The Hindu Business Line : Newspapers struggle to find a new business model

With 24-hour news channels and Web sites that offer much of the news content free, newspapers are at a critical time in their life cycle. How does one run a profitable newspaper is a crucial strategy question.

C. Gopinath

For many, the day does not begin without the newspaper in one hand and a cup of coffee in the other. It is an easing into the day’s routine, while catching up on what happened around the world. Each one has a favourite starting point. Some start from the sports section and work their way to the front, while others go straight to the financial pages. One’s name appearing in the newspaper is an event that is usually savoured by preserving the clipping along wit h other family documents. Have you contemplated what your life will be without that newspaper lying outside your door every morning? Is it the same to save a digital file which has your name in it?

The city of Boston, my fair city, was faced with the threat of losing its leading paper a short while ago. Will the Globe survive or not, was the question. The city was agitated. The nightly television news anchors gave out a phone number for people to call and register their votes. The mayor weighed in that the paper was crucial for the city but he ruled out any government assistance. The future of the 137-year old paper was in serious doubt because it was in deep financial trouble.

The Globe was bought in 1993 by the New York Times Co and remained profitable for a while. However, the paper lost about $50 million (Rs 250 crore) in 2008 and is expected to lose even more this year. The Times Co had been engaged in cost-cutting and even layoffs in the newsroom. Finally, in a desperate push for more, it gave an ultimatum to the unions that unless it got labour concessions within 30 days of about $20 million (Rs 100 crore), it was prepared to close down the paper. The concessions included wage cuts, elimination of pension contributions, and life-time employment guarantees for some personnel.

The current recession has affected many industries, and firms across the board are struggling to tide over these difficult times. But the problem facing the Globe went beyond that affecting the economy to a generic one affecting many newspapers in the US.

Other dailies such as the Star-Ledger of Newark, New Jersey and the San Francisco Chronicle were also subjected to closure threat in order to achieve cost savings. Some newspapers have shut down. The Christian Science Monitor, renowned for its international coverage, has recently stopped printing a daily paper and publishes daily news online and prints a weekly edition.

Dipping ad revenues

Newspapers have been facing declining advertising revenues (the Globe saw a drop of 30 per cent in the first quarter) following falling readership.

The big corporate advertisers have cut back due to the recession, but even classified ad revenues have been falling as there are alternative means now available for reaching target groups. With 24-hour news channels and Web sites that offer much of the news content free, newspapers are at a critical time in their life cycle. The seekers of news have many alternatives for both news reports and opinions on the Web.

The days are gone when opening the newspaper in the morning was the first time one heard of the results of a sports match the previous day, or about the overthrow of a government somewhere. How does one run a profitable newspaper is a crucial strategy question.

The Evening Standard, a British 181-year old paper that is published in the afternoon has adopted a different strategy to attract attention and subscription. It has begun apologising in ads for ‘being negative,’ for ‘losing touch,’ and for ‘being predictable.’ Subscription has been falling, a new owner is in charge, and the paper is trying to promise a different style of coverage. With access to the Internet from hand-held devices, you get the news as it is happening. Then why would you want to pay for a newspaper (apart from wanting to read my column here)?

One reader writing to the Globe, making his case for the continuance of that newspaper, argued that one cannot use a laptop when trying to soak up the mess the puppy has created inside the house! Funny, but it raises the critical question of what need does a newspaper satisfy these days.

Hybrid model

Some papers have shifted to a hybrid model of also providing content on the Web and charging for it. While some charge a subscription, others have adopted a micro-payment model where you may have to pay to access preferred columnists or popular stories. Yet, the viability of the model has not yet been proven. With falling ad revenues, the Globe has been raising subscription prices

After some hard bargaining, the publisher announced that the Globe will survive, after all, at least for the present. The owners have negotiated pay cuts of 5 to 10 per cent with the unions (yet to be ratified), and reduction in retirement benefits. Life-time job guarantees held by about 190 employees will go, managers would also take a pay cut and lose benefits, and company contributions to healthcare benefits will also be cut.

While this may help the paper in the short run, the key issue is to be able to shape the newspaper to satisfy the needs of different potential target groups. One reads the paper for different kinds of news (world, national, regional, local), opinions, advertising of different forms, and so on. Entry into this industry at a local level was relatively easy (one could subscribe to newsfeeds, and add some local reporting), and there were few substitutes.

Trying to establish a regional or national reputation took a lot of work, and required investment in bureaus, sharp reporting, and skills in leading the news, by highlighting issues before they were common knowledge. Papers built their reputation for scoops, and the reputed ones worked hard to maintain integrity, which not only meant truthful reporting but also keeping news coverage separate from opinion and hence drawing readership from all sides of the debate.

The question now is whether it is only the medium, that is, how we get the news, that is challenging the existence of the papers, or also whether ease of access to the news has made the customer pickier about the kind of news the reader wants.

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. )

Related Stories:
‘Indian print media needs to prepare for storm of digital migration’
E-media versus p-media

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page