Newspapers Confront The Digital Media Revolution

There are two phenomena that everyone interested in the future of media should be tracking closely. The first is the Apple (AAPL) iPhone, which is the first breakthrough mobile media device. The second is the transformation of newspapers as they work (REALLY) hard to evolve in a networked, digital media world where they no longer enjoy monopoly distribution.

Every traditional medium is going through this transformation, but newspapers are feeling most acutely that the future is now. (Anyone who thinks newspapers aren’t working really hard to transform hasn’t witnessed what’s happen on the inside.)

Check out the lead story in my own local newspaper that arrived on my doorstep yesterday, which demonstrates the point with appropriately deep irony.

Here’s a round-up of newspaper news just from the last few days:

Newspaper Ad Sales Show Accelerating Drop

This piece is just a round-up of declines in newspaper ad revenue from the first quarter, with anticipation for more bad news in the Q2 earnings releases, but this chart brings the situation into sharp relief:


Audit Bureau of Circulations will start counting newspapers’ online audience
This gets to the problem I was looking at yesterday — the huge imbalance between the ad revenue per reader in print vs. online. But counting online audiences, although a critical first step, doesn’t get at the core issue of how these audiences are valued — and how newspapers can value their online audiences more (A LOT more).

Dow Jones Board Approves Sale to News Corp
The sale of Dow Jones (DJ) to News Corp. (NWS) may be the last great newspaper M&A after Tribune’s sale to Sam Zell — or it could be the first in a wave of consolidation.

Jon Fine’s BusinessWeek media column challenges the San Francisco Chronicle to be first to stop publishing in print
Jon makes an entirely rational economic argument that the best candidate to be first to make the bold move of giving up publishing in print is a newspaper like the Chronicle that’s bleeding cash. Jon sees it 18-24 months out. I could see it happening in the next 12 months. The conversations are already happening.

Fisher Communications Acquires Hyperlocal News Pioneer Pegasus News
What’s notable is that Fisher Communications is not a newspaper company, but rather an owner of local TV and radio stations, which have realized that they need to compete head-to-head with newspapers online for local ad dollars.

Washington Post Launches Hyperlocal Site LoudounExtra.com
This is a play for the local small business ad dollars that The Washington Post can’t get in print, and which represent the long tail that they need to capture in order to shift the business’s center of gravity online.

Google Expands Its Print Advertising Program

Speaking of long local ad dollars, this is the deepest irony — Google (GOOG), the archetypal digital media company, is — all at once — squeezing the inefficiency out of, disintermediating, and propping up newspaper PRINT advertising through its dynamic AdWords marketplace.

Yahoo (YHOO), the other iconic digital media company, is coming at it from the other end with its Newspaper Consortium program that seeks, among other things, to bring market efficiency to local ad ONLINE sales by leveraging and evolving local ad sales channels.

It’s no accident that Google and Yahoo are so focused on newspapers. First, newspaper are close to — and have sales channels into — the still largely untapped markets that comprise thousands of local business who don’t yet advertise. Second, newspapers are the most fertile ground, given the harsh economic realities they face, for the kind of bold experimentation that is required for traditional media companies to survive in the digital age — and that will determine the fate of the billions of ad dollars still tied up in traditional media.

Comments

[Frank Li]

From AP:

<blockquote>
Newspaper publishers reported sharply lower advertising revenues for the second quarter on Thursday, and two of them laid part of the blame on a drop-off in real estate advertising in key markets.

McClatchy Co. and Media General Inc. both reported steep advertising declines and lower profits, while Dow Jones &amp; Co., publisher of The Wall Street Journal and the target of an acquisition bid by Rupert Murdoch's News Corp., had lower profit because of a charge but higher revenue and operating income.

McClatchy, which owns The Miami Herald and several newspapers in California, including The Sacramento Bee and The Fresno Bee, had a 9.8 percent decline in advertising revenue across its 31 newspapers, with the biggest drops coming in Florida and California. McClatchy is the country's third-largest newspaper company, behind Gannett Co. and Tribune Co.

McClatchy attributed much of the weakness in those markets to economic factors including the slowdown in the formerly hot housing sector. With real estate playing a key part of the local economies, other ad categories such as autos and employment also sagged, McClatchy Chief Executive Gary Pruitt said.

Media General Inc., a regional publisher based in Richmond, Va., had an 11 percent decline in advertising, including sharply lower results at The Tampa Tribune newspaper, which reported a 36.7 percent drop-off in classified advertising.

</blockquote>

[Long-ShortGuy]

Related:
<blockquote>Pear... which owns The Financial Times and The Economist, has risen about the same amount. But The Washington Post Co. is down about 10 percent over two years; The New York Times Co., which owns the International Herald Tribune, has fallen about 20 percent, as has Gannett, which publishes USA Today; and McClatchy, which bought the Knight Ridder chain last year, has sunk more than 50 percent. What may be especially disturbing for shareholders of those companies is that the cascades have occurred despite efforts to restructure their operations. Newspapers used to be cash cows, then the Internet came along and stole many of their readers, especially younger ones, and advertisers soon followed. Publishers took plenty of time to recognize and respond to the changes confronting them. Finally they began expanding and improving online access to their content, although they have been slower to lure advertisers to their Web sites. "The Internet is a fairly small part of their businesses now," said Brian Lund, who follows media stocks for Legg Mason Capital Management. Online is profitable because newspapers are building their Web sites around content that is already bought and paid for, he said, but the earnings are "too small to make up for declines in other areas." Legg Mason's portfolios are free of newspaper publishers and are likely to remain so until the companies show concrete signs of a turnaround or until investors begin to abandon hope that one will ever come.</blockquote&g...

Source:
Publishing stocks: Why Wall Street loves Rupert Murdoch