax through trimmed margin on subscription offers, more complex and time consuming consumer offers and other changes. Fairfax sees newsagents as a cost rather than an opportunity. If they reversed this view and treated newsagents with economic respect they may have healthier sales than today. By this I mean that Fairfax should reward newsagents for growing sales. Instead, with some of their current offers, newsagents are effectively penalised for new subscription customers.
Mark, I agree, fairfax have been on the slippery sloe for many years.
In my humble opinion, newspapers are dead. Its just a matter of time and i think when that time comes it will hit us quick and hard. It wont be the slow death that people think it will.
On yahoo business the other day, it quoted the alarming nubers for advertising in the USA for newspapers.
The rate at which newspaper advertising was falling year on year was in the high teens.
Each year was greater than the previous.
We have been treated appalingly by publishers for so long that i have restructured my business to not be so reliant on their product, so when the time comes we wont feel the crunch as much.
cheers
The way i see newspapers is that customers buy it out of habit ,we have a small local paper that is probally the biggest waste of money going as there is no news in it and when there is news well it was in the other papers the day before but yet the sales are great for this paper .People will never break the habit of buying a paper on the way to work sitting back having a read with a coffee before they start the day ,or sitting down at home having brekky reading the headlines .You would probally find most of the population does not have a computer in there work place to read the news ,how many people in the construction industry do you see pulling out a lap top and having a read at smoko ,i just can not see this happening any time in the near future .This is just my view on what i see happening everyday
I agree with Shaun in the opinion that buying newspapers is a habitual thing…for the older generation. (35+ up for me..)
newspapers would probably die out at around the same time.. so that’s still about 50 years of habitual buying to keep newspapers alive. unless something else comes out first.
Ar gees I gotta comment about this one even though you won’t probably believe me. This is a monthly sales comparison November 07 & 08 comparison in our shop i will send it to tower tomorrow and they might back it up it’s their software but I doubt it
Paper sales shop nov 07 13,060
” ” 08 14,700
excluding subs and runs their pretty contant
Total shop sales for nov 08 are down 5% on 07 but papers are moving in the opposite direction. Were in a strip off main street customers are mainly blue collar some uni students mail and town runs to to surrounds, owners do nothing special just try and be nice without loosing it. Papers are not set up at the front they are half way up the middle isle popular mags are at the front,shop is only 90s/m .
My opinion of a paper buyer is strange,, most are left wing but they read a right of centre paper the telegraph, they seem to want to read papers that have a strong opinion even if they don’t agree with the headline, it seems nothing else can do that , a person on Tv doesen’t come near the power that a headline or comment that a newspaper has maybe its more real you figure.
Whilst the newspaper will not be what it once was, pre-tv. I really do believe that it will have its place. Look at the local/regional rags. People will always want to read about local issues. That is why local news rates better than National news in most cases.
When it comes to the msn news services etc, they have no depth to the story. Most breaking stories skim the surface with some depth. The newspaper journo will go much deeper and look to insight fear, sympathy, anger or common ground.
What if Fairfax are using the excuse of newspapers going out of favour to cut dead wood? Wouldn’t be the first company.
Brad, Paul, Aron, Shaun. Listen up boys you missed my point.
Its not the fact that people will stop reading, it where the advertising dollar will go.
Its already happening, and once the advertising dollar turns the critical point where not enough of that dollar gets to the newspaper is when you will see paers close shop.
Even though the brickies,and the tradies like to read a paper at smoko time, this loyalty or habit will not be enough to allow the paper to survive.
Advertising revenue is what keeps the papers alive. Get the point.!
But dont worry, when the time comes, you as independent business men just need to have another offering to your customers to turn over a dollar.
Chris,
You are right, it is where the advertising dollar will go or has gone.
Our businesses are built on accessing traffic from these physical distribution channel reliant products – albiet for a tiny clip of revenue.
