2012 look ahead: Print will fund change for some time

British newspapers continue to be very profitable. The owners' problem is debt. They continued to acquire more decline, rather than invest in innovation, which is the driver of value.

A survey I recently undertook for the Society of Editors found that since 2007 creative newsroom staff numbers have sadly declined by 19 per cent. Declines in editorial production and editorial management staffing of 37 per cent were, in my opinion, overdue in the UK.

More worryingly –and I don't have industry numbers, only company experiences – is the dramatic scything of advertising staff numbers. Many newspapers no longer have enough staff to manage their current client base, never mind compete with the raft of new entrants.

In addition, the concept of promotion or branding has all but gone. Coke still spend 14 per cent of their turnover marketing their brand. Most newspapers spend nothing and publishers wonder why they are disappearing.

The question is whether this is a blip – be it structural or cyclical – or it is terminal. My observation having worked with dozens of news-media companies around the world, reflecting every conceivable economic and market model is that yes the blip due to market forces is serious. But most of the decline in the UK newspaper industry is self-inflicted.

Meanwhile another apocalyptic forecast, this time from the, tellingly called, 'Centre of the Digital Future'at the University of Southern California, gives newspapers five years. Nonsense.

The British market is very unusual in the scale of its national press. The average daily newspaper circulation in the UK is 150,000. Only Japan shows a higher figure. For 90 per cent of the world's newspaper industry, our business is 'local'. Worldwide average daily circulation is 17,000. Local is re-emerging as a big opportunity.

The concept of a multimedia local franchise – audio-visual, print, digital – seems to me to be an extremely attractive option. But publishers seem strangely reluctant to take it up.

It is made more attractive by new content management algorithms, for both editorial content, and advertising delivery that will overcome newspapers' biggest weakness in the digital space. While we are good at attracting visitors, newspaper websites show very low depth of frequency and pages visited, and thereby a lack of inventory or targeting for advertisers. This is the explanation for why 27 per cent of all advertising revenues in the UK are digital, but only 12 per cent of newspaper advertising revenues are from digital.

Such algorithms together with advanced targeting databases may at last solve this conundrum at a very low cost.

Another game changer is the eReader or tablet:

  • Amazon reports that one in three books available digitally are bought digitally
  • French publishers have reported that reading times of eReader applications are as high as those of print
  • American publishers have found that subscription conversion and retention levels for eReaders are higher than for print products
  • A German study found that older people read faster on the iPad than in print
  • Forrester believe that in less than two years, 25 per cent of Internet users will be eReader based
  • The USC study predicts that PC usage will fall to 4 per cent of digital consumption.

The next big theme will be how society resolves the issue of ownership and continuing investment in news dissemination. The traditional newspaper model of news, funded by advertising is broken.

Government could extend subsidies (as happens in Scandanavia), in order to ensure a free press, but not under current ownership regimes

There is the established successful model of trust status, where businesses are profit generating, but with a commitment to delivering quality news. The Guardian is the best example where the Norway's Schibsted perhaps the most innovative news media company in the world, is a quoted stock, but within its covenants is a guarantee of newspaper quality

Another option to be explored is that news media companies become not-for-profit charities, benefitting from tax advantages in exchange for guaranteeing reinvestment in innovative delivery of objective news and debate

There is a lot of - I'll call it wishful thinking that rich local entrepreneurs will come to the rescue of their local paper. I've spoken to a few. Their response is consistent: Why should I buy decline? Where is the innovation?

What is not going to work for society, for freedom of expression, for our employees, or shareholders in the long term is the short-term representation of financial institutions on newspaper boards. It is in their interests to work out an equitable exit strategy before their current corporate guidance loses them even more money.

Print will fund the future of the business for some time to come, and lack of love and care has caused the majority of declines of recent years.

Yes there are further tough times ahead, but this doesn't mean they can't be exciting, and positive if we start making some brave positive decisions about the future of news.

Jim Chisholm is a media consultant who works with news organisations around the world.

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