The Global Media Weekly for executives and entrepreneurs

‘Generation N’ can put profit into newspapers

It’s been just like the old days in Britain this week. There’s been fierce coverage for and against Margaret Thatcher. And sell-out newspapers reporting her life and death. Fittingly, UK daily sales peaked 24 years ago when Thatcher became Prime Minister. But it’s been downhill ever since.

The problem is that a fixation with the advertising-subsidised past is obstructing fundamental change. How else can you explain the 450,000 of “bulk copies” distributed in January by UK national dailies to hotels, airlines and railways? It’s all about hyping circulations for the “benefit” of advertisers but the obsession with sales figures is holding newspapers back. And some of the worst offenders are strong brands which are already filling the revenue gap.

Time to stop 'padding' copy sales
Time to stop ‘padding’ copy sales

The UK’s Financial Times is the world champion at increasing its cover price: up from £1 to £2.50 in six years after a four-year standstill. It has thus been able to generate  consistent profits despite shrinking ads. That’s not much of a reason why even this venerable newspaper padded its copy ‘sales’ with 13% of “bulks” in January. Hotels have piles of the FT, neatly counted for the ABC figures.

It’s not only in the UK where newspapers have remained hooked on circulation figures long after many advertisers have lost interest. News Corp’s The Australian recently disclosed that 20% of its weekday ‘sales’ were accounted for by copies distributed to airlines, hotels and universities.

In neither of these cases were the bulk copies sufficient to offset substantial decreases in total sales; and advertising has anyway been declining even faster.

Just in case UK daily newspapers need reminding, advertising revenue is vanishing. It is forecast to decrease a further 9% in 2013, falling below £1bn for the first time – 60% down since 2005.

It is time daily newspapers got to grips with their revenue prospects. As if the loss in advertising pages was not enough, the prices keep falling and eventually may suit only the new wave of free newspapers with ‘guaranteed’ mass circulation – and very low costs.

Things are changing – but slowly. Daily newspapers everywhere are planning paywalls. Some, like Europe’s two largest-selling papers Bild of Germany and The Sun from the UK, will use top-tier football video clips to win readers. Popular newspapers will need such premium content but it may still not be enough for readers whose bite-sized appetite for news is being satisfied elsewhere – and for free. On the other hand, quality dailies may find it easier to charge for content. But it’s a question of how many buyers and at what price? And then comes the almost inevitable search for cost savings to ensure profits. The paywall is not a business model, just a step in the transition towards one.

Although newspapers like The New York Times, the Financial Times, and The Times are encouraged by digital subscription gains, there are plenty of ‘bundling’ challenges ahead: should digital and hard copy be sold together or separately? Ditto the weekend and weekdays? Should web sites be ‘all-you-can-eat’ subscriptions or metered access? How about the enticing free-paid ‘freemium’ model? The UK and Australian experience of daily newspaper profits being generated almost exclusively from magazine-packed Saturday-Sunday editions will inevitably tempt some publishers simply to reduce frequency. But, be careful: UK studies show that switching many regional dailies to weeklies in 2011-12 failed to halt the copy sales decline, let alone reverse it.

The urgent task is to make copy sales profitable. And that means reducing costs as well as increasing prices for the new market. Many newspapers have already trimmed ‘bulk’ copies. This and an end to ‘push the boundary’ copy sales marketing will mean smaller circulations, but more loyal, easier-to-retain core readers who are prepared to pay ‘viable’ cover prices.

Free can be more profitable
Proving that free can be more profitable

The long-time expensive search for paying readers explains how the London Evening Standard managed to switch profitably from paid to free circulation.  Increased ‘guaranteed’ free distribution has yielded higher advertising revenues and the benefit of reduced costs in marketing and unsold copies. Which is why other UK newspapers are certain to follow.

But there’s much more to the future of daily news.

Newspapers everywhere have spent increasing sums of money trying to attract younger readers – for advertisers. That has become futile in many markets because ‘digital natives’ have, naturally, been among the most online-dependant – and have expected their news to be free or cheap.

The result is that daily newspaper readership is largely dominated by adults aged 55+. In the US, an estimated 70% of newspaper readers are 45+. In many countries, less than 10% of 18-24 year olds read a daily newspaper. In the US, only in the 45+ age groups, is the proportion of newspaper readers greater than their share of the population. The newspaper reading gap between young and old is growing ever wider. It confirms newspaper-type content appeals less strongly to young people. So, news companies should look to their existing readerships, knowing that they have the separate option of developing new products, channels and services for ‘digital natives’. But, for now, the priority should be the readers who have remained loyal to daily newspaper brands, in print and digital.

UK's Telegraph: strong on Generation R
UK’s Telegraph: strong on Generation N

US research shows that these 45+ avid newspaper readers often migrate online with their existing brand. Newspapers should, therefore, relish the opportunity to focus on these readers who, in many Western countries, are:

  • The largest and fastest-growing population group
  • Are relatively rich in income, assets, and ‘time’
  • Are fast-growing online users, especially on health, travel, finance, genealogy – and news

These are the ‘baby boomers’ (born during 1946-1964) and regarded, generally, as the healthiest and wealthiest generation so far. This is the “News Generation” (let’s call it “Generation N“). Their lives have been punctuated by the collapse of UK daily newspaper sales from 21m in 1950 (equivalent to 150% of all households) to 10m (40%)  in 2010.  In the US, daily sales fell from 54m (124% of households) to 43m (37%) in the same 60 years. Generation N has witnessed the explosion of news by broadcast, cable and online. And most have stayed with newspapers.

While Generation N’s internet habits still lag those of the under 16-24s, iPad and Kindle sales are, if anything, slightly skewed towards them. This – and the rising level of digital subscriptions for daily newspapers – implies that many committed readers are going digital by way of the medium (the tablet) closest to their hard copy experience.  The truth, of course,  is that even many ‘seniors’  (65+) are actually tech savvy. In the US, among the 60% of 65+ year olds who are online,  some 90% + use email, 50% are on Facebook and 40% play solo online games and shop online.

This all encourages the belief that daily newspapers can manage the migration of these long-term readers onto digital platforms. The challenge is to capitalise on Generation N loyalties by offering internet ‘portals’ which meet their needs and concerns, across a wide range, as follows:

Baby boomers retiring now... (source:
Baby boomers retiring now…
  • Live news
  • Curated access to high-interest sites including travel, money and health
  • Aggregation of blogs, web sites and user-generated content
  • Social media
  • Ecommerce
  • Online TV channels
  • Web security

In this way, quality daily newspapers could reclaim their former roles as custodians of news, information and entertainment – and enhanced by social media and ecommerce. They will, though, have to learn the digital lessons of partnerships, aggregation, sharing and unbundling. They can no longer own everything they “publish” nor charge people for content they don’t want. Their heyday package has been pulled apart by digitalisation. So, for many companies, there still needs to be a lot of reinvention and attitude change. But newspapers should be inspired by The Week and The Economist, two of the world’s most successful news brands, which have profitably bridged the print-digital frontier – and which have strong 45+ readerships.

After years of fighting to win young readers and trying vainly to re-create their glorious mass market past, many daily newspapers have the opportunity to grow again with the readership they know best. Generation N is ready to help put profits back into the news business.