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The Carpe Diem blog on the American Enterprise institute has become famous in the past years for visualizing, albeit in isolation, the decline in newspaper revenue. Doomsday reporting around the "death" of the newspaper industry attributes the decline in circulation and newroom layoffs. Since 2008, several banks, auto manufacturers, and major retailers have declared bankruptcy. And yet, newspapers are still around. 

While the chart shown below is accurate and shows a sharp drop in revenue starting in 2007, there is very little explanation other than print is failing. newspaper

So what really happened?

Financial Crisis

The financial crisis was a catalyst for behavior change among advertisers and subscribers. Too much to detail here, but this I believe is one of the major factors. Among other factors, this caused advertisers to really examine budgets and see where cash could be conserved. The financial crisis also reduced credit availability for SMBs, especially classified verticals (cars, homes, jobs) which typically account for 20-40% of advertising revenue.

Retail Consolidation

Retail consolidation and bankruptcy from 1995-2007 (Macy's finalized May acquisition in 2006) finally caught up with ad expenditures. Combine this with the real estate crash and financial crisis and I have no idea why pundits are yapping about the death of print. Fewer big retailers = fewer big ad dollars. Circuit City, Good Guys, Bullocks, Montgomery Ward, CompUSA—all out of business.

More Finance: Media Consolidation and Financial Capabilities

After 150 years of profitability, the industry was not prepared to deal with a financial shock just a few years into the growing debt burden from years of newspaper acquisitions funded by debt. Combined with the factors mentioned above, the lack of experience and knowledge of finance and strategic planning left newspapers with fewer options. If newspapers' sales people were order takers, then the finance departments are filled with bookkeepers.  

It Was Never (Only) About Getting News.

Depending on the publication and regions, upwards of 30% of subscribers get the print for the ads. See item 1-3 and suddenly there are far fewer advertisers (retail consolidation) and fewer local ads (SMB frozen out of credit). 

What About Digitial?

As evident from the chart above, total advertising revenue for the newspaper industry only dropped 4%. Digital advertising revenue was not even reported in this format until 2004, but until recently a consortium of newspapers owned several large profitable internet channels including Cars.com, CareerBuilder, and Apartments.com. The newspaper industry has partnered with major internet and advertising companies.

Death of Adobe Flash

While many websites relied on Adobe Flash for menus and some animation, news websites in particular leveraged the creative potential Flash to develop interesting visualizations. Suddenly in 2006, Apple dictated that Adobe Flash would not be supported. Flash turned into a bad word and +10 years of training and experience became useless. News websites quickly became boring pages of text with a photo gallery, losing engagement as well as any protection from content scraping.

iPhone & iPad

So first, Apple killed Adobe Flash and then launched the iPhone and iPad. With the launch of the iPhone, digital news became portable and suddenly much less profitable. Before the domination of mobile, the print newspaper still had some value: it was easy to carry. Mobile traffic grew from 10% of total to up to 40% in four years, with 1/3 the ads and 1/8 the screen size. Also, competition came not just from other news sources, but also from reduced leisure time with a never-ending stream of time/mind-wasting apps. 

Standards Reduce the Power of Suppliers

The Internet Advertising Board (IAB) sets the guidelines for the advertiser and online publishers. The board of the AIB is comprised of major publishers and advertisers and is analogous to the board for Alliance for Audited Media (the AAM, formerly the Audit Bureau of Circulation).   

While the standards set by the IAB helped large advertisers by providing a common set of creative that could be used on multiple publications, the standards decreased CPM for publishers and prevented local publishers from charging placement premiums. The evolution from standards to market-based bidding further reduced average CPM and gave advertisers even more reach for the same dollar. To offset decreased CPM, publishers increased the number of ad units per page and negatively impacted user experience.

Clearly, there are many factors that contributed to the newspaper revenue decline. Now, in order to reverse the trend and avoid heading toward "extinction," newspapers must find strategies to recapture ad spend in the digital space. 

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