Greenslade says newspapers are heading for the cliff
Respected media commentator Roy Greenslade has written a column – Suddenly, national newspapers are heading for that print cliff fall – for The Guardian that will challenge all who have print newspapers as part of their business model mix.
I am in Ireland to address the Irish Press Council’s annual general meeting in a lecture entitled “Have newspapers got a future?”
My theme is that they have no future. Declining circulation figures tell us that people are switching week by week from print to screen. It is simply a matter of time before it becomes unprofitable to continue publishing newsprint papers.
While we know that newspapers will stop publishing when the numbers no longer work, Greenslade makes an excellent point about the poorer quality of stories as newspapers cut costs in the end days.
Space in newsprint papers can be filled. The end result is something that looks like a paper, but the content lacks any real value. It is not journalism. It is pointless material without any public benefit.
While Grenslade is writing about UK newspapers, there are parallels here.
For our part, we newsagents should long ago have reset our businesses to not rely on newspaper traffic. Those who have not are facing trouble.
Fairfax CEO on the performance and future of Fairfax, and future of daily newspapers
Fairfax CEO Greg Hywood yesterday delivered a presentation at the Macquarie Australia Conference in Sydney. The content is available online through the ASX website.
Below are some excerpts from the published material followed by my comments:
Over the last four years we have reset the 185-year-old Fairfax. We are now a modern media business that is diversified and ready, willing and able to be part of the future.
The strategic priorities and opportunities for each of our businesses feed into our Group strategy, which is to ‘transform, grow and invest’ to drive long-term performance.
We have delivered a 26% reduction in annualised publishing costs (that is $400 million).
At the same time, our digital and print audiences have never been larger, reaching 12.9 million Australians and 3.2 million New Zealanders, as well as 2.2 million radio listeners.
While it could be tempting for newsagents to be critical here from their perspective, I think a more helpful take-away is the focus on cutting costs and pursuing revenue from other sources. These are mission critical moves for newsagents. Newsagents need to set their 140 year old businesses (that’s how old the channel is) on a similar path – cutting costs and pursuing other revenue sources. Many of us have been doing this for years now.
Over the last four years, we have reshaped all aspects of the way we operate. We have built a stronger, more diversified, digitally-driven business that is leaner and more agile.
We have never shied away from the fact that we are on a print to digital journey. We have prepared our business to minimise
Newsagents need to be on a similar journey, replacing traffic for old products with traffic for new, replacing traffic for agency products with traffic for new.
The reality of media today can be summarised in four points:
1. Consumers have wholeheartedly embraced digital, as reflected by the rising use of search engines, social media as well as going online for news and information. Print is steadily declining but still attracting valuable audiences. Already around 70% of our Metro audiences reach us via digital means.
2. Print advertising and circulation revenue continue to decline. Digital display advertising and circulation alone cannot provide an offset.
3. Mass circulation print products involve a high level of fixed cost, notwithstanding the reduction and variabilisation we have achieved over the past four years.
4. Technology and systems costs to support legacy print and digital infrastructure have grown over the years, creating complex and expensive support requirements.
In short, failure to address the old – the traditional model – is not an option.
These are points we need to read again and again. In short, the points come back to: spend less on the parts of your business that are shrinking, chase new traffic, not acting is not an option.
It should surprise no one, and certainly not us, that the seven-day-a-week publishing model will eventually give way to weekend-only or more targeted printing for most publishers. We are already seeing this happening offshore.
Quite simply it is likely that one day, the viability for newspapers on current trends will run out. It isn’t going to happen overnight – but eventually it will.
The question for newsagents is: are you ready for this? Are you ready for the decline in daily traffic that will result from the end to the daily newspaper? Are you ready to no longer be the habit-based retail stop-off? The ramifications beyond newspaper sales could be extraordinary.
Material reduction in printing and distribution costs resulting from significant reduction in newspaper publishing frequency. We expect increased industry cooperation on printing and distribution.
Distribution newsagents take note.
This slide on page 19 of the presentation document is telling. There is no denying the trend re print circulation reported by PWC and included in the presentation by Fairfax – and seen in our own benchmark studies.
