US newspaper groups could face a US$20 billion shortfall in the next five years as readers and advertisers shift to the web, according to researchers .
Analyst group Outsell said a ‘perfect storm’ of declining circulation, pressure on print advertising and rapid growth of online news media would lead to a huge revenue gap for the newspaper industry by 2010.
It predicts that the decline of paid circulation revenue for print newspapers will accelerate as 18 to 39 year olds continue to shift online for news, with circulation of daily papers possibly dropping by as much as 19.5% from 2004 levels.
The report says growth in newspaper groups’ online ad earnings will not be fast enough to replace lost print ad revenue, and warns that they will need to generate new top-line growth and negotiate better revenue-producing agreements with Google et al in order to transform themselves in time.
“The estimated shortfall is even larger than newspaper executives have acknowledged,” said Outsell lead analyst Ken Doctor.
“The business of news faces an unprecedented transformation as these trends likely accelerate over the next five years.”
Although the report didn’t focus on UK newspapers, it’s been clear for a long time that they face similar pressures.
It’s also interesting in light of the article we published last week on UK newspapers and Web 2.0. As Big Media firms try to stay relevant and improve their websites for users, this will require a total shift in mindset away from intrusive ad formats and towards user-centricity.
One of the key challenges for publishers is to make sense of all that data they presumably log (explicit, behavioural, etc), to improve relevancy for users and targeting for advertisers (increasing the rate card in the process).
E-consultancy has been beating this drum for years - read Ashley's comments on web analytics and user profiling from 2004.
Some publishers appear to be taking note of these warnings, yet so long as we keep seeing godforsaken pop-ups and pop-unders we'll assume that more pain is to come...
Reader comments (1)
Director Of Strategy at Blue Latitude Network
12:11PM on 17th August 2006
What is interesting here is that Richard has taken a marketing approach to defining the challenge facing newspapers.
I am in total agreement with the need for the publishing industry to improve their online offering, and placing user needs at the heart of their sites would reap enormous benefits.
However, in order to properly embrace the opportunities that arise, the publishing industry needs to undergo a significant cultural shift away from a 'dead tree' mentality. This dead tree mentality has resulted in a process of migration from offline formats to online that tends to stifle real innovation.
This migration has resulted in offline models and approaches (eg page layout, advertising formats, and revenue models) being replicated from the offline world to the online.
Publishers should consider taking a more radical approach. What would the outcome be if a major publishing house redefined their business as pure content generators, then threw away everything they know about traditional print media and setup a website instead?
The evolution that has taken place so far started with offline models and translated them for the online world. I wonder if taking a pure user needs approach might result in a revolution?
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