newspapers

Negative-sum games

As if current economic conditions weren’t dire enough, several forces conspire to push the media sector’s financial performance further downward. These factors are an obsession with market share, price wars, and first movers’ ability to set the tone, often for the worse.

Take the iPhone application market as an example. At first, publishers were elated: at last, a content distribution platform with an embedded transaction system. They saw it as the first step to make customers pay for content. Then, another idea took over: market share. Like “eyeballs”, the old Internet Bubble de rigueur metric, market share is today’s mirage: once you get it, profit is (almost) sure to follow. Never mind there are zillions of companies that have once and for all severed the connection between market share and profit (Apple for computers, BMW in the auto industry, Nucor in steel production, name but a few).

Unfortunately, the first one who shoots for market share sets the standard, sometimes with surprising twists and turns. Take the Wall Street Journal: first-rate web site, highly successful business-wise with one million paid subscriptions (about $100/yr). When it came to the iPhone opportunity, guess what: they went for a free application loaded with pathetic ads — apparently locked on the saturation mode, the same banner kept showing endlessly. Just a few weeks ago, seeing a steep drop in profits, the WSJ.com reversed itself and restricted access to its app. More

The Cash Is In The Topics

All conversations I keep having about the economics of a news web sites revolve around two key ideas: how to increase both the duration and the depth of a visit. In this respect, much work remains. For August 2009, here are the numbers of page views, as measured by Nielsen Net Ratings on the French market. :

  • Online gaming:         between 400 and 600 page views per person and per month
  • Facebook:………………………411
  • Google:………………………….260
  • Meetic (dating site) :………..208
  • Leboncoin (free classified):..182

That was for the top 17 French sites ; further down in the rankings, medias sites go like this:

  • TF1 (n°1 television network):…39
  • Le Monde (national daily):………24
  • Ouest-France (regional daily):…22
  • 20 minutes (national free):…….20
  • Le Figaro (national daily):………20
  • Les Echos (business daily):…….14
  • Rue 89 (pure player):……………10
  • LePost (pure player):………………8
  • Liberation (national daily):……….8
    (Those numbers apply widely elsewhere as behaviors don’t vary much from one market to the other)


Well. You see where I’m going: if you set aside tricks such as massive video or slide-show contents used to artificially increase page view numbers, heavily used news sites such as Le Monde’s or Le Figaro’s get less than 5% of the monthly page views of a gaming site. Agreed, you shouldn’t compare gambling and consuming information; but in analog life, there isn’t the wide difference we observe in the digital universe, on line, between the amount of time people spend playing the lottery or betting on horses, and reading a newspaper or a magazine. In other words, the internet hugely accentuates the viewer’s “engagement” in favor of social entertainment, at the expense of consuming solid, but static contents such as news. Depressing indeed. But here is the good news: there is room for improvement.

If we take 4 pages per visit as a credible average for a news site, adding 2 more pages  per visit will sharply increase the actual advertising revenue per visit. Not by 50%, of course, since the more you add pages, the less valuable they become (CPM drop fast once you leave the hottest part of a site), but still worth the effort. More

Inhale, it’s Free

“Free”, as a business model, is a figment of the imagination. In itself, “Free” is not a business model, it is only a component of broader revenue system. Unlike Chris Anderson, author of the book “Free” ($18.00) — a bestseller not a bestfreebie — I happened to actually practice the free “model”. Between 2002 and 2007, I was the editor of one of the most successful free quality daily newspapers in the world.  20 minutes is now the most read newspaper in France with 2.7m readers, every single day, in eight major cities.

To put things in perspective, the US equivalent would be a free daily distributed in about 20 cities, with 13 millions readers. More than Japan’s Asahi Shimbun. 20 minutes is not a mere compilation of newswires. It is a “real” newspaper, with original content provided by an 80+ journalists newsroom. And readers love it. Free it is. But so costly.  When we reached our cruising altitude, we needed about €200,00 ($280,000) in advertising to break even (which the paper eventually did achieve). In Spain, too, 20 minutos, became the largest daily in its market with 14 different editions and a good profit margin — that was before the recession struck hard. (The Norwegian group Schibsted owns 100% of Spain’s 20 minutos and half of the French edition, in joint ownership with the regional group Ouest-France).  

I was then an advocate for the “free” press and I still am. Applied to the print media, the free concept brings many great things. 20 minutes’ readers turned out to be :

  • New : 75% of them didn’t read a newspapers before.
  • Young : they were about 10 to 15 years younger than the average French reader.
  • More gender balanced: we had an equal proportion of male and female readers.
  • More professionally active (almost no retired people, for instance).

