THERE’S NO SHORTAGE OF READERS, SO CAN NEWSPAPERS SURVIVE IN THE INTERNET AGE?

Posted on October 27, 2012

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Nineteen ninety-one was a big news year. Paul Keating was plotting to tear down Prime Minister Bob Hawke; Operation Desert Storm was launched in the Gulf; the Soviet Union formally broke apart. It was also a big year in the news business. The Fairfax publishing company had gone into receivership after the impatient Warwick Fairfax Jr tried to take his inheritance private; the Seven Network, too, was in the hands of receivers after the collapse of Christopher Skase’s house of cards.

In 1991, Australians bought an astonishing 874 million national and metropolitan daily newspapers. Official figures covering the last quarter of 1990 and the first quarter of 1991 showed more newspapers were printed and sold than in any other six-month period in our history. No one reported this moment of significance because no one knew then that newspapers had reached their peak.

And in 1991, newspapers gave little space to a report on a computer boffin by the name of Tim Berners-Lee who had devised a simple way to connect computers, turning a clunky process then used only by the academic and scientific community into a new form of do-it-yourself communication. He invented the protocols that drive the World Wide Web. From that moment, the world changed. And, perhaps by chance, from that moment newspaper sales went into decline. Today there are almost 5 million more of us, yet we buy almost 200 million fewer metropolitan newspapers annually. We are 21 years down the information superhighway. How far have we yet to travel before we see the end of newspapers? Can newspapers as we know them remain relevant, desirable and profitable in a new world of mobile communications using pixels and digital tablets?

I have lived, and loved, the golden years of newspapers.

On the morning of February 29, 1960, a leap year day, I presented myself at the offices of The News in North Terrace, Adelaide, and asked for Mr Bob Danter, the ruddy-faced retired Englishman who supervised the copy boys. We were gophers. “Boy!” came the cry and we took copy from reporters to the sub-editors, went to the shop for cool drinks or cigarettes, did errands or delivered late editions to the editor’s home. We were driven by a buzzing box, the kind you see in British upstairs-downstairs dramas. When the buzzer sounded a number dropped into a painted window. The numbers indicated an internal pecking order and you responded accordingly: if it were No. 9, the finance editor wanted a sandwich so you sauntered to his office. But if No. 1 dropped you rushed, because that was Miss Yelland and she was secretary to our energetic young proprietor, who we called, in reverential tones, Mr Murdoch. Whatever Miss Yelland wanted we sprinted to oblige because we might be lucky and catch Rupert Murdoch’s eye.

From the long copy boys’ pew next to Mr Danter’s desk I first felt the excitement and involvement of newspapers. Everyone played a part, and I was a part of it. It took a year, but eventually I moved off the copy boy’s seat into a cadetship and a life of journalism that has given me so much – a front row seat at events that made history; a life of travel and privilege; a boy from the bush thrust into a position to interpret events and analyse society.

Journalism and publishing was at its height: the mass circulation of news and views; a mighty megaphone that shaped the thoughts of millions. Then, in 1991, the World Wide Web promised everyone a voice and a way to shout out their own version of the truth. The world changed. But just as we didn’t recognise the sales peak of 1991, neither did we stop to ask how long it would be before the man with a megaphone would be drowned out by everyone else’s newly liberated opinions.

Newspapers are not dead yet. Rupert Murdoch,

now 81, says they will be published for many, many years to come. But there is a general acceptance that the rising tide of internet-based digital services will eventually swamp them. What is at issue are the processes involved in this transition, the time frame, and what will replace them.

APN News and Media, which publishes 12 paid daily and 56 smaller community titles, last year abandoned daily editions of its Daily News at Tweed Heads on the NSW far north coast. APN chief executive of regional media Warren Bright says it made business sense to concentrate on one bumper Saturday edition and scale up its online news reporting to fill the daily gap. “The print circulation is up 10 per cent and while there has been an overall reduction in advertising revenue, profitability is significantly healthier,” he says.

