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“If I hadn’t known such riches I could live with being poor,” sang Tim Booth on the band James’s iconic single Sit Down. Back when James were a shaping the Manchester Sound in the late 80s, traditional publishers were indeed rich. And few were quite as rich as the regional press.

Well, times have changed. James are doing 90s tribute evenings and local newspapers are having to get used to being poor. The days of 40% margins and local monopolies are over, and have been for half a generation.  In that time, whilst publishers’ operating models have got leaner, their revenues have fallen at an alarming rate, so that few media investors can see much of a future for the industry.

This is because of four things. First: circulation has declined for decades. Second: classified revenue has and is migrating online. Third: non-classified revenues are now threatened by online group discount models. And fourth:  the rise of social media and web 2.0 redefines the role local news plays in people’s lives (i.e . there isn’t one).

So  Paul Gillin’s blog Newspaper Death Watch (hmmm, what side of the fence do you think he’s on?) is now urging the industry to start inflating the balloons for the after show party, and cites the latest Harris Interactive Poll as evidence: “we saw the new Harris Poll that found that over half of online adults now believe traditional media as we know it will no longer exist in 10 years, causing us to wonder if there’s really any point to “chronicling the decline” any more when the majority now agree  on the end point. But we forge ahead for SEO purposes, if nothing else.”

Even Felix, when I asked him once what role local papers would play in recruitment in 10 years looked at me blankly and said “errr…but there won’t be any local papers in 10 years.” We can forgive his coldness.  He’s German.

But hold on, might we be mis-reading the signs? As a publisher I have sat on both sides of the fence, and dutifully I have held both opinions – behaving on this issue either like King Cnut (“print has a long and vibrant future, lalalala, not listening, lalalala,”), or like a 90s dotcommer (“are you still here with your dead trees and your hatecrimes, Grandpa? Dude, it’s over, it’s like nineteen ninety-late”). But recently I’ve come to a stunning conclusion: they’re both right. The traditional local newspaper model is doomed. And yet the printed word could present a strong future for local advertisers.

But for it to work, we have to listen to Tim Booth (who’d have thought that?). If only we hadn’t seen such riches…local press owners  judge their businesses continually by the legacy of where they’ve come, and if they continue they will fail. The margins are gone, the monopolies are gone, the world of diverse revenue channels, of make up your price, of winner in everything, of oak pannelling and Jaguars and Managing Directors… it’s all gone. Forget the fact it worked well once and made everyone rich back in the day, it’s gone.

But if they can forget they saw those riches, I suggest publishers can live with being quite a lot poorer through leaner, tighter models, smaller titles, consolidated back-office functions and lower margins. Because with downsized ambition, there is evidence the industry is not without hope.

Let’s take those four reasons to be gloomy about local papers in turn.

First: circulation is declining and has been for a generation. This is true. But here are three interesting facts: 1. Local weekly newspapers’ sale is significantly better than dailies. Indeed in a significantly large minority of cases, weekly circulations are showing year on year growth. 2. The launch of free local commuter newspapers such as Metro and Evening Standard have attracted massive audiences and developed a new culture of pass-on and reader engagement (what is often described as ‘the Metro moment’) amongst an elusive audience. 3. While circulation declines, research shows readers per copy increasing very fast and that readership builds quickly across the week. The fastest growing segment is 18-34 year olds.  In other words the decline in sale is more a function of frequency of purchase than of decline in the total number of purchasers or rejection by the digital native.

This says to me that local print products are not in trouble because they are local print products, but because daily frequency, and paid for, seek-me distribution methods, they fit less well into the modern lifestyle than they used to. In their current form they are going to decline further until the rump of buyers are left whose lives remain unreconstructed from the 1980s. Recognise what kind of lives their readers live, and local papers may still have a place, even among a young audience; after all these readers embrace the Standard and Metro.

The survey Paul Gillin cites from Harris shows 81% of over 55s preferring to get their news from traditonal media, whilst this drops to 57% of 18-34 year olds.  This is somewhat natural but not necessarily damning. That’s still a majority of digital natives who prefer analogue channels for news. The same source says 75% of online adults claim their print media consumption has not declined. And amongst that young audience, whilst a healthy proportion (52%) go to news aggregation sites, 63% go to local TV and 56% to local print for news. This is lower than amongst older groups but says to me that the younger generation, more digitally aware, have integrated online channels into their lives but have not made a binary decision to reject print as a medium. Therefore they will consume it if it has something to say.

