Newspaper publishing is a business in decline. Price wars, diversification and an over-reliance on promotions and product innovation at a time of rising newsprint costs is testament to the fact. And as if we needed further proof: across the world, from the Electronic Telegraph to the San Jose Mercury News, newspapers are leaping into cyberspace.
According to The Global Newspaper Market, a report published by Goldman Sachs last month, total newspaper circulation in 36 countries fell by 12 per cent between 1989 and 1993. “Broadcasting and other delivery mechanisms threaten to erode the two strongest unique selling propositions of newspapers, namely regional/national news and targeted advertising – particularly retail and classified,” it says. The report goes on to acknowledge newspaper publishers’ growing desire to diversify.
Publishers believe electronic publishing offers them longer term security. But is the stampede to go on-line driven by vision or desperation?
The truth lies somewhere in between. Newspapers will never again enjoy the position of sole news provider. The advent of radio and TV put paid to that. Now, the arrival of “new media” offers another threat and potential challenge: a new avenue to exploit their news gathering, analysis and editorial skills. It is essential to publishers’ survival that they ensure their electronic products do not compete with their printed ones and that eventually they can be honed to generate new revenues.
Publishers are adopting a two-step approach. For the time being, information providers are reproducing printed material in electronic form for little or no financial return. “It’s a start, but it can’t be where we end,” says Josy Roberts, special projects manager at FT Electronic Publishing, which launched FT On-line in May. Electronic services must offer greater depth and added breadth, she says.
Publishers must accept that their days as print-based news barons are numbered and their future lies as suppliers of “software”, or intellectual property. The Financial Times owns the Profile and Extel information services and has published on CD-Rom since 1992. “Our on-line service is central to all this. Its technology allows the most rapid updating,” says Roberts.
Pearson, owner of the FT, is far from the only British publisher involved in electronic publishing. In fact, they’re all at it, to a greater or lesser degree. The Telegraph was one of the first to move on-line with the launch of Electronic Telegraph last November. More recently, Mirror Group has confirmed plans to launch The Independent and Daily Record on the Internet (MW June 23). Associated Newspapers has already launched the Evening Standard on-line, and the Daily Mail and Mail on Sunday will soon follow.
It is a trend mirrored in magazine publishing. Among the first – and most successful – launch was Hot Wired, widely acknowledged as the definitive on-line publication. Accessible via the World Wide Web (WWW) – the rapidly growing graphics-based side of the Internet – it is entirely separate from its printed cousin, Wired. So far, Hot Wired has attracted 200,000 subscribers, only 20 per cent of which also read Wired. Since its launch, a further 31 magazines have gone on-line, according to a recent report by 20/20 Media.
Newspaper publishers deny they are going on-line for defensive reasons. Electronic publishing offers a chance to generate printed copy sales through sampling, has prestige and PR value and offers the long-term potential for new revenues through advertising or advertiser-related services such as mail order and home shopping, publishers claim.
Associated group technical director Allan Marshall says on-line applications are part of a broader new media brief following other developments such as the launch of PageFax, a fax-on-demand service.
Associated is participating in the Inesnet Publishing Network project with other publishers, including the Telegraph. Unlike when dealing with Internet service providers, publishers will own the service themselves and take all the revenue generated. Each one will set up a server for its own pages and those of its partners, and readers will be able to download pages from all participating publishers with a single phone call.
United News & Media, which owns the Daily Express and Sunday Express, is involved in 60 on-line projects, chiefly in the US where it has 12 on-line sites, six of which are on the WWW. These largely relate to UN&M electronic, computing and new media titles such as LAN and Keyboard magazine.
Last week, the company launched its Music Week site in the UK. It is negotiating to supply “software” to commercial on-line service providers, which include UK On-line and The Microsoft Network (TMN) – Bill Gates’ commercial on-line service to be launched in late summer.
“The WWW offers the greatest opportunity to publishers because of the potential to use graphics, video and audio,” says UN&M new media director Michael Chamberlain. “But the mistake made by a lot of publishers so far is simply to take the printed word and put it on a site.”
It has to be more than this; the potential services which will be charged for are being developed. And the advertising base is growing. TSB and United Airlines will soon join Barclaycard and Guinness as Electronic Telegraph advertisers.
Daily Telegraph marketing manager Hugo Drayton says: “We’re on the Net to play our strengths.” While the source of material is the same as the printed paper, Electronic Telegraph is edited separately and meets a different brief, he adds. Of the 85,000 predominately male users registered so far, 30 per cent are aged over 35 and 60 per cent are between 20 and 35.
A number of developments offer new opportunities for publishers. Chamberlain believes the imminent arrival of The Microsoft Network and the introduction of new systems to enable secure on-line financial transactions are vital. Not only will TMN boost Internet access (it will come as standard with the next version of Microsoft’s Windows software, Windows 95), but it will also force people to rethink the financial basis of all commercial on-line services, he claims. “Unlike its counterparts, TMN will offer 70 per cent to 95 per cent of revenue generated by a service back to the service provider,” says Chamberlain. (Others generally pass back 20 per cent or 30 per cent).
Improved security systems will make financial transactions more viable and encourage commercial activity. Making money, after all, is a primary long-term concern, even if most on-line sites today are being run to boost traffic rather than revenue. Which is why UN&M is experimenting with paid-for ads, sponsorship and pay-per-view mechanisms. “Technology will allow us to take revenue, securely, within the next six to nine months,” Marshall reckons.
Many believe the commercial applications for electronic publications are significant. Hot Wired predicts it will generate $1m (630,000) from ads by the end of its first year.
Success depends on balancing new media activities against old, to ensure they do not detract from the core areas of business.
There is a fine line to tread, warns Roberts. While print can offer editorial authority and perspective, on-line services offer greater detail and extra information. Distancing electronic versions of publications too far from their printed cousins is risky. “Unless the newspaper’s editorial values are translated to the new medium, all you end up with is a database,” says Roberts.
Which brings us back to printed newspapers. Just how they will fare given the evolution of electronic publishing is unclear. Carolyn McCall, director of advertising for Wired and deputy director of advertising at The Guardian and The Observer, says: “New media offers the ability to deliver news and information in real time, with background on stories, at a fraction of the cost.” It will redefine rather, than render obsolete, traditional media, she adds.
That may be so, but it will also force newspapers to re-examine themselves. In a speech at the NetMedia 95 conference in London last month, consultant Gregory Stone likened newspapers’ position with that of the US railroads at the turn of the century. Under threat from new technology, they died because they believed they were in the train business, and not the transport business. Stone says the same principle applies today.
The long-term viability of electronic publishing depends on a growth in the number of people regularly using the Internet (see box). Assuming numbers grow as the pundits predict, consumer preference is the key. Will readers want to access daily news on-screen, and if not, just what sort of on-screen service makes sense?
If properly managed, relatively undiverse newspaper groups will be resilient “for years”, the Goldman Sachs report predicts. But it identifies a growing need for the vertical integration of news delivery from the printed word to full motion video. “In the process of convergence, it will be increasingly important to have control of – or consistent access to – content, as well as occupying the service provider or publisher role, so as to maintain the gatekeeper relationship with the consumer,” it concludes.
Future success will depend on getting closer to consumers and their demands. If you can no longer be first source of news, you can still work to ensure you are the preferred one. There can be no doubt that the long-term prospect for newspaper publishing is grim. The message is at least clear: it may be a sunset business, but publishers have the power to dictate how long and colourful the sunset will be.