Business sense, perhaps. But what of its readers? Tweed Shire mayor Barry Longland laments the

passing of the daily print editions. “There is a sense of loss,” he says. “It’s left a gap in the lives of many people. It has affected their ability to find out what’s going on around the place and it’s made it harder for us on the council to get our information to them. We have a large aged population here – double the national average – and some of them are not so savvy about online. And it’s not the same; doing the crossword, reading the death notices. It’s like the demise of an old friend – there are stages of grief and I think we’re still in the denial phase. Acceptance hasn’t come yet.”

Media companies have different strategies to deal with the new world and most analysts accept there will be different outcomes for different market sectors. There is no single or simple answer. What is agreed is that newspaper-producing companies have never had more readers. London’s Daily Mail recently passed The New York Times and reached 100 million unique browsers a month to become the world’s mostread masthead. In Australia, The Sydney Morning Herald sells about 160,000 printed copies each weekday yet says more than 3 million unique visitors click onto its website each month. The Australian has a Monday to Friday circulation of 129,000 (a print readership of more than 400,000 daily) and online it boasts a unique audience of 1.1 million a month.

The problem is that while plenty of people are reading, not enough are paying. This is a legacy of the first big miscalculation made by publishers: they gave away their content online. Most did so because they believed online audiences would grow to the point where advertisers would pay handsomely to reach these consumers. But it didn’t happen. The price of online advertising was driven down by limitless space and intense competition, not only from other publishers but also from new players in the digital field. Where the need for costly printing presses and distribution systems once provided a tall barrier to entry for potential publishers, the internet gave a cost-less voice to millions of bloggers. Those who were able to attract large audiences began to also attract a trickle of advertising, automatically placed by the new gorillas on the block, the internet giants such as Google.

Newspaper publishers around the world joined the chorus of lament: We’re replacing print dollars with digital dimes. In Australia, a digital dollar is valued at 18 cents. In other words, you need more than five times the volume of online advertising to replace a dollar’s worth of print advertising.

Once newspaper publishers lost patience with the free online model they faced a very difficult question – how to unscramble the omelette? How do you get people to pay for something they’ve been getting free for a decade and a half? The answer is a work in progress, but there are some encouraging signs. Newspapers such as the Financial Times and The Wall Street Journal never embraced free websites and are now reaping the benefits. The London-based FT recently announced its 300,000 digital subscribers outnumber its print subscribers, and the WSJ reported a 12 per cent rise in digital and print circulations in 2011. The New York Times, which introduced a pay wall last year, now has 500,000 subscribers helping drive up circulation revenues by almost 10 per cent in the quarter to June this year. More than 20 per cent of all US newspapers now have pay walls. The Australian introduced a pay wall last year and now has about 40,000 digital subscribers. The SMH and The Age, long wedded to the concept of free sites, will soon follow suit.

Not only are pay walls delivering more committed readers, they are beginning to deliver more and higherpaid advertising. The time-honoured lament of advertisers is summed up in the quote: “I know half of my advertising spending is wasted – I just don’t know which half.” Newspapers have been able to tell advertisers how many copies they sell, but not to whom. Socio-economic readership data has divided audiences into groups but it has been an imprecise measurement at best. Digital data is precise. A recent analysis of data matched to The Australian’s digital pass suggested subscribers are 6.4 times more likely to transact with Qantas than a non-subscriber, transact twice as often and spend twice as much. That kind of information allows advertisers to target their messages with rifle-shot accuracy – far more attractive than the old shotgun mass media approach of firing off both barrels and hoping to hit someone.

The shrinking of advertising revenues started with classifieds. More than $1 million a day dried up as new web-based businesses took the lion’s share of job recruitment, real estate and car sales advertising. It will never come back to print. Newspapers still attract a quarter of the $12 billion spent on advertising in Australia in 2012, with half of that – about $1.5 billion, going to the major metropolitan titles. This is down on the 30-plus per cent of a decade ago. Advertising on internet sites is increasing and this year passed the $1.5 billion allocated to metro newspapers. The size and reliability of print advertising remains significant, but there is no doubting the trend: the money is following the eyeballs and only incurable dreamers would suggest the flow can be reversed.