This was no accident, it was the result of a well-crafted strategy. More

A Case Study: Le Figaro’s Advertising Gamble

Let’s start with a counterintuitive move: At a time when, all over the world, publishers are  tired of the red-ink their printing plans produce and dream of dumping the dinosaurs, the historic French daily Le Figaro fires up this Monday a brand new €80M printing facility to launch a redesigned edition. Behind this apparently irrational decision lies a gutsy but calculated bet to change French advertising habits.



French  newspapers love what they call
Une Nouvelle Formule. As the Fall approached, the left-leaning Libération launched its own, then Le Monde retooled its weekly magazine. “Libé” is betting on an elegant graphic redesign; fine, but this is merely a diversion, a way to avoid painful challenges such as editorship, insightfulness, content relevance.
Le Monde Magazine wishes to reconnect an excellent but elitist magazine to the advertising market and, incidentally, to its readers. To beef up its mag operation, Le Monde brought in a new seasoned editor, a new art director and relies on an abundance of journalistic or photographic talent at and around the paper in order to produce high-quality content.
How these two initiatives will fare is too early to tell. Le Monde’s mag was launched Friday, as for the redesigned Libé, it is barely a week old.

Le Figaro’s move is both more ambitious and much riskier. First, let’s have a look at the company’s fundamentals. More

How to make readers pay for news

An idea is gaining momentum: online readers must open their wallet. In recent weeks, several suggestions for moving from wish to implementation have popped up. The latest one comes from Google. The company proposes to give a boost to its not-so-successful Checkout service by harnessing it to online newspapers interests. Quite a change here. Only a few months ago, Google’s haughty advice to the newspaper industry was : You’re on your own guys ; Darwin is in charge here ; adapt or face extinction. Last November in Paris, I personally witnessed Googlers’ poor performance in front of media barons — an embarrassing mixture of unpreparedness and arrogance. Some of us felt really sorry the search giant screwed up so badly.

Google was slow, but it finally got it. It understood that its position — “Thank us to the billion clicks a month we send to your sites, we bring value to your businesses, the rest is your problem” — was no longer defendable. Google can no longer ignore the dramatic deterioration of the news media sector. 
Here are key figures for the US market:
- The best recent period was 2005 ; that year, US newspapers reported a total advertising revenue of $49.4bn. 96% from print (35% from classifieds) and 4% from online. Since then, between 2005 and 2008, things changed dramatically :
Total ad revenue :…….. -23.4%
Print:………………………..-26,7% (and a drop in classifieds of -42.4%)
Online:……………………..+53,4%
It looks like this :

Now, to get a more precise and recent representation, let’s compare the last available quarter (Q2 2009), with the recession’s impact, to Q2 2005. Here is the evolution over four years :
Total ad revenue:……………-44%
Print:…………………………….-47% (classifieds dropping by : -64%)
Online:………………………….+30%

An important precision for the online ad revenue: it peaked in Q4 2007; since then it has dropped by 23% in Q2 2009. More

Indian Press: The Price Problem

Here is the Indian newspapers price problem: at the kiosk, you face a multitude of titles (roughly 4700 dailies across the country) including about 60 in English. Prices range from 1 to 3 rupees ($0.02 to $0.06). Even by Indian standards those are untenable rates: they cover only about 10% of variable costs. Finnish newsprint and German printing presses come at Western prices. Just for comparison, based on the Economist Big Mac Index, an Indian newspaper is roughly seven times cheaper than an American one; it is twenty times cheaper than a French daily.
Now, how do you significantly raise prices in a country where a decent meal costs about $2 ?

That question led to a heated debate at the last INMA South Asia Conference, in New Delhi. (INMA is the International News media Marketing Association). I was invited to talk about the migration from print to digital  — which, let’s face it, is not on the top of the publisher’s mind in a country where internet penetration is about 7% of the total population (details here) –  but India media moguls are keen to prepare their industry’s future.

The Indian press is staring at a difficult question. A few years ago, when we met for the first time in Chicago, Times of India’s CEO Ravi Dhariwal explained its newspaper was virtually free, with a price (3 rupees, $0.06) carefully adjusted to be slightly above the price of the scrap paper collected by poor people in the street of Delhi or Mumbai. Things have changed. As one of the publishers explained last Friday in Delhi: “We have built a bubble which is about to burst. Against all fundamentals, we have been pursuing circulation figures at any cost. Our model no longer works”. Around the table, the consensus was the price of papers had to go up significantly, probably by a factor of 2 to 5.

Well… Let’s consider a few impressive fundamentals. Circulation numbers are commensurate to India’s 1.2 billion population.  According to the Indian Readership Survey, Dainak Jangran, a newspaper unknown to Western radars as it is published in Hindi, has 55 million readers in 19 editions. The Times of India is the world’s biggest English speaking newspaper, with a circulation of 4 million and a readership of 14 million. More

Web + Print: A Powerful Combo

In today’s context of massive revenue depletion, everyone (almost) agrees on one thing: digital media revenue sources will have to be diversified. There is no magic bullet, no dominant model that will guarantee, by itself, a sustainable revenue stream. Time to think the hybrid way.  Free will coexist with paid-for, different users (occasional vs. intensive) will be discreetly assigned different revenue models, platforms will diversify as technical standards for publishing or transactions emerge, opening new fields for monetization. Old churches and ideologies will crumble.