I like that Fairfax is transparent about what it is doing and why and that it has been for some years. Presentations like the one to which I refer above can inform newsagents for their own plans, and this is what I hope happens.
Sure, it would be easy for newsagents to complain about Fairfax for a various reasons. I think time and energy would be better spent learning from their plans and considering this information when making our own plans for our future.
If you have not significantly changed your newsagency in recent years, what should this Fairfax presentation encourage you to do:
- Cut operating costs relating to print media products. This means less floorspace but not necessarily less range. It also means driving supplier efficiency.
- Chase new traffic. This means finding new products to attract people in your area who do not shop with your today, promoting these products outside your business and creating an in-store experience that is contrary to a newsagency in-store experience.
- Change your management practices. You no longer own and operate a newsagency.
- Cut off dead wood. Stock, people expenses – anything not helping you pursue the goals of your business need to be eliminated, urgently.
- Have fun. Change is an opportunity for excellent fun in-store.
The shift in newspaper marketing newsagents need to see and confront
For decades the focus of newspaper marketing has been home delivery as it sat at the heart of the economic model pursued by newspaper publishers. Long-term home delivery customers were gold when it came to setting advertising rates. Advertising revenue has been the most important revenue stream to publishers.
That was then.
This is now.
The ad stuck on the front of the Sunday Age newspaper at the weekend was all about promoting six months access on any device, anytime. This is a digital subscription. No sign of a home delivery offer in sight. No support for the print product being used to serve the ad.
I have written here previously that I expect Fairfax to be the first newspaper publisher to retreat from seven day production of a capital city newspaper. On pure circulation numbers it ought to be one or more of the News Corp. dailies in single paper cities. However, in smaller cities there are factors other than circulation that can keep a newspaper publishing. Also, I think News is more invested in not being first than Fairfax.
This ad reflects a change on focus by Fairfax. We need to take notice … today, not next month, not in six mounted, today.
- What percentage of transactions in your business include a newspaper?
- How many newspapers are sold alone?
- How much do other parts of your business rely on habit-based newspaper shoppers?
- What is the overhead of newspapers in your business – in terms of space and labour?
- What new traffic are you generating now to replace newspapers into the future?
These are other questions deserve consideration and answers. Thinking about this issue and the starter questions I have noted is a positive thing to do. The only negative in all this would be if you did nothing.
I have not written this post to alarm anyone. Rather, it records the fact of the shift on focus of Fairfax marketing – with the hope of engaging newsagents in thinking about retail businesses without daily newspaper traffic.
While the decline in over the counter newspaper sales is not new, too many newsagents are yet to factor this into their business planning.
Rupert Murdoch started talking about the shift in April 2005. Back then, he was considered to be slow to the digital discussion. sadly, he appears to have been an early adopter compared to too many newsagents.
The future of your newsagency with less reliance on newspapers is up to you. Just as Fairfax is clearly planning for less income from print, so must you.
Newspaper publishers snipe at each other when they ought to focus on their customers
News and Fairfax are sniping about layoffs at their competitors. With print copy sales continuing to decline and ad revenue down it is only natural the publishers want to cut costs.
Publishers ought to focus on creating more compelling products for today’s marketplace. With editorial roles at the heart of what publishers create, retaining and hiring good and important voices ought to be a core goal.
I want a newspaper I can enjoy for more than the 2 or 3 minutes I give many I pick up to read today.
Could drones be used to deliver newspapers?
With more retailers, like Walmart, seeking approval to test delivery of products by drones, is it only a matter of time before publishers or others seek to trial delivery of the daily newspaper by drones? While there are regulatory challenges, drone delivery of newspapers could be more cost-effective in built-up areas where drones would be challenging.
The Economist recently published an excellent article, Welcome to The Drone Age. The article opens with a stat that is extraordinary:
THE scale and scope of the revolution in the use of small, civilian drones has caught many by surprise. In 2010 America’s Federal Aviation Authority (FAA) estimated that there would, by 2020, be perhaps 15,000 such drones in the country. More than that number are now sold there every month.
Swiss Post is trialling drones for small parcel delivery. So, why not newspapers?
75% off for The New York Times
I signed up for the free 12 week offer of digital access to The New York Times a few weeks ago. Last night, this offer arrived by email. 75% off home delivery for 12 weeks. They do not filter out people overseas – until you click on the link and it breaks.
