Ten Ways Newspapers are Preparing for Tomorrow

Are newspapers truly dying, like all the media prognosticators indicate? Mort Goldstrom at the NAA doesn’t seem to think so, and here’s why:

The Newspaper Industry Today

You may be anxious about the newspaper industry these days. Newspapers are filing for Chapter 11 protection. Newspapers are reducing their days of publication. Newspapers are going out of business or threatening to do so. Newspapers are dead or at least dying. I have heard this also. Actually, I read it in the newspaper. If there is one thing our industry is good at, it’s self flagellation.

So as major newspaper advertisers, you must be asking yourself, “What’s going on, really?” And, of course you are trying to figure out if your investment with our industry is appropriate. I am here to tell you that newspaper advertising works. Newspapers are effective advertising vehicles today and our industry is taking appropriate action to ensure that we are effective for you in years to come.

Let’s take ten minutes to talk about what is going on and what is the industry doing about it.

1. Separating the business of newspapers from the business of owning a newspaper.
Generally speaking, business in almost every sector of the U.S. economy is pretty lousy these days. Newspapers are no different from almost any business. In fact, when our customer’s businesses suffer, we suffer. There is no doubt that business in many sectors, who have traditionally advertised in newspapers, have cut back due to the economy. You read us; and you know that the real estate industry is really suffering, the auto industry is terrible, and unemployment is at a 25 year high. These are the newspaper industry’s big three classified advertising sectors and when they cut back on their advertising, well, we suffer. The same is true from our traditional retailers. Some retailers have struggled and have cut advertising and some have gone out of business, merged, closed stores, or cut back in other ways and all have at least considered ,if not substantially cut all forms of advertising including newspaper advertising. As a result, newspapers have lost revenue as advertising makes up nearly 85% of a newspaper’s revenue. Many newspapers are public companies and revenue losses certainly reduce profitability for our investors. And investors want to own more than merely profitable businesses. They want to own growth businesses. Newspapers are profitable businesses, but are frankly not growth businesses at the moment.

Newspapers are not as profitable as they were a year ago or even two years ago. Many newspapers have dropped from a 30% margin to maybe a ten to fifteen percent margin. A Midwestern based advertising agency recently studied a major metropolitan newspaper’s pages and could not find one advertiser in the pages of that newspaper with margins as high as that of the newspaper they were advertising in. And that newspaper had declared bankruptcy. Huh? According to consultant John Morton in a recent AJR article, newspaper companies that have reported results for the first nine months of 2008 had a weighted average operating profit margin of 11.3 percent, clearly down but still above what is typical for most non-media businesses. He concludes that article by saying “Overall, the beleaguered newspaper industry’s financial health has been weakened but remains healthy by most measures. In this environment, that is an achievement.”

Yes newspapers may have to settle for lower margins and honestly, a few are actually losing money and maybe a newspaper here or there will close, especially in multiple newspaper markets, but there are several thousand U.S. newspapers and newspapers are not sitting still for declining margins. They are cutting costs, merging operations, forming partnerships, reducing staff and news holes. They are getting their proverbial ducks in a row. Newspapers are cutting newsroom staff, true, but they are cutting strategically by reducing duplicative coverage or coverage of news items that have low interest to consumers and re-focusing journalists on high-impact and high-interest journalism.

2. The business of newspapers part two.
Over the past several years, mergers and acquisitions of newspaper companies have been taking place. And we are seeing the home owner equivalent of being upside down a mortgage. Companies owning newspapers expected to pay off debt with advertising dollars that are currently not coming in. This debt issue may be a bigger issue these days than other issues. Sometimes we forget how many people it takes and how big a capital investment it takes to run a newspaper. High speed presses, rising newsprint costs, smaller but still expensive news gathering and editing staffs are costly. Adjusting for this debt will cause some newspapers to refinance, or even go through bankruptcy to resurface stronger going forward.

3. Putting Readership in Perspective.
Here is an interesting tidbit that is getting lost among all the stories written about items one and two. People still read, respect and even treasure reading newspapers. Scarborough Research reports that more than 100 million adults read a printed newspaper on an average weekday (and more than 115 million on Sunday). Compare that to 94 million that watch the Super Bowl, 23 million who have viewed American Idol and 64 million who typically watch the late local news. Newspaper readership in the top 50 markets has declined about 6 percent in the past five years (according to Scarborough). Compare that to a 10 percent decline in prime time audience and a 6 percent decline in early evening local TV news in 2007 alone.

