We’ve known now for some years that newspapers are in decline. We reported September 4 that the decline in newspaper advertising is accelerating, and that the end of newsprint may be sooner than we think, but that was based on figures from before the current turmoil on Wall Street. Whether the bail out is resuscitated later this week and the United States avoids a repeat of the great depression is a moot point, because what ever happens, the economy is going to take a hit, and heritage media suffers. The hit is going to come on several fronts, and although new media will be far from immune, it’s traditional newspapers with the biggest exposure.
Newspapers suffered a 14% drop in revenue in the first half of 2008, continuing a downward trend starting in early 2006. The biggest contributor to the decline has been the rapid disappearance of advertising, down a whopping 35.2% for the first half of the year…and this is before the current financial crisis. All the external factors in the economy suggest that advertising spending will contract in the second half of the year at a rate higher than the first half of the year, and heritage media, and particularly newspapers will take a huge hit. Advertising doesn’t stop in a recession, but data shows that advertisers get smarter with their ad buys, and search advertising is the biggest beneficiary.
New media isn’t immune from a downturn in advertising, but the figures leading up to this point show that while the economy slowed, online advertising continued to growth, although at slower rates than previous years. In a deep recession, or even depression, the online ad spend may start to shrink, but it enters today far better positioned to take a hit than newspapers are. The classifieds market for newspapers contracted to $5 billion after a 35.2% hit, imagine them taking a 50% or larger hit in the second quarter; in the space of the next 12-18 months, the newspaper classifieds business may simply cease to exist.
As people turn to the latest news on the economic crisis, they aren’t turning to print newspapers. Here’s the front page of the Wall Street Journal today
When news of the bailout failing to pass broke, people turned online for the latest news. Certainly yes, many also turned to newspaper websites, but they didn’t rush out to get their latest news from the print edition. Print has long declined as a relevant source of breaking news, but this crisis proves it more so. The angle that newspapers provide thoughtful analysis isn’t a strong selling point in an age where substitutes are a mouse click or Google search away. Newspapers have lost their edge, and as the world continues to rapidly change, the concept of a print newspaper becomes more and more archaic, and the decline in circulation increases.
Opportunities for new media
Those that survive this economic crisis well into the future will be well run companies with low overheads, and new media best fits the bill. The massive superstructures of traditional newspapers aren’t cost effective, and it’s new media that can thrive in this environment. Newspapers though aren’t stupid, and the smart ones will survive by cutting costs and eventually moving to an online only presence, but as long as they’re still clinging to print, the longer new media has to thrive. Smart startups in the sector will be looking to offer newspaper substitution in an economic fashion, targeting verticals everywhere from local through to international, to build an audience now, and to be placed to pick up the refugees as the newspapers start to fall. Lets just hope that the socialism endemic in the financial crisis isn’t extended to old media, and Governments world wide don’t decide to start bailing out media companies as well :-)
There’s no good news for newspapers at the moment, and the perfect storm we described earlier this month just intensified. Some newspapers will survive, at least online, but the deeper this crisis is, the quicker newspapers will fall. Those of us in new media just need to remain focused on running a tight ship to minimize any exposure online advertising may have as part of the broader downturn in the economy.