How long, then, can newspapers survive? The

answer is simple: as long as there is a demand for them. Rupert Murdoch says they will last for many, many years. At Fairfax Media, analysis of the trend lines and models for the print editions of The SMH and The Age suggests the answer is three.

Greg Hywood took up the role of chief executive of Fairfax Media in late 2010 knowing exactly where he had to take the company. “I had been to Silicon Valley in the ’90s and saw it all … I had a firm understanding of the direction this business was going,” he says. “We will stay in print as long as it is profitable. It will depend on demand. We must remain flexible and respond to our times, but we can’t base our business on the premise that print will stay profitable forever. There is no point in getting teary-eyed about this. People got upset when motor vehicles replaced horses and buggies, but within a year they had forgotten their horse’s name. People wailed when they shut bank branches and now no one goes near them.

“News print is a 500-year-old mobile communications technology, but tablets are the game-changer. They are an efficient modern mobile technology and they’re only going to get better.”

News Limited CEO Kim Williams has a more positive view about the future of print. “This is not to say the trend towards digital is not happening,” he says, “but there is no sense of defeatism about print. We’re still selling 7 million copies of our metropolitan titles a week along with 5 million of our community newspapers. That’s pretty substantial in anybody’s language, and print revenues are higher and more reliable than digital revenues. We are working hard to improve our business at all levels. We want a better understanding of and servicing of distribution at all levels – newsagents, other outlets and subscribers – and we are working to improve the quality of our connections with our consumers, both readers and advertisers.”

Chris Mitchell, editor-in-chief of The Australian, is also a glass half-full kind of guy – a confidence no

doubt brought about by the relatively good sales story revealed in the circulation figures. The Australian and The Australian Financial Review are the only two national newspapers and The Australian uniquely shows a higher circulation today than in 1991. It sells 11,000 more copies each weekday, but is down on weekends by 23,000 copies. Both titles are down on their sales peak established in 2000 but the movements are marginal.

Mitchell’s analysis is that now is not the time to defend his position. Now is the time to attack. He says Fairfax’s plans to convert its SMH and Age into tabloids will present a great opportunity for his upmarket and serious Oz. “They [Fairfax] have never been good at tabloids,” he says, “and they will fall faster as tabloids than as broadsheets. I’ll stay a broadsheet and we’ll pick up the top end of the market.” And Mitchell relishes the thought of Fairfax abandoning its weekday print editions – “in two or three years, I expect” – noting that “when Sydney and Melbourne become one-paper towns that event alone will extend the life of the surviving mastheads.”

Mitchell’s enthusiasm for print does not diminish his acceptance of digital as a valuable part of his business. “Digital revenues are nowhere near the level of print revenues,” he says. “For us it’s advertising first, cover price [circulation] second and digital a long way third. But the data generated by our digital pass is valuable – people used to come to our site through search engines; now they come to the address directly and spend two and a half hours a week with us. We are now selling that engagement – it’s a way to fight the tyranny of the online advertising auction models which sell our advertising space so cheaply.”

While it is indisputable that the future is challenging as newspaper markets contract, the fall is not universal. Of all Australia’s state-based capital city newspapers just one has increased circulation over the past 21 years. The Darwin-based NT News has seen its circulation rise by 4.6 per cent – nowhere near the Territory’s population increase of 32 per cent, but at least a gain where others are losing.

The NT News won an award for its branding at News Ltd’s recent awards night in Sydney and editor Matt Cunningham says it was the result of deliberate efforts to stand out in a crowd. “We have to have exciting front pages,” he says. “They’ve got to jump out at you.” In Darwin, that means a reliance on crocs, UFOs and the bizarre doings of some of its citizens. Cunningham says his paper does cover politics and business, but rarely on the front page. “We follow the dictum that papers should not inform, entertain and excite,” he says. “They should excite, entertain and inform.”