The biggest stimulus for such creativity is the collapse of the internet advertising model. On average, CPM (cost per thousand viewers) have dropped by 30% – 40% during the last twelve months and very few expect a recovery.  As far as booking rates are concerned, they are dropping as well. It is frequent to see only a mere 30% of pages inventories actually sold to advertisers. Unlike prices, this latter percentage is likely to bounce back at the first sign of economic relief.

But the classical advertising model’s weakness is more structural. The “old” banners / display stuff doesn’t fly as expected. People simply don’t click enough on those items and even sophisticated targeting yields minor relief. The only “healthy” segment is search ads, but it is dominated by the Google Way — a massively deflationary one. Successful medias will be the ones who manage to shake off the old cobwebs and proceed to rethink their relationship with the advertising sphere. It will be fairly easy for social or non-hard news sites, but true information content vehicles are likely to struggle with ethical issues…

As far as platforms are concerned, last week, we looked at smartphones: they’re on their way to become the main vector for news, whether it is for text or video. Numbers looks good: last year, according to IDC, on the 1.19 billion mobile phones sold worldwide 155 million (13%) where smartphones. In 2013, says IDC, 1.4 billion handsets will be sold, among them 280 million (20%) smartphones. And if anyone harbored any doubt regarding the ecosystem’s health, just consider the 65,000 applications available for the iPhone and the state of the competition. As explained in this Fortune magazine story, the sector is red-hot: since the iPhone introduction in june 2007, Blackberry quarterly sales have more than tripled. Even Google joined the fray with Android phones — and following a trajectory than will put the search engine to a collision course with Apple (see Jean-Louis’s column War in the Valley; Apple vs. Google).

Coming back to the title of today’s column, let’s talk about paper, the pulp, dead tree version. I can see many reasons why some sort of paper version can help. More

Media: What’s left for the brand ?

A well-established brand is supposed to be a key asset. Everybody keeps dreaming of building a long-lasting brand with lots of positive attributes. How true is it for media ? In the rapidly changing environment, in the massive shift towards electronic media (and the vaporization of value that goes along with it), how relevant is the notion of media brand?

Quite important, actually. Brand management must be handled with great care, especially when business models are threatened. The brand becomes a critical line of defense, and a strategic component to build upon. There are conditions, though, to the survival of media brands — and to the emergence of new ones. More

The News Cycle Heartbeat

How do mainstream media and blogs interact? How do they feed each other ? Everyone in the newsmedia would love to get a better view of the mating dance. A few weeks ago, scientists at the Cornell University unveiled a thorough analysis of the relationship between the two universes. Borrowing from genomics techniques, they dug into a huge corpus of politically-related sentences and tracked their bounces between mainstream media (MSM) and the blogosphere.

Their dataset:

  • About 90 million documents (blog posts and news sites articles) collected between August 1 and October 31, 2008, i.e. at the height of the last US Presidential race.
  • 1.65 million blogs scanned.
  • 20,000 media sites reviewed, marked as mainstream because they are part of GoogleNews.
  • From this dataset, researchers extracted 112 million quotes leading to 47 million phrases, out of which 22 million were deemed “distinct”. These phrases were important enough to be considered as news.
  • The phrases where political statements or sound bytes pertaining to the political race  and uttered by the two candidates, their running mates or their staff.
  • Processing these 390GB of data took about nine hours of computer time (using a complex set of algorithms, involving “markers”, as in genetics).

The findings, in a nutshell:

  1. Mainstream media lead the news cycle. They are the first to report a quote, the story behind it, the context, etc.
  2. The 20,000 MSM sites generate 30% of the documents in the entire dataset and 44% of  the documents that contained frequent phrases.
  3. It takes about 2.5 hours for a phrase to reverberates through the blogosphere.
  4. The phrases that propagate in the opposite way (from blogs to MSM) amounts to a mere 3.5%.
  5. A news piece decays faster on the MSM than on the blogosphere.

The comparative curve looks like this :

For those who want the complete analysis, the full report is available here.

As expected, this research triggered controversy. More

The end of the breaking news — as we know it

In the internet storm sweeping the media, breaking news is, without a doubt, the main casualty. This branch of the information stream is the most likely one to endure a kind of “commodity syndrome”. The breaking news circa 2010 will be ubiquitous, instantaneous and simultaneous. Its value, its market price actually, will tend to zero as a result.

Two forces are at work, here: the professionalization of the blogosphere and the impact of Twitter. Dealing with this is critical for the survival of traditional media. Let’s have a closer look. More