There Is Still A Great Future For Print Newspapers Says The President Of The World Association of Newspapers – Well, He Would Say That, Wouldn’t He!

Philip M. Stone June 4, 2008

One place the naysayers of newspaper profitability are not welcome this week is Gothenburg, Sweden, where some 1800 senior media executives from around the world have gathered to glory in their industry. The basic message, as told by Gavin O’Reilly, President of the World Association of Newspapers (WAN), is that newspapers are not being reinvented, they are simply going through evolution.

O’Reilly has a “take no prisoners” approach to global financial analysts and media commentators whom he blames for spreading false misconceptions about the newspaper industry, as if they are to blame for all that may be going wrong. As he told his flock at Monday’s opening ceremonies, “If WE don’t keep our heads and keep uppermost in our minds the realities and hard facts about the enduring force and impact of our core, print business, who will do it for us?”

So by Tuesday as he participated in a discussion on the future of newspapers he really warmed to his subject and he is worth quoting liberally for the case he makes that print is not dying, but, yes, it is in the midst of changing business models.

“Virtually every brokerage report from the investment banks appears to support a new conventional wisdom that newspapers are soon to be some relic of the past, and that newspaper companies are not up for the challenge or indeed, the many opportunities that the digital world offers. What a profound mistake these commentators are making. We don’t need to reinvent the newspaper, -- I talk about evolution, not revolution,” said O'Reilly, who is also chief operating officer of Independent News & Media.

“All of us in the industry know the big strategic issues and challenges at play in the fast evolving digital world and the really successful publishers are those who recognize and capitalize on the newspaper’s relative position in the busy media matrix. Happily, that is the majority of publishers today.

“The fact is that newspapers are winning well in a world of heightened digital fragmentation. In properly assessing the performance of newspapers, one needs to calmly analyze the underlying audience trends for our industry the quantum of our readership and the quality demographic that we deliver, coupled with the incremental and growing audience that we garner from online. And the conclusion is that our industry is extremely well-positioned at weathering the storm that is media fragmentation, guaranteeing as we do sizeable, reliable and relatively stable audiences.”

He pointed out that newspapers are a US$190 billion dollar industry globally, reaching 1.7 billion readers daily. Newspaper advertising is expected to grow by 17% over the next five years, or at a faster rate than the preceding five years. “Newspapers are a vibrant, relevant and commercial proposition for readers and advertisers alike. For investors, the investment in new technology and the delivery of new audiences produces an unrivalled cocktail of success: strong, definable demographics coupled with strong margins delivering consistent returns,” he said.

Well, yes, all well and good but how does all of that fit in with what US publisher Dean Singleton told the same Congress on Monday – that by his count 19 leading newspapers in the US are losing money?

The issue for print is not difficult to dissect for North American and US newspapers – we’ll leave Asia out of the equation, if it were not for Asian growth WAN could not be so gleeful when talking about global statistics. During the good old days of just a few years back publishers went heavily into debt buying more newspapers. Couple that debt with much lower advertising revenues today and the debt load for many of those newspapers is crippling. It’s so bad that many newspapers have to cut away at their core business to make the necessary savings to meet debt payments, they even are issuing additional shares and bringing in foreign investors. Just look at Journal Register in the US. Look at Johnston Newspapers in the UK. So debt is a heavy chain encircling some of these businesses.

But for those that have their debt under control, the next problem is changing business models, and that was a major subject at the Congress.  Everyone accepts that with the collapse of classified print advertising revenues that digital projects need to pick up the slack and there was much talk on the best ways of doing that.

But the sad fact for now is that in most cases – there are a few exceptions – no matter how well digital projects are doing the revenue they are bringing in does not equal, let alone surpass, what print is losing (one reason why we have often said that the WAN statistics put out each year are missing one very important ingredient – profitability --  because at the end of the day it is not circulation, it is not advertising revenues, it is profit that drives this business, and the major unanswered question is how much/little profit is acceptable in today’s environment)?

The answer to that question is key. The likes of Rupert Murdoch  and Frank Bennack (Hearst) have said recently that publishers need to lower their sights – indeed a profit that hits double digit percentages can be considered pretty good these days. Are publishers willing to accept that in order to protect and maintain the core product – the print newspaper – to make the core product the center of everything they do – and to keep that core so good that it can feed digital – that it is worth accepting lower margin? If the answer is “No” then what’s the point of all these Congresses giving advice on how to make the core great, if publishers are going to nibble away at it to maintain unrealistic margins?

Put simply, as publishers keep telling staff that change must come in the way things are done, so publishers must accept that change must come in what is considered acceptable profit margins. Keeping to the old profit margins while switching to the new business models is not the answer.

The other unanswered question for which no one really has an answer is how long will it take for digital to more than make up print’s losses? The general  answer is that it will probably take longer than was originally thought because the trends seem to be that Internet advertising growth is declining, that one should not be fooled by the giant numbers put on Internet advertising revenues because Google gobbles up around 60% of that with Ad Sense and similar, that there is so much competition on digital platforms for the advertising dollar that rates will probably remain low except for those sites with the really big numbers. Digital is going to be a real “survival of the fittest” regime.

While everyone is busy integrating newsrooms to provide the best print and digital products at the least cost, and there are great ideas out there on how that should be done and the type of digital information users want, there really seems to be no answer to the overpowering  question of how does a newspaper make up for print losses from digital platforms.

So, cheers to O’Reilly for talking up how great print is doing, but frankly it is not the naysayers he needs to convince, but rather those readers and advertisers who are looking elsewhere.