1.  
   • 62 percent of 18-24 year olds and 25-34 year olds read a newspaper in an average week. 64 percent and 66 percent, respectively, visited a newspaper Web site in the past seven days. So much for the notion that younger people don’t read newspapers.
   • A recent poll by independent researcher Doug Schoen showed that 75 percent of adults and 84 percent of “elites” read newspapers everyday or several times a week to inform them about the election. More than half agreed that newspapers provided definitive information that guided both the networks and cable stations in reporting the news.

4.  Becoming Platform agnostic.
Newspapers are expanding the growing list of digital products and niches. Proctor and Gamble realized years ago that consumers want their toothpaste in a variety of ways. From the days of one size and one flavor, they have offered dozens of options to meet consumers needs, from pastes to gels to whiteners to breath fresheners etc. Newspapers today are recognizing that their consumers too, enjoy their newspaper in a variety of ways and it is our job to deliver that newspaper to them in whatever form they require. I am sure you know that newspaper websites are the number one website in 22 of the top 25 U.S. markets. Newspapers’ digital audience has grown more than 68 percent since 2005. More than 42 percent of active Internet users visit a newspaper Web site in a typical month. And newspaper sites are growing at twice the rate of the internet in general. By the way, ads on newspaper sites are 24% more likely to be acted on than ads on portals. Beyond the web sites, you are seeing more newspapers offering mobile applications, some newspapers experimenting with e- readers, newspapers working with printers on personalized newspapers and more. The bottom line here is that our reader’s needs must be met and we are in the information industry not printers. We are moving quickly to meet those changing needs.

5. Increasing Local Focus.
Newspapers remain at the heart of the local conversation. No one tells consumers more about what is going on in the community than newspapers. For advertisers, newspapers are finding incremental ways to target locally. Newspapers are inserting themselves as the hub of community information and interactions, providing platforms to share local content, host discussions and provide in-depth community information. Most of this centers around Geographic communities, e.g. TribLocal, Bluffton Today. The, New York Times plans to provide hyper-local blogs for various metro area communities, etc.

6. Innovating Content to meet consumer demand.
Newspapers today are less Do It Yourselfers and far more the curators of content. When it comes to content that consumers desire, newspapers have a unique talent for aggregating both the content and the sources for that content in ways that best meet consumers needs. Newspapers have been quick to embrace incremental sources of content including User Generated Content, partners who generate content, syndicates, reporters, columnists, wire services and even advertiser generated content more than ever before. And that content takes many forms. Newspaper websites lead the industry with video content for example. Newspapers continue to a lot of original content but are focusing editorial resources on unique, high-interest content, including more investigative journalism.

7. Bringing Targeting to a new level.
Traditionally, when we think of targeting locally, we think geo targeting and targeted preprints in newspapers. It is true that newspapers continue to fine tune preprint targeting with the migration toward zip and sub zip insert targeting as these approaches cost significantly less than direct mail options. However, many newspapers are looking beyond merely zip and sub zip. Some newspapers are offering targeting of inserts to non-subscribers utilizing an opt-in program. Additionally, technology is allowing for individualization of the targeting to the household level along with personalization that newspapers are investigating. Merging newspaper databases with advertiser customer lists is another option newspapers are now employing. Of course, inserts are but one method of targeting. Another is niche print products focused on lifestyles and life stages. Online, newspapers are quickly offering micro sites that appeal to niche audiences with sites carved out for Moms. Men, Teens, Dog lovers, Entertainment sites, sports enthusiast sites and more. And then, largely through the partnerships newspapers are forming with companies such as Yahoo, newspapers are able to offer Behavioral Targeting options as well.

