When historians write the story of the demise of the newspaper industry in the early part of the 21st century, they’ll have a colourful cast of suspects. Colonel Zuckerberg, in the Saloon Bar, with slow-acting poison. Or perhaps Reverends Brin and Page, in the dining room, via strangulation. A range of less exalted figures, including tech-whispering editorial appointees, spurious media think tank gurus and publishers willing to pay them fortunes to divine the future of the industry. Even readers, who, given the choice between paying for the same old undifferentiated content and getting it for free made the rational choice of spending their hard-earned salaries elsewhere.
In truth, no-one expected it to work out this way. Fifteen years ago, as the shockwaves of the first dot.com crash wiped out most of the remaining new media startups, sobered publishing executives knew that while there was little appetite for gushing profiles of dot.com geniuses, the gloomier financial outlook didn’t mean the internet was going away.
Their storied brands and millions of paying readers gave them a moat protecting against the worst of the crash. From here, new empires would be built. Few were in any doubt about the potential of the internet (though its total mobile ubiquity was perhaps underestimated). Newspapers who were prepared for the next phase of internet dominance would make billions. And not only from home readers: Freed of print and distribution costs, anyone in the world with an internet connection was a potential reader.
Example: In 2003 the average daily readership of the Guardian was 1.4 million with 360,000 copies sold daily. By the end of 2016 readership was 860,000, with only 158,000 copies sold – its most recent circulation figures show 149,524 print sales.
But in 2003 46 percent of UK households had internet connections; by 2017 it was 90 percent, with the average household owning 8.4 internet-connected devices. Internet readership could soar. The Guardian’s current rate card puts UK monthly readers for print, PC and mobile combined at 24,946,000 (print is just a fraction of this: Mobile dominates). The newspaper claims a monthly global readership of 140 million unique readers across all platforms (apps, website, social).
Newspaper advertising revenues peaked in 2000. If you’d shown a publisher their readership figures for 2018 back then, they could have been forgiven for extrapolating the data to promise untold riches by the end of this decade.
As we know to our cost, that’s not what happened. Of the $281 billion global advertising spend on digital forecast for 2018, newspapers will be competing with “everyone else” against the Google and Facebook duopoly. In the UK, Facebook and Google took £6.3 billion between them last year: 54 percent of all digital advertising revenue. In the US, Google gets 42.2 percent of the digital advertising market; Facebook brings in 20.9 percent.
Worse, no-one is predicting newspaper’s share of advertising to grow. Analyst Enders predicts that traditional ad turnover will fall from £1.5 billion in 2011 to £533 million by 2019. Digital revenue will double to £227 million, but that’s not going to account for a fall of £1 billion in annual revenue over the course of the decade.
That’s the gloomy picture, and it’s why leadership of what remains of the news industry will face an existential question over the next five years.
They should be careful where they look for advice.
Not every news industry visionary has newspapers’ best interests at heart. In fact, a case could be made that gurus missed everything over the past two decades. Dimly aware of the potential of the internet, with an audience of publishers leading legacy businesses poorly equipped with staff and resources to adapt, plus the lure of vast riches if you should strike on a solution… gurus in the last decade weren’t getting rich selling shovels in the Gold Rush, they were distracting clients from where riches lay.
First, paywalls. The New York Times introduced a paywall in 2005. TimesSelect lasted two years and gained 250K+ customers who paid for commentary and analysis. Industry gurus reacted with scorn. The Times was withdrawing from “the conversation”, “ducking into its shell”, refusing to take on the challenge of becoming a global news organisation. Even Times columnists complained they were being deprived of a global audience.
When the Times went back to a free model in 2007, there was widespread relief. The paywall experiment had ended, the newspaper’s growing page views would easily surpass its subscription revenues and even the only remaining holdout with a paywall, the Wall Street Journal, was rumoured to be going free over the internet in exchange for those online advertising riches.
Here we are more than ten years later and the Journal has one of the hardest paywalls in media, and the New York Times boasts its digital subscribers brought in $340 million last year, vs $238 million in digital advertising.
