The financial crisis brought about by Covid-19 has accelerated existing trends – namely the shift from print to digital – but it is not an “extinction event” for the news industry at large, media analysts have said.
News UK has warned of job cuts as it speeds up its transition to a “digital future” as a result of the financial impact of the coronavirus crisis.
Where once newsrooms were the beating heart of a newspaper, now reporters and production journalists work remotely, forced into a step change by lockdown measures to slow the spread of the virus.
So what might the news industry look like once the Covid-19 crisis has eased? And will it ever return to the way it was before?
“The implication of the question is that there’s a moment where everyone thinks: ‘Now is the moment it all feels normal again,'” said Douglas McCabe, chief executive of Enders Analysis.
“I don’t think we’re ever really going to have quite that moment.”
He said newspaper offices may take a very long time to return to anything “even resembling normal” as newsrooms have shown they can operate with hardly anyone actually sitting in the office building.
“Offices will shrink and not all staff will be expected to be at their desk five days a week,” he predicted. “I think a new system of working will start to play out and so we’re not going to return to the industry quite as it was.”
McCabe said he also thought there would be a greater emphasis on more specialist journalist, for example using journalists with an actual science education to report on the subject, when the crisis eases.
Nic Newman, senior research associate at the Reuters Institute for the Study of Journalism, said the financial impact of the coronavirus crisis is a “catalyst for change” in the news industry that has forced publishers to do things they had been putting off – and at speed.
Newman said that while there will likely be closures “a lot of it will be around consolidation, and cost-cutting, reorganising and rethinking what a news organisation needs to do going forward if not in an all-digital way [then] in a way in which digital is genuinely leading the charge”.
He added: “[Publishers] who’ve been thinking about things like dropping their weekday editions, but haven’t done it because the income’s been good enough, they’ll be forced into that step.”
Revenue from advertising and print circulations – still the principal source of income for many news publishers – has been hit hardest by the cancellation of events and restrictions on movement.
Newspaper sales slumped in the first five weeks of lockdown,which came into force on 23 March. The FT and i lost nearly 40% of their circulation month-on-month. Distribution of the free Metro has fallen by 70% as free papers struggle with the end of the commute as we knew it.
Both McCabe and Newman agree that weekend publishing is likely to hold up better than weekday as the pandemic exaggerates a longer term trend.
McCabe said Monday to Friday circulation will be “quite soft for some time” because people are out of the habit of going to the shops and commuting to work every day as a result of the lockdown.
Shift from advertising to reader revenue online
The collapse of advertising spend has forced publishers to look again at their business models, with digital taking prominence.
McCabe warned that “at best, two-thirds of the advertising as it was in the first quarter of 2020 will come back”, but he said some sectors would recover from the crisis faster than others. The tourism and retail sectors have been among the hardest hit by the crisis.
The Advertising Association/WARC Expenditure Report has revised down its ad spend forecast for 2020 to £21.13bn, a 16.7% drop on last year, as a result of the coronavirus crisis. Search and online display advertising are both forecast to fall by more than 12% this year.
Even when it returns to something resembling normality, the reality is that big tech platforms are still taking the lion’s share of digital ad spend and the revenue they do share with publishers is not enough on its own to sustain a news operation doing original and investigative journalism.
“What the best businesses are doing is… shifting from an advertising model, which is both print and online advertising, to a reader model, which is a whole online revenue stream that has been almost ignored by many publishers for too long,” said McCabe.
“The biggest problem is that it’s all happening at such a fast pace that publishers don’t have enough time to exploit new strategies or really fully develop them, but those publishers that can will come out fighting and be in by far the best position.”
Newman agrees that a consequence of the pandemic will be newsbrands “trying to increase the amount of reader payment in the mix”, with the coronavirus acting as an “accelerator to paid models”.
A Press Gazette reader poll asking: “Which business model do you think holds the best hope for supporting quality journalism in the future?”shows a roughly even split between the ad-funded model (24%) and paywalls (22%), with more than 600 respondents over the last week.
The Sun and Times are good examples of these two opposing business models, and all within one publisher: News UK. The Sun online is chasing audience scale and is reliant on advertising, while the Times is focusing on growing a loyal subscriber base through a digital paywall.
News Group Newspapers, publisher of top-selling daily newspaper The Sun, lost £67.8m before tax in the year to the end of June 2019 (the latest available accounts). The title gave up a paywall after two years in 2015.
But its stablemate Times Newspapers, publisher of the Times titles, made a pre-tax profit of £3.75m over the same period.
Elsewhere, pre-tax profits at Financial Times Ltd grew by three-quarters in 2018 to £8.15m, which the company put down to a rise in digital subscriptions. The FT was the first UK newsbrand to chase a digital subscription model and now has more than 1.1m subscribers.
The virus has forced news publishers to take dramatic action to protect their businesses. Staff have been furloughed at some titles – including nearly 1,000 at Reach alone – with pay cuts for those still working.