Second reason to sound the death knell of local papers: classifieds have all gone online. Also true. Of the main platforms, only jobs really has any credible passive market which might be better served offline today, but with candidate marketing services, the job boards are largely able to cover this off. Papers are already declining in circulation most steeply on days when they carry supplements dedicated to recruitment, property and motors. The audience is, I suspect, in many cases ahead of the advertiser in terms of understanding where the marketplace lives, and it is rarely any longer in print.

This means thinner, less profitable newspapers, without lots of pages crammed with small pictures of houses or ruled boxes with lists of used cars in them. But the loss of this revenue doesn’t mean the end of newspaper profitability all told. Just as the audience is able to adapt to accommodate new media entrants, so the market is able to divide spend amongst those channels best placed to deliver results for one type of advertising or another.

To me, what is happening is simply the breakup of the old monopolies. The traditional media cannot own the entire market any more – they must identify what pieces they can and pursue those vigorously.

This is well illustrated by the rise of Groupon.  Groupon is a phenomenon (even though it principally uses email – bleurgh how last year!). But Groupon, just like Google, cannot serve all sectors of the local advertising market, at least in its current form. It is no coincidence that it majors on restaurants, spas and beauty treatments. It does less well with accountants, structural engineers and livestock feed merchants. Google has products to serve many of these more niche SMEs, which need leads but are unlikely to be able to stimulate demand even with a 50% off deal.

So Groupon scores with direct response advertisers, aimed at generating demand amongst customers who don’t have an obvious need, a significant market. And Google scores with directory advertisers who want to be found by customers with a need. Again a, truly huge market.

But there is another type of advertising which both struggle to fulfil: brand. Brand advertising raises awareness, positions the advertiser and creates latent demand. The zeitgeist is that brand advertising is irrelevant to the SME: it’s all about leads. This is right to an extent but it is naïve about how leads are generated. Not all retailers can stimulate instant or impulsive demand, but still need to push a message rather than wait to be searched for. Think of bridal shops, furnishers, jewellers, and to an extent hairdressers, dentists, dry cleaners and driving schools. These businesses will not generate sufficient business from passing trade or directory traffic alone, they need to position themselves with customers in advance of the demand arising, and gently nudge them along. They may get some results from discounting and create some artificial demand but this is unlikely to be a sustainable form of custom and therefore the only marketing channel.

This is also true of the extremes: higher end merchants or low margin business. For sole traders or top end restaurants discounting is either not affordable or not consistent with the image of the business. Online in general finds this hard to do because of the functional way it is used. It is something traditional media does much better.

And the key to making this play is the final objection: that now we can customise our world around our own friends, interests and careers, without needing to be defined by geography, local is no longer relevant.

This supposition however is lazy. Location is still an important part of being relevant, it has just become tighter. The bar has been raised on how local you must go. Once newspapers move into the very local (hyper-local and micro-local) the joy of the model is that commercial content becomes editorial content. A new Saturday morning opening time for the local grocer is news, and a marketing message too. Pictures of the refurbished pub are going to be of interest and stimulate demand. At this point, commercial relationships locally become about reduction of content generation costs as well as topline revenue contribution.

So my point is that if we’re to move on we have to forget where we’ve been. Think about the right frequency of publication, the right price point, the right distribution method and the right definition of location to match the audience’s lifestyle or interests and print still has some traction with consumers. That gives it an importance to advertisers, but again don’t think in the traditional classified spaces. Local papers will be largely display vehicles and provide back up for online coupon or loyalty rewards, and provide signposts for businesses which need to be found or which list inventory over the web.

Print publishers cannot ignore online or behave like it doesn’t exist; it does many things better than print. But just as local print’s monopoly has been broken up for others to feast on and grow, so current web trends will still leave a gap if the content is right and the positioning recognises the pattern of user consumption and the cost base it needs to run on.

One thing’s for sure, it will not be a landscape of wealthy publishers. Rather the print of the future will be many small, weekly, often free (or nearly free), low margin, and display dominated titles with hyper-local content. But a tapestry of highly relevant well targeted newspapers meeting the needs of a good section of local business seems a pretty rich future for the industry to me.

About the author:  David Roddick is the Group Commercial Director at Nortcliffe Media. Before that David was the Digital Director and Sales Director of the Sun Online.

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