European Journalism Observatory, May 2009

EJO Research

A study conducted by media researcher Piero Macrì assesses obstacles facing the newspaper industry and options for recovery.

Newspapers have never been read as regularly as they are today. Nonetheless, the publishing industry is in a crisis not transitional in form, but rather structural. In order to understand how to resolve the dilemma, the following points must be taken into consideration:

• Despite the notable increase in online readership, advertising has not kept pace. Indeed its growth has been insignificant, and the shift from paper to online advertising has been greatly limited. On average, the investment value of Web advertising does not exceed 10 percent of a newspaper’s total revenue.
• Any attempt to impose access fees for news content appears to have little potential for success. Readers are accustomed to obtaining information for free, and thus are inclined to reject any type of subscription or micropayment. A shift in this tendency is possible only if leading publishing companies assume a joint strategy. In this respect, one must consider the steps taken by Rupert Murdoch, who claimed he was determined to charge fees, as is now the case for the Wall Street Journal and other newspapers owned by the News Corporation. Will Murdoch’s initiative be enough to change the dynamic?

• The business model of online journalism suffers from competition with Google. Should newspapers rid themselves of traffic generated by search engines, they would immediately see audiences decrease by more than 50 percent. A re-evaluation of this relationship to Google seems crucial and should encourage a search for compromise economically advantageous to both parties.

• Expenses of a traditional publishing firm can be estimated with 25 to 35 percent devoted to paper and printing, 30 to 40 percent toward distribution and 15 to 25 percent toward publishing personnel. Around 60 percent will be consumed by production costs, which drop significantly the moment a company decides to go online. Costs of a technological infrastructure needed for exclusive use on the Web correspond to about 10 percent of the total costs, or six times lower than those of traditional print publishing. However the online model is not economically sustainable. According to an optimistic view, in exceptional circumstances between five and eight years will be needed for the online model to become sustainable – a range of time during which many newspapers will be forced to close or reduce drastically.

• State interventions for subsidizing the publishing industry serve to alleviate the sector’s difficulties, but are unsustainable in the long run precisely because of the ways in which the public obtains information are changing.
  

• The print industry clings to the belief that its old form of organization can be preserved, that the logic of generalized content is fundamentally sound and requires a simple digital facelift. Nothing is more erroneous. Only a few large firms can afford to offer general information of quality – the vast majority ought to limit themselves to the focus or types of information that represent their strengths.

• Over the course of time the term “print” has become synonymous with “journalism” – a word, in fact, that is derived from “journal.” There is no greater anachronism. The journalism of the future will be multi-medial and highly interactive, but this requires a change in mentality that journalists tend to resist, placing themselves at great risk of self-destruction.

• The Web favors the proliferation of news, combined, however, with swifter and more flexible editing. Only in this way will online information become economically sustainable. This offers an opportunity for the rise of nascent news sites, and a challenge for traditional sites to resolve or alleviate debt inherited from past investments, such as full color rotary presses. Previous assets are quickly transformed into liabilities, and the ability to deal with the latter will be very important in determining the possibility for adjustment in the present world of publishing.

• The logic of adaptation also concerns advertising. On one hand, serious doubts arise regarding the reliability of a method based on the mode of access that prevails today. Yet on the other hand, publishers have not yet grasped the Internet’s full potential. If it is undeniable that a business model has not yet been found, it is equally true that attempts to find new sources of revenue have been scarce, and even when they’ve been made, they once again adhered to old logic. For example, why not respond to Google’s competition by adopting their logic, aiming for open-minded forms of aggregation among the newspapers?

• The old world of publishing was based around the newspaper’s exclusivity. The new one, due to the role of search engines and the brief period of time spent on site visits (three minutes, on avergae), promotes an entirely different focus. That is, a focus on content-sharing and collaboration among newspapers. In order to embrace these developments, however, all must change their approach – journalists, editors and advertisers included.