As ad revenue plummets and competitive pressure mounts, newspapers are using new technological systems to boost workflow efficiencies, curb operational expenditure and expand service portfolios. For the beginning of 2009, highlighting immediate cost saving benefits is the most important message to take to market for technology vendors, professional services companies and systems integrators.
There is little doubt that the print newspaper industry is in dire straits. Newspapers were already in a precarious position before the market downturn due to growing competitive pressures. Now, the massive hit to ad spend as a result of the financial crisis is causing many newspapers’ revenue to plunge further. Plummeting ad revenue and consumer migration to online and TV-based news sources have put a massive strain on traditional business models. Over the next 12 months, newspapers face the difficult task of realigning their businesses, creating new revenue generation streams and reassessing the ways in which they interact with consumers.
As newspapers publish their latest financial results, it is easy to see the crippling effect which the credit crunch has had on the industry. Third quarter revenues for the biggest names in the business, including Gannett, the New York Times and McClatchy & Co, exemplify that revenues are falling consistently quarter-over-quarter, with decreases over the course of 2008 ranging from 9-15%. In some cases, the massive decline in revenues is placing newspapers at risk of missing their debt obligations to lenders, causing companies to consider huge cost saving initiatives such as staff cuts.
Declining ad revenue is at the heart of newspapers’ revenue loss. The Newspaper Association of America reported that over the last five quarters, ad revenue decreased by an average of 10.5% over each quarter, with Q3 2008 dropping by 18%. Over the course of 2009, the outlook is just as grim. In the UK, for example, WPP’s Group M predicts that ad spend will fall by 9% over the year, with national newspapers’ ad spend plummeting an average of 12% as advertisers rein in their marketing budgets. Considering this significant drop, Fitch, the ratings agency, expects to see an increase in defaults, shut downs, and liquidation of national and local print newspapers in the coming two years. Indeed, since 2005, 40 US newspapers have already initiated plant closures.
While falling ad spend is partly due to slowing economic activity, there has also been a shift of ad spend to online media. As new information channels mature, primarily online websites, newspapers have observed a significant shift of their audience base (and associated ad revenue) away from print media. While print newspapers have, in most cases, built comprehensive websites in the early part of this decade, the competitive pressure from alternative sources such as blogs and broadcast news agency websites is a cause of growing concern to the industry. In order to continue to provide an attractive service to consumers, newspapers must expand their service portfolio to include multimedia, community interaction and multiplatform distribution.
Considering the trends of declining revenues and service expansion, newspapers are turning to technologies and system realignments to help boost business, IT and production efficiencies, lower operating expenditure and manage new multimedia content services.
The integration of digital and print newsrooms is one method which newspapers are employing to consolidate staff functions and lower expenditure. Traditionally, the two functions have run in production and IT silos due to the perceived differences of operations. However, certain newspapers, such as The New York Times, are already at the forefront of integrating their newsrooms to content and platform-agnostic distribution. With the migration to an integrated approach, there needs to be a concomitant reassessment of traditional editorial and production architectures, and workflow management and process automation systems.
For a multi-site and multiplatform newspaper, creating efficiencies in the planning, budgeting, editorial and distribution process is essential to lowering operating expenditure, quickening time to market and generating flexibility to handle future service expansion. Integrated content management systems (CMSs) that span all or at least some of a newspaper’s processes, such as products from NStein, SAXOTECH, DTI and CCI, are crucial in helping to achieve these goals. While in many cases content management evolves from in-house systems, there is growing opportunity for managed third party systems that are easily upgraded, open and adaptable, and offer a potentially lower total cost of ownership.
The ability to manage and publish video assets is a requisite for any modern newspaper. Indeed, it is a service offering that consumers have come to expect as standard from publishers’ websites. Furthermore, as newspapers begin to create their own content for distribution (such as the Financial Times’s ‘View From The Top’ series), the ability to create a user and enterprise friendly management, distribution and archive system is crucial. Either through in-house or third party software as a service platforms, an effective online video platform (OVP) will help manage everything from ad campaigns to community interaction blogs. Transforming websites into revenue generating video content portals will be one of the biggest challenges for broadcasters over the next 12 months.
However, despite the movement towards integrated newsrooms, multi-functional CMSs and the creation of new services through OVPs, newspapers are still finding it difficult to keep afloat. With high ad revenue exposure and waning income, newspapers are more concerned with lowering costs than ever before. In addition, with growing competition from other news and entertainment sources, it is imperative that newspapers respond with new service offerings.
For technology vendors, professional services companies and system integrators which are aiming to sell into the tightening newspaper market, ensuring that marketing material and pitches address how their solution can significantly lower costs will be one of the most important points to take to market in the beginning of 2009. As newspapers scramble to survive, it is essential to highlight how to lower expenditure as quickly as possible.