The 75% off cover price is an amazing deal for the second step deal after 3 months free access as it includes home delivery. I can’t see how they make money from this with ad revenue down and distribution costs that cannot be cut further.
Pricing like this from any newspaper publisher, and there are plenty doing it, makes we think they are in a race to the bottom. Once they get there they will urgently need a completely different business model.
Why newsagents should not resist providing News Corp. sales data through XchangeIT
I am aware of some newsagents refusing to provide News Corp. with sales data through XchangeIT. The provision of this data is one reason for News now using XchangeIT to send supply files to newsagents.
Unlike some magazine publishers, News wants to reduce the paper wastage of returns – saving them money as well as newsagents money. The best shot they have to make more accurate allocations is through timely access to accurate data. Hence the move recently to partner with XchangeIT.
I have met with senior people from News in Sydney on this and related topics several times and am certain there is no sinister plan afoot here. No, there is no conspiracy.
The data being provided is for the stated intended use only. Indeed, the data being provided would to help the company move against newsagents as it is narrow in its scope.
Even a fractional decline in newspaper returns can be valuable for News and valuable for newsagents.
I encourage all newsagents to get on board with this project and to ensure that accurate sales data flows back to News through XchangeIT.
Now before anyone comments – the folks at News and XchangeIT are not aware I am writing this nor have they asked me to write this. I have written this because I think this project is good for our channel. The more we and our suppliers use timely accurate data the better (are you reading this magazine distributors and publishers?)
There are other factors that will reduce newspaper sales in and through newsagencies that newsagents need to be aware of. Worrying about the supply of this data to News is a waste of time in my view.
Yes, News will put their needs ahead of newsagents, as they should. We, too, should put our needs ahead of News – such as where we place newspapers, how we market the product and the time we invest in managing the category. All our efforts should be focused on our profits from the category as it is with News.
Distribution newsagents given a delivery fee increase by News Corp.
News Corp. has advised distribution newsagents in QLD of the results of its annual distribution fee review. While not probably as much as some were hoping for, any increase is better than nothing.
Some said that the structure of the fees is a problem, and that distribution newsagents are not keeping up.
In the announcement, News made a couple of other interesting comments on their plans:
News Corp Australia has implemented cover price increases on all of our mastheads in the last 12 months and we intend to continue this in the forthcoming year. This has, and will continue to add additional revenue to the home deliveries and retail side of newsagency businesses.
We will also be continuing our highly successful series of collectable promotions which have generated considerable circulation increases and incremental merchandise sales, along with incremental distribution revenue.
You can access the News Corp. announcement here.
FYI I’m not endorsing or promoting the review, only sharing the results.
Thinning newspapers not unwrapping as well as newspapers from years ago
With page counts in newspapers down from years ago when plastic wrap for home delivered newspapers was introduced, the product experience for readers today, on particularly thin newspaper days, is not ideal.
On Tuesday I saw this first-hand in a customer location. There on an unrelated matter, when they found out I owned a newsagency they brought out the newspapers delivered that morning and complained about how they look.
The people at this business are so frustrated with their experience that they say they will cancel home delivery and pick up what they want from the 7-Eleven down the road. That they would spend more for flat newspapers speaks to their frustration.
Thinking about newspaper thickness across the seven days of the week here in Melbourne, the Herald Sun would wrap well three maybe four days a week and The Age two days a week. I’d not thought about this before now but listening to the home delivery customers on Tuesday, I think they have a point.
While slimmer newspapers are easier to throw and less of a health risk for deliverers, the result for the reader of a wrapped product is not as good today as a few years ago – because of the reduced page count. This will need to be considered if delivering a good reader experience is a goal for publishers and newsagents.
The convenience of a home delivered product has the be considered about the state the product arrives in as a result of the wrapping for home delivery. This is a challenge to be considered.
Publishers pushed newsagents to introduce wrapping and they have control over the size of they product. Any solution would need to consider the
To newspaper publishers who want to know how to sell more newspapers
To newspaper publishers who ask how can we help retail newsagents sell more newspapers I say stop using us to switch our customers away from our businesses. The deal stuck on the front page of The Age today is a good and frustrating example.