The table below shows the latest full accounts for each publisher:
|Publication||Business model||Publisher (owner)||Turnover (FY)||Profit / (loss)|
|The Sun||Ad-funded, print sales||News Group Newspapers (News UK)||£419.9m
(FY to June 2019)
|The Times||Ad-funded, print sales, digital subscriptions (strict paywall)||Times Newspapers (News UK)||£330.2m
(FY to June 2019)
|The Guardian||Ad-funded, print sales, donations||Guardian News and Media (Scott Trust)||£209.6m
(FY to March 2019)
|Daily Mirror||Ad-funded, print sales||MGN (Reach)||£207.6m
(FY to Dec 2018)
|Daily Star||Ad-funded, print sales||Express Newspapers (Reach)||£164.6m
(FY to Dec 2018)
|Daily Express||Ad-funded, print sales|
|The i||Ad-funded, print sales, digital subscriptions (premium paywall)||DMG Media (DMGT)||£672m
(FY to Sept 2019)
|Daily Mail||Ad-funded, print sales|
|Daily Telegraph||Ad-funded, print sales, digital subscriptions (premium paywall)||Telegraph Media Group (Press Acquisitions)||£271.4m
(FY to Dec 2018)
|The Independent||Ad-funded, digital subscriptions (premium paywall)||Independent, Digital News and Media||£27m
(FY to Sept 2019)
|Evening Standard FREE||Ad-funded||Evening Standard Ltd||£65.4m
(FY to Sept 2018)
|Financial Times||Ad-funded, print sales, digital subscriptions (strict paywall)||Financial Times Ltd (Nikkei)||£323.6m
(FY to Dec 2018)
Press Gazette has found that the pandemic has driven more than a million new digital subscriptions for leading news providers in the UK and US.
But last year’s Reuters Institute Digital News Report found that only a small minority of people were paying for online news.
Newman, who co-authored the report, told Press Gazette that when it comes to subscriptions were a “few big winners taking most of that money right now” and it was “very hard for others to break into that”.
“I think other brands are just not in a place where they have sufficient distinctive content to do that,” he said.
“Brands like The Sun or… the Mail, they might put some paid add-ons to it, but fundamentally it’s going to be very hard to shift out of scale with the audience and the proposition they have.
“So I think we’re going to see that it won’t be for everyone, but we are going to see it work very nicely for broadsheet newspapers and tech publications, and potentially those that have strong ideological commitments.”
‘It’s the journalism that people pay for…’
Before the virus outbreak, the Daily Mail had begun to enhance its digital offering, separate from Mail Online, through Mail Plus, which offers three daily briefings and video content to registered subscribers.
The Independent launched a premium paywall in late 2018 .
McCabe said news publishers had traditionally relied on readers going to newsagents and picking up a copy of the paper day after day, but “ultimately news businesses have to think about how that’s going to work online, because I don’t think they’re going to find it all that easy”.
McCabe said reader revenues were like a pyramid. At the bottom is any visitor to the site, while at the top are the premium subscribers prized by titles. “But the reality is there’s very few of those people and everything in between is where the real value probably sits,” he said.
“My view is we’re still in the foothills, but the whole industry is starting to kind of get to grips with what a reader-first and a reader-centred model might look like.
“Forget the distribution mechanism – digital-first is a meaningless phrase, just like print-first – it’s the journalism that people pay for, it’s not the physical paper any more than it is the bits and bytes in the code that deliver the content via Google and Facebook or to an app.”
Newman said there was a need for the industry to develop digital formats that people spend time with in the way that they did with print, such as newsletters and podcasts.
Donations and external funding
But an online paywall is not the only source of new revenue for journalism that might grow in the post-Covid era. Reader donations are another.
The Guardian has been asking for financial support from its readers since early 2016 despite continuing to provide content for free online. More recently this tactic has also been adopted by The Independent and many local newspapers.
McCabe said: “While its journey has been quite complicated to get to the position it’s got to, [The Guardian] has nonetheless proven without a doubt that if you express your mission you can look your readers in the eye and say: ‘Look, you don’t have to pay for this, but if you did, it would be incredibly helpful to this business.’
“And they’ve persuaded lots of people to do precisely that. I think that’s a very powerful case study that should build confidence right across the industry.”
Newman said external funding is another revenue strand that has been developing in recent years and will be “supercharged by Covid-19”.
“I think we will see more money coming from platforms and other routes to try and support journalism that’s not commercially sustainable, but is still important democratically,” he said.
Although this is unlikely to include state intervention – our poll shows this to be the least preferred option – Newman said it would be along the lines of the recommendations made in the Cairncross Review.
A tax cut for digital publications, suggested in last year’s report, has already been brought forward by the Government and an innovation fund worth £2m handed out money to media organisations earlier this year.
Its proposed Institute for Public Interest News was snubbed, however.
Offering some encouraging words, McCabe said news publishers “need to believe in themselves and come out fighting” and evolve their business model to meet the challenges of the time.
“What is it audiences really want? These are critical questions… fundamentally it’s don’t stand still, develop your business in really positive ways so the engagement grows, not just reach grows.
“I think that’s really critical to media’s future.”