Smart newsagents have been developing other revenue streams off the back of print media traffic. Others have cut back on print product altogether.
The crucial message here is that we are in the middle of tremendous change outside of the current economic situation.
Mark.
Yes papaers are reliant on advertising but you have to differentiate between classified and display advertising. It is classifieds where the hemmoeraging is happening so if your business model is built on classifieds (Fairfax’s “rivers of gold”), you’re in trouble unless you can migrate them across to other platforms you own.
Advertisers will continue to advertise in newspapers as long as it works for them, not because self proclaimed experts declare they are dying.
And whilst you can look to the USA newspapers to see what potential trend might occur, it is not a complete guide. Have you seen US papers? They are grey and uninteresting…..one thing the Australian newspapers are not.
Having said all that, there is no doubt that newspapers are in decline. It’s the pace of that decline that’s in dispute….and the danger is we as newsagents make decisions about a product that is currently still a major traffic generator for most, based on the possibly false assumption their demise is shortly upon us.
Chris,
The point you make about advertising dollars is crucial. The financial model that newsapers are based upon is reliant on the advertising revenue stream. The production cost of a newsaper is FAR more than its retail cover price.
As readership declines at a continualy increasing rate, so will advertising revenue. Even if a publication is able to turn a small profit, major publishers won’t consider then a viable product. They require a certain ROI for their investment.
We have already seen mass staf reductions in the print media arm of Fairfax this year. This is a strong sign of the trend. Circulation is down, advertising revenue is down (especially when looked at as a percentage of advertising revenue spent on all mediums).
Shaun,
Newsagents need to understand that electronic media is not simply the same print articles on a computer. Why can the tradie not read news articles, or blogs such as this, or watch video clips on his PDA? Mobile phone? Mini-notebook?
Understanding that the change is not simply a shift in medium but also in the very nature of the content. Electronic media is not just words on a page and the opportunities this presents to publishers, readers and advertisers is very very appealing.
Jarryd,
Not sure what newspaper you are referring to when you say the procudtion cost is FAR more than the cover price. I asked this exact question of a newspaper publisher and received a very diiferent answer.
I can understand there being a high cost for newspapers with glossy magzines inserted but that doesn’t apply to most days of the week.
What do you base your statement on? Which newspaper are you referring to or are you generalising?
Regardless of how we got to where we are today or where this will end up, it is crucial that newsagents either have a plan or are part of a marketing group that has a plan. Sadly, few are in either situation.
Mark
Jarred dont you think a newsagent should receive a return on investment for delivering john fairfax publications. because at the moment not many are. how much longer can we continue. cheers andy
Andy,
Newsagents have failed on this mission for decades. Publishers know we are weak – look at our pathetic contract negotiation in 1999. Newsagents leading the channel failed newsagents.
I sold my run just over two years ago. It was a smart move.
If you have a run which is not financially viable, quit it.
Mark
Ted,
I am generalising. I have been quoted a production cost of between $5 and $10 per newspaper by someone who has been in the industry for some years. I wouldn’t expect publishers to be openly promoting this.
Using the cheapest example – The Daily Telegraph could not be produced for less than $1. The cost of paper, printing materials, publication labour, distribution labour would be far higher than then $0.75 wholesale price.
Andy,
Fairfax is doing whatever it can to turn a profit. As Mark says, it is newsagents who have failed on this mission. As harsh as it may sound, I don’t think I would be doing it differently if I were Fairfax. What incentive do they have to make runs profitable if the majority of newsagents continue to operate them anyway?
I agree with Mark – “If you have a run which is not financially viable, quit it.”
Chris, i think it’s a while before i become an independant business man. i just finished vce, and stating how i see the newspaper situation.
Appreicate the thought though.
Say 350,000 copies x .75 = $262,000.00
plus adv should clear 360k /day thats serious money Do you think Rupert got rocks in his head, He is always talking them down so he can buy em cheap otherwise he would have run out of money years ago, wish I had one.