Gurus and industry think tanks missed much more. Weblogs came out of nowhere in the early 00s, and briefly rocked the industry’s authority by giving a platform to people who could speak on some subjects with more authority than paid journalists. Having missed the phenomenon, gurus overreacted and argued newspapers themselves should become more like blogs, which led newspapers to create a lot of newspaper columns in the form of blogs, by which time most bloggers had returned to their day jobs.
Video was missed too. While many digital visionaries the pay of newspaper publishers saw it coming, initially it was too expensive. In the name of convergence, publishers built studios, production houses and brought in new teams of video producers and journalists. One can’t blame them for speculating: After all, pure play digital companies like Vice and BuzzFeed have spent hundreds of millions of their investors money in doing the same, but in the mid-00s it was too much cost for too little punch.
It was difficult to get investors excited about video content in 2005.
Journalists grumbled about having to take on new roles, publishers couldn’t decide if they were competing with one another or with broadcasters, while cheap and cheerful video startups like Rocketboom created a new vernacular for news video.
Obviously the biggest miss was social media. It might also have been old media’s biggest error: Rupert Murdoch’s $580m acquisition of early social media platform MySpace, which in 2006 became the most-visited website in the US, overtaking Google, before Facebook overtook it less than two years later.
Again, it’s difficult to fault publishers for this. Murdoch’s 2006 speech on “The Dawn of a New Age of Discovery” is as good a guide to the state of digital in the mid-00s as you’ll find anywhere. Part encomium to the transformative power of technology, it’s a justification for his purchase of MySpace and how it was likely to change publishing.
Murdoch is seldom wholly wrong. He says “We must (…) accept that we will make mistakes, sometimes very large ones.” Social media did change the world but the better firepower was possessed by Facebook, not MySpace. “It is a creative, destructive, technology that is still in its infancy, yet breaking and remaking everything it its path” – looking back, he could be talking about social’s effect on established media.
As Murdoch says, the next big thing was hiding in plain sight. MySpace’s founders wanted to buy Facebook in early 2005 but thought the $75m Zuckerberg wanted was too much. The September after Murdoch’s speech, Facebook allowed anyone with an email address to join; a year after that, the first iPhone went on sale. Another truly transformative technology product that old media missed and new media used as a vector to reach billions.
The relationship with newspapers and Facebook isn’t so different from that of newspapers and the internet in general a decade and a half ago. Go where the audience is, give them free content, the advertising revenues will flow in time. And once again they didn’t.
Newspapers have lost a decade.
There are multiple causes. Huckster gurus dazzling publishers and sleepy industry bodies better used to academic problems than existential crises are just two this report has focused on.
The industry has been undergoing a period of extraordinary disruptive transformation with no precedent. While you’re only as good as your last digital media triumph, track record hasn’t proved to be a guarantee of future success. Look at the $75m price Zuckerberg put on Facebook in 2005. Had MySpace paid that the previous ten years might look very different – and Zuckerberg is still reportedly haunted by his previous brushes with Murdoch.
The relationship with social media hasn’t been all one-way, either. Google and Facebook recognise the value of working with the media. We could add:
- Competition from growth-focussed pure play new media companies funded by venture capital with no revenue targets. Nimble digital companies that don’t need to hit advertising targets (at least at first) can spend endless cash pursuing social media strategies
- These companies don’t have legacy issues like brand hygiene to protect, can experiment with clickbait and dubious news in pursuit of viral traffic
- They work with user-generated content and young content creators, so no legacy issues like newsrooms, pension funds and expensive senior staff
- Advertisers have been persuaded that the millennial or younger audiences digital platforms attract have greater lifetime value than the more mature readers of newspapers.
- Reading newspapers vies for attention with distractions that didn’t exist 20 years ago. While newspapers score high on engagement and focus while they’re being read, we simply have other things to do with our digital time.
We could add that no-one expected newspapers to rake in the entirety of the hundreds of billions social and search have taken this decade. No newspaper built Google or Facebook. They don’t offer the invaluable services Google exchanges for user data, or Facebook’s distracting 24 hour engagement with family and friends. They didn’t built (and perhaps never wanted) the ability to target readers with uncanny precision or manipulate them into states of emotional energy.
But how do they move forward in a period of collapsing revenues, reader distraction and digital platform dominance? These are questions this site hopes to address in the coming months.