The World Association of Newspapers & News Publishers (WAN-IFRA) regaled its annual conference in Turin this week with stats showing that print circulations declined 5% in the US and Europe in 2013, and 10% in Australia and New Zealand. Across five years, the decline has been at least double that. And, just to depress delegates further, WAN-IFRA pointed out that newspapers get a relatively small share of rising digital advertising revenues (dominated by Google and non-news companies) so no less than 93% of global newspaper revenues still come from print.
That is a reminder of how traditional news groups – shattered by their loss of power and profit – have been slow to see digital ‘natives’ like Facebook, LinkedIn, Twitter and Google as their real competition. In the mass market, it sometimes seems like an unequal fight between traditional news and social media. But, for some of the largest newspapers (and TV news channels) on both sides of the Atlantic, a new battleground is emerging. News is becoming a global business.
A new era
The worldwide audiences for same-everywhere coverage of Edward Snowden, Nigeria’s kidnapped schoolgirls, the Ukraine crisis, the missing Malaysian aircraft, Mandela’s death, the UK prince’s birth, the Boston Marathon bombing, and the rise of Pope Francis have helped to define a new era for international news media. They have also started to mark out the potential winners, among traditional media. Five newspaper groups and three broadcasters from the US and UK are piling resources into a digital land-grab. Some are doing better than others.
The UK-based Financial Times (known as the ‘FT’) has, arguably, been ahead of other UK-based dailies in recognising the need effectively to disregard
advertising revenue and build a digital business model based on subscriptions. The iconic salmon-coloured, 126-year-old newspaper whose modest profitability (and frequent loss making) has long belied its “must have” content, is now solidly profitable for the first time in years. The newspaper still sells more than 200,000 copies daily – two-thirds outside the UK. But digital subs (which grew 31% in 2013) are now double those for the paper.
Total circulation grew 8% year-on-year to 652,000 across print and online in 2013, the highest paying readership in its history – and the first time that digital content revenues had exceeded those from print. That milestone was marked by the decision, from this year, to go ‘digital first’ and combine five print editions into a single global newspaper.
The web site has an average 2.7m monthly uniques. However, its trumpeted profitability is discreetly underpinned by its 50% shareholding in the prestigious, solid-as-a-rock international weekly The Economist, which last year accounted for more than half of the £55m profits of the ‘FT group’. So the relatively high-cost FT (with its 600+ worldwide journalists) is probably making profits of no more than £20m. Given that this “trophy asset” may actually be valued by some would-be buyers at £500m+, you can expect parent company Pearson Plc (the world’s leading educational publisher) eventually to yield to pressure from shareholders and sell it, possibly in the next year or two.
First in line for the auction will be the the 115-year-old Wall Street Journal, whose ‘owner’ Rupert Murdoch spent fruitless years in the 1980s as a hostile Pearson shareholder, trying to buy the FT. Now, his News Corporation (demerged last year from 21st Century Fox) fosters an ambition – among many other things – to build a worldwide business news network. Combining the legendary financial dailies would be a great start – and at a revenue-pressured time when competition authorities might be expected to wave through the deal.
The Wall Street Journal (WSJ) has a 2.4m circulation, some one-third of which are digital subscribers. Advertising still accounts for more than 50% of total revenues, and digital services have a monthly average of 31.3m unique visitors – almost 50% of whom visit the sites daily. Published by Dow Jones, one of the world’s largest news gathering operations with nearly 2,000 journalists in more than 80 bureaux, the WSJ has 12 editions in nine languages.
A merger of the FT and WSJ could create a single, highly-profitable, global operation. News Corp would face stiff competition for the deal, not least from the cash-rich, privately owned Bloomberg. But, right now, Murdoch has other things to worry about. In the seven years since its egregious $5bn purchase, WSJ has piled up losses and is said still to be unprofitable. But, as if to fuel the ‘merger’ rumours, its new CEO is Will Lewis, who has spent his career working in UK dailies – including lengthy spells on the FT.
The strategy may, though, be superseded by Murdoch’s determination to compete not so much with the Financial Times as with the New York Times. Right from the start, he declared his intention to blur the historic line between a business newspaper and a general interest one. He has shifted the coverage from being exclusively business to including more general politics and international coverage. That has led to heavy investments in news video, iPad innovation and global growth, and also in old-fashioned reporting resources, and expansion of general news and coverage of New York.
Champion of journalism
This is not Murdoch the tabloid warrior but as the longterm investor in journalism and the world’s largest employer of journalists. He and CEO Robert Thomson (former editor-in-chief of the WSJ and The Times of London) are fighting to build the profitability of News Corp – without the demerged cash cows of film and TV.
The rivalry with the New York Times (NYT) has been juiced by the arrival of the paper’s new boss Mark Thompson from Murdoch’s longtime UK nemesis, the BBC. But the NYT had already become an example for the world’s daily newspapers seeking to grow revenues from readers – and subscriptions.
Last year, it grew paying online readers by 19% and slowed the decline in advertising. It also overtook USA Today to become America’s second largest circulation newspaper – after the WSJ. Its 1.9m circulation increased by an impressive 18%. The NYT launched a “freemium” paywall in 2011 that limits the number of free articles readers can access. In the fourth quarter of last year, it added 33,000 digital subscribers, bringing the total to 760,000.
Revenues from digital-only subscriptions increased 33% to $149m in 2013. Newspapers everywhere are watching to see if it can reverse a four-year decline in advertising revenues through video and “native” ads. But readership revenue prospects continue to look more promising, especially international subscriptions through its rebranded International New York Times (formerly the International, Herald Tribune). But for all its growing reputation as a digital pioneer, the NYT was embarrassed by the recent leak of an internal report which highlighted some very traditional obstacles to its digital development.
The report noted that the NYT still earns less than a quarter of its revenue from its website, and that the talk of becoming a “digital-first newsroom,” was undermined by distinctly print-first traditional practices, including an obsession with Page One, poor optimisation of content for search and social media, and an inability to repurpose content. It highlighted a recent Flipboard “most-popular-ever” feature on NYT’s top obituary articles and wondered why nobody at the paper came up with the idea for its own site.
The report managed not to mention anything about staffing levels, the elephant in the room at most traditional media companies. The NYT has a newsroom of more than 1,000 people. BuzzFeed – whose news-you-