While I understand the role of discount home deliveries in the mix, stop using my shop to attract these customers. Instead, work with me on driving over the counter sales.
News Corp. removes newspaper home delivery price protection in South Australia
News Corp. has advised newsagents in South Australia that it will remove price protection for home delivered product within weeks. Here is the advice the company provided newsagents:
Please note that News Corp has decided to remove the price protect for home delivery customers with the forthcoming price increase for the Sunday Mail on Nov 2, 2014. Thus, please charge full price for all home delivery customers from Monday October 27. At the same your rate for agent collect flat wrap copies will rise to the same as the retail papers.
Many years ago newsagents told News that home delivery customers were not concerned about price for the quality premium service. It will be interesting to see what customers think today with the status of newspapers now compared to then so different.
Celebrating 160 years of The Age
The Age newspaper is 160 years old today and some have used social media to say long live newspapers. I wish I could say that. The weekday editions of The Age must be perilously close to the point where printing and distributing them is loss making, where falling advertising revenue is not being covered enough by a rapidly (in newspaper terms) rising cover prices because copies sold are decreasing at double-digit levels.
Fairfax CEO Greg Hywood has said that newspapers will stop being printed when they are no longer profitable. They must have reached that conclusion with the community newspapers they have decided to close.
With costs cut to the bone and cover prices up 50%, they have little else they can change. The reality is there is no upside for print newspapers. They have been trumped by technology for delivering access to news and the print model has not adjusted to provide on a daily basis something consumers want in sufficient quantity. As with anything you cherish, one hopes for a good death.
On the two major Australian publishers, what is different for Fairfax compared to News is the ratio of subscriptions to over the counter sales. For Fairfax, the percentage of subscriptions is far higher. But long-term subscriptions come at a bottom line cost to the business and only those inside the company have the data to know how close to the line their mastheads are each day of the week.
I still expect to see a capital city daily newspaper to cease daily publication in the next twelve months. I don’t want to see it but I expect it will happen.
Gold Coast Bulletin souvenir edition not in newsagencies
News Corp’s Gold Coast Bulletin published a special edition yesterday commemorating the handover of the Commonwealth Games. As their own report indicates, this special edition was not available in newsagencies.
News Corp has passed up another opportunity to demonstrate its commitment to the newsagency channel.
The company for years has said newsagents are important to them – their actions do not match their words.
Newsagents nervous about digital and print newspaper offers
I heard from several newsagents yesterday concerned about the promotion of a digital and print offer that appears to be targeting digital seven days and print two days a week.
We will have three key membership options; digital plus weekend newspaper delivery, digital plus 7 day newspaper delivery or digital-only membership. The best value package is a digital and weekend print newspaper delivery costing only $2.50 a week for the first 12 weeks (then $5 per week at full price).
I can understand newsagents feeling nervous. The reality is that we need to run our newsagency businesses for the future we want and with the knowledge of these and other changes and challenges. This is what News and other publishers are doing with offers such as these. I don’t like them but I acknowledge I’d probably do the same thing if I were them.
Memo to accountants and lawyers – News Corp. is not taking control of newspaper distribution runs
Lawyers and Accountants advising on the purchase of a newsagency have a responsibility to ensure that the advice they provide is accurate. It is frustrating hearing one or the other make a statement that is not based in fact.
One accountant recently told a prospective newsagency purchaser that it may not be a good business to buy because News Corp. is taking control of all the newspaper home delivery runs.
This is not true. Newsagents can hand their newspaper home delivery runs if they wish but it would be their choice.
The T2020 project trialled more than a year ago in South East Queensland to facilitate newspaper home delivery territory consolidation did not proceed as trialled.
Stolen newspapers challenge distribution newsagents
Every newsagent who owns or has owned a newspaper distribution business has experienced the theft of home delivered newspapers. I experienced it years ago before I sold my delivery run. In one instance a resident at a church run retirement village was regularly stealing the paper delivered to a fellow resident.
I know of people who have been caught who say it’s a victimless crime. It’s not, of course. The newsagent carries a considerable cost – replacing stolen product, making good the situation and often soaking abuse from the customer.
