Cultural inertia threatens newspaper revenues

New research from the Pew Center for Excellence in Journalism lays bare the struggle being endured by existing print media and it tries to reposition its business for a digital age.  On the promise on anonymity, Pew researchers persuaded 38 newspapers (mostly in the US), from six different companies, to share a significant body of internal data.

With exceptions, the picture that emerges is this.  For every $1 that these papers gained from new digital ventures, they lost $7 from traditional print revenue.   Some lost revenue from both sources last year.  As well as crunching a lot of figures, the Pew researchers also interviewed many senior executives –and the picture that emerges from them is as fascinating as it is depressing.

For the moment, the bulk of newspaper revenue comes from traditional print sources.  Having long enjoyed local advertising monopolies, their business operations find it difficult to turn their attention from the large, if declining receipts from this source.  Digital income might be growing, but until it forms a larger proportion of those newspapers’ incomes, it is unlikely to be the focus of their activity.

The risks of waiting for this to happen, however, are considerable – as David Parkin has shown with  He was able to attract advertisers from his old employer The Yorkshire Post, with a dramatically cheaper ratecard and the absolutely dependable metrics of click-through.  Pew characterise the ‘heritage’ media as suffering ‘cultural inertia’ when trying to shift the focus of their businesses.

There are glimmers of light in the Pew report.  One of the papers that generated most digital revenue, was selling targeted digital advertising that was customised around customers online behaviour.  The company in question considered this to be its biggest likely growth area – but was the only one of the 38 papers selling this kind of smart advertising.

Another company was buttressing its traditional newspaper business with a consulting business to help its advertisers and other businesses to position themselves in the digital landscape.

The scale of the mountain that newspapers need to climb can be gauged from The Guardian’s sometimes frenetic efforts to dramatically grow its digital revenue – after a decade of trying.  Its latest volley of initiatives, including massive above-the-line brand advertising, Facebook apps, and a version of the newspaper being offered on tv.  These come with the stated ambition of doubling the £45m revenue that the paper currently generates online.  Given that GMG, The Guardian’s holding company, made trading losses of £46.2m in 2009/10, the urgency of this task is obvious.

No doubt more newspapers will survive the next decade that some naysayers allow for.  I suspect that the ones that are most likely to endure will be those that transform their businesses so completely that they are scarcely recognisable to those who know them in their current forms.