8. Streamlining operations.
Newspapers are focusing on our core competencies – creative content and local relationships – and looking to outsource and streamline non-core functions. One way that the newspaper industry is retooling for a prosperous future is via the utilization of technological advancements in our back end processes. An obvious example is the implementation of self service options for small to medium sized businesses. In addition, newspapers are taking a fresh look at win-win partnerships for both cost efficiency and revenue growth. Newspapers are sharing delivery systems with each other. Some newspapers are even sharing content, reporting and other editorial functions. You have probably noticed the transition to narrower web widths that many newspapers have implemented and these are proving to be a big hit with readers. And, while newspapers continue to experiment with days of publication, distribution strategies and pricing, it remains clear that large audiences still flock to newspapers. Newspapers are outsourcing preproduction operations and in some cases even printing. Many newspapers are forming alliances with their former competitors to share presses, newsprint and even cross-market distribution. In addition to revenue partnerships with large companies such as Yahoo, Monster, Advo and Google, many newspapers are pursuing revenue and audience development strategies. For example, Zetabid online real estate auctions, Metromix for entertainment, and dozens more. We are also seeing newspapers restructure their staffs and their processes to allow for better service to you and simpler faster more accurate ways for ad order processing, ad delivery, credit, billing, e-tearsheets and more.

9. Advertising option optimization.
These days, when it comes to offering you advertising solutions that work better for you, newspapers are truly and literally thinking outside the box. The days of square ads have gone and shapes assist the attention gaining of your message. Fixed positions including front of section advertising, content adjacency, versioning, and in test today even individualized ads. The world is changing and so are we. Newspapers are no longer a one trick pony when it comes to advertising options. Consider poly bag ads, post it notes, we prints, spadeas, shingle spadeas, scented ads and even taste it ads. Color in newspaper is now pervasive. Event marketing, database marketing, e-mail blasts, e-newsletters, ad tags, glow in the dark, belly bands, temporary tattoos and way more.

• According to Google research, 56 percent of respondents to their 2008 survey, either researched or purchased at least one product they saw in a newspaper the previous month. Of those who researched a product from a print ad, 67 percent research online and 48 percent visited a store. For those who saw a product online and then saw it in a newspaper, 48 percent considered the product more trustworthy and 52 percent were more likely to buy the product.
• Another new development has been the way that newspapers are measuring both their audiences and advertising effectiveness. Research coming from RAM or IRI measure ad effectiveness. More frequent and comprehensive data collection and survey approaches allow for you to be more analytical in evaluating how we deliver.

10. One last point.
Despite all the doom and gloom you read about, the just released Scarborough Research data points out that 46% of U.S. adults read the average daily newspaper and that number increases to just under 50% when you add the newspaper’s website. 52% read the average Sunday paper. You may be surprised to learn that over the past two years the decline that the pundits report as near death is but -2.5%. That average number of newspaper readers exceeds those who bought a lottery ticket in the past month, those who even own a DVR, and nearly doubles the number of U.S. adults who typically watch the network nightly news.

Anyone who thinks that newspapers have an “audience problem” need only look at recent Nielsen Online numbers for the newspaper industry. In January 2009, nearly 75 million unique visitors used newspaper Web sites – an all-time high and a 12 percent increase from January ’07. That means 44 percent of all active Internet users visited a newspaper site in January ‘09. Newspapers, in aggregate, delivered 80 percent more unique visitors than CNN’s digital network, 85 percent more than Yahoo! News and 442 percent more than Google News!

In print, newspaper readership declined a modest 2.7 percent from 2007 to 2008, according to Scarborough Research. Meanwhile, our friends at the broadcast TV networks lost 7 percent of their total audience in the last 3 months of 2008 alone. More than 100 million adults read the newspaper on an average weekday, compared to 63 million that watched the World Series, 42 million that visited Amazon.com in the past month and 60 million that watch any reality TV show. And those elusive 18 – 34 year olds – 30 percent are still reading on an average weekday and nearly 60 percent over the course of a week.

Hardly an indication of an industry in the throes of death. On the contrary, our audience – the true measurement of the health of a medium – is strong and getting stronger.

I guess you can’t believe everything you read in the newspaper after all. The newspaper industry is not here to today to merely assuage your fears about our future. Today it is about how we can be even better partners to help you grow your business. As you centralize, we believe we can be your Local eyes and ears and more. We, the newspaper industry, are ready, willing and able to make your campaigns successful.