This attitude sets the NT News apart from most other newspapers in the regional sector, which have remained relatively stable. You won’t find many prizes for journalism going to the bush, but you will find a consistency and loyalty to long-standing mastheads. Steve Kelly, editor of Fairfax’s Warrnambool Standard, which has maintained a relatively steady circulation in the face of the internet revolution, says: “We’ve been going for 140 years and we have extraordinarily strong connections with the local community and an extraordinary loyalty from readers. Much of this comes from members of our staff who have worked for us for 35 to 40 years – they’re lifers, born and bred here, with a deep understanding of their community. We tell it how it is, with a focus on local news. It has paiddividends because that’s what matters most to local people. We treat people with respect, which is vital for a local paper. Often newspapers can work against their communities; they get into fights with their local councils and they can get mired in a negative mindset.”

This sense of parish-pump attachment between readers and their papers is also seen in the community sector – free papers stuffed in the letterbox each week, packed with news titbits and bargains from local supermarkets and shops. In this market segment, circulations are set by the publishers. The normal constraints of supply and demand do not apply. So long as advertising revenues stay strong, the printing presses will roll. “We see a robust and long future,” says Bob Osburn, editor in chief of News Limited’s NewsLocal, which publishes 22 titles covering most of Sydney and the NSW Central Coast. “We have recently completed market research that tells us 80 per cent of our readers want to get their local information in a printed format. They don’t see us as part of the news cycle where events will overtake us quickly, so they can put us aside and read us to catch up with what’s happening in their neighbourhood at their leisure. They see the main media as full of crisis and catastrophe. Turn on the radio, watch the TV or pick up your morning paper – it’s the worst of the world today. Our readers want a more positive and uplifting approach. They rate community volunteers as their most revered people and applaud local champions.”

While Osburn hot-gospels his newspapers he admits the websites, Facebook pages and Twitter accounts he oversees on behalf of his mastheads are “rocketing up” in traffic. “I guess one day the lines will cross, but there’s no crystal ball that says when,” he says.

I recently gave up newspapers for a week. I lived a

fully digital life by using my laptop, iPad and iPhone as my sole connections to the world, and guess what? I survived. It’s not difficult. Everything you ever wanted to know is there and accessible. But it is not the same. There is something deeply satisfying about sitting down with a cup of coffee, a piece of toast, the radio on softly in the background, digesting a newspaper. It may not occur to you at the time, but you are not only getting the news; you’re also getting subtle hints about it. You can tell at a glance what is important by its placement on the page. Expert design and layout will lead your eye to explanations of why it matters. You can’t do that with another line of breaking news headlines in an online scroll.

This process of sifting the news and presenting it in a coherent way to give it context is decided by a team of people you trust, by dint of your purchase decision, to select and arrange relevant bits of it for you. Sure, we can all arrange to have information of importance tailored for us by computers. I get daily or weekly emails from a dozen media-centric sources just as I would get the latest farming information if I were a farmer, or the latest sea conditions if I were a fisherman. But newspaper editors save us time by curating the news for us. The serendipity involved in turning a page and finding something unexpected and interesting is a wonderful part of the newspaper-reading experience.

At the end of my week-long experiment I made a conscious decision: I’m going to continue a lifetime’s habit and keep buying newspapers. I like them. That is my preference and my choice. I know they will become slimmer and more expensive but if enough of us continue to buy them, the longer they will live.

And that’s what it’s ultimately all about: choice. Today, more than ever, and in the future, you can choose your media – you can choose what music you fancy and where to get it, you can choose where and how you access books, you can communicate with friends via Facebook, open a Twitter account and tell the world what you think, or start up your own blog. You can opt in or opt out of the incessant media noise that surrounds us. It’s your choice, and if enough people choose to buy newspapers they’ll continue to be with us for many years to come. If not, well, that’s also your choice.

By Mark Day