I’m opening the topic here for discussion following recent comments on another threat. Over to you…
Distribution newsagents miss out on News Corp cover price increase
Distribution newsagents are voicing frustration that the price increases for News Corp. newspaper titles are not resulting in an increase in the fees they are paid.
While News Corp will say they addressed this in their restructuring of fees last year, any reasonable assessment will challenge this. Last year’s fee increases did not catch up with the cost increases newsagents have absorbed in recent years.
Ater the increase in 2013, distribution newsagents were still worse off in real terms than a year earlier.
As long term SA newsagent John Fitzpatrick noted yesterday:
The retail price of the Saturday paper has jumped from $2.00 to $2.50 the extra commission to Distribution Newsagents on copies supplied to retail outlets = ZERO, Subagents receive an additional 0.0625 per copy BUT nothing for the Distribution Newsagent!
Granted, we will receive the .0625 cents on Home Delivered copies – BUT NOT all copies – Cafe’s, Hotel’s, NIE Packages, TAB and many more will be at a reduced rate.
There are never ending costs in Subagent delivery, especially in SA where current weekend publishing times have been very late.
It seems News doesn’t value the work involved in Subagent Distribution.
News will need to work urgently on the current model if it wishes to retain all existing distribution newsagents. And right there is the question many newsagents are asking.
News delays iServices implementation for SA
News Corp. is delaying the introduction of DTI Circulation – its national circulation and subscriptions system which is already in place across New South Wales, Victoria, Queensland, Tasmania and the Northern Territory. No reason has been given for the delay in SA. News has advised that the WA implementation will be undertaken later this month.
News Corp. security breach a case for not centralising newspaper home delivery data?
The admission by News Corp Australia today that a vulnerability had been discovered in its subscriber data systems is a reminder of the risk of centrally managed data banks.
For decades newsagents held subscriber data at the local business level and it is only in recent years that the newspaper publishers have sought to centralise this. While there were significant benefits for News, at the time of centralisation there was considerable concern by newsagents and some of their customers about the risk of unauthorised access to the data.
I recall one newsagent lost newspaper home delivery customers because of the centralisation of their data. One customer, a barrister, said they trusted the newsagent and their systems more than they trusted a publisher.
Today’s announcement by News could serve as vindication of concerns expressed at the time even though this breach relates to newsletter subscriber details.
Any company holding customer data needs to take the security of the data seriously. The greater the centralisation of data the greater the risk and the more valuable the reward for those who trade in data.
For a more complete report on what happened check out the report published by The Age.
News Corp. changes to newspaper distribution remuneration should help drive value of newsagency businesses
News Corp. Australia has this morning released the long-awaited results of the national newsagent remuneration review. I see the changes announced as a reinforcement of commitment to newsagents from News. The headlines as I see them are:
Three year contract. This gives newsagents certainty, something they can sell. It will help newsagency sellers and buyers. But most important, the three year contract term will help banks better understand and price the value of a newsagency business. This should make borrowing to purchase a newsagency easier. The three year term also encourages newsagents to consider capital investment within the context of such a term.
Consistent fee structure. Under Kim Williams leadership News transitioned from a state and regional business with many silos each with its own approach to management and each with its own newspaper delivery fee structure to a more centrally run company. The new fee structure of essentially two fixed fee-per-copy fees – category 1 (20 cents a paper) and category 2 (25 cents a paper) – quits close to fifty fee structures. Gone is a fee that reflects a percentage of cover price. I see this as focusing attention on the distribution business as a freight business.
Fixed fee-per-copy replaces sliding scale delivery fee. Gone is the discount for second and third newspapers delivered to one address. The new approach treats each delivery as a delivery. This move to a fixed fee-per-copy approach is sensible from what I can see. This change should increase the income earned by many newsagents.
They remuneration decision shows that News is committed to the newsagency channel. Beyond the increase in fees, the more valuable changes are contract tenure and the fixed fee-per-copy. My understanding is that these moves will increase the income earned by distribution newsagents.
While newsagents will be frustrated that they have to wait for six months for the remuneration changes to take effect, the time is necessary for News deliver changes to its internal systems. The delivery pricing model is quite different to what some News systems have been used to.
I see the remuneration and contract changes as part of a broader process being undertaken at News. The company has work to do with retail newsagents to drive single copy sales. As a retail only newsagent this issue is important to me if I’m to continue to sell newspapers.
News also is yet to fully address the issues of consolidation following the suspension of the T2020 project in Queensland earlier this year. That said, the FAQ document accompanying the announcement indicates the company is supportive of voluntary territory consolidation. I’d be keen to see it go beyond this and actively encourage newsagent-driven distribution territory consolidation.
News has a website with some details. All affected newsagents will start receiving letters from today.
While these are my views, what really matters is what other newsagents think. Over to you…
Who’s next to have a crack at sorting out News Corp’s Australian newspapers?
Change agent Kim Williams ‘resigned’ from running News Corp. in Australia yesterday. He’s been replaced by the former Chairman of the Herald & Weekly Times Julian Clarke in a move many commentators label seat warming for a longer term leader – some are speculating about Lachlan Murdoch for the role.
Williams’ resignation is evidence of company infighting at News. He was a change-agent recruited to focus on the digital platform. In this role he inherited T2020 – the name of the strategy to overhaul newspaper distribution. Williams oversaw tweaking T2020 and then presided over its death or stalling at least.
Now it looks like print people are back in charge. News insider Mark Day said as much on ABC Radio yesterday. This could mean T2020 or the goals of T2020 – cost savings for the company – are pursued again. But this is only speculation.
My expectation is that News will refocus on its print products and the costs associated with distribution of these products. They’ll do this because subscriptions and advertising revenue from digital come nowhere near what the company needs to serve its cost base or support its share price, nowhere near advertising revenue from print today.
I expect we will quite quickly see moves by the company on print given the saving some in the business expect they can achieve by focusing on the distribution costs. While I could be wrong as to the outcome, I am certain there are senior people in the company keen to ‘fix’ what they see as an expensive and inefficient distribution model – especially in capital cities.
The recent leaking of internal News correspondence, a reported by Crikey, showed discontent within the company and disputes between old and new guard factions.
It was put to me recently that some News execs see newsagents as a union they have to break in order to fix what needs to be fixed. The company will disagree, saying there is no one in the business who holds that view – just as they denied my comments a while back that News was in crisis in terms of newspaper home delivery.
While T2020 is what will matter most to newsagents flowing from the coup at Holt Street, the bigger picture is the future of the company itself. Challenges abound:
- Print versus digital.
- The financial model of free versus paid.
- Subscriptions versus single copy sales.
- The processes and costs of landing subscription copies on front lawns. That last mile is the killer for them.
These are matters of serious interest to newsagents and to News executives. They go to the core of the change in leadership I think.
We’ll read from industry associations that they are seeking meetings with the company and that they will advise newsagents once these meetings have happened. The reality is that News will advise newsagents about its plans when it is ready and not because someone demands answers.
The changes to the distribution of newspapers are far from over. Newsagents can be on the front foot by themselves consolidating to deliver News greater efficiency. I’m certain News will welcome more proposals from newsagents that reduce drops and the number of newsagent accounts they have to manage.
My advice to distribution newsagents is – do not wait for action from News, get on the front foot now, develop a business plan and pitch it to the company.
Just read: Killing Fairfax
Killing Fairfax is an excellent read, I couldn’t put it down over the last couple of days. Beyond telling the story of how successive leaders of the once giant media company missed online opportunities, the book takes us deep into Australian media family rivalries thanks to excellent on the record sources.
Newsagents wondering about the future of newspapers ought to read this book. It’s pages are drenched with insights newsagents could benefit from as they plan their future.
Beyond the question of the future of print, this is an excellent business book and most instructive for businesses facing the challenges of disruption to the model they were founded.
Kudos to author Pamela Williams. I highly recommend Killing Fairfax.
170,000 home delivery subscribers not enough for Oregon newspaper
The Oregonian newspaper in the US is cutting its seven day a week home delivery service to four days a week reports the newspaper on its own website. The newspaper has 170,000 subscribers.
What’s interesting in the move is that they will still publish seven days a week yet only home deliver on Sunday, Wednesday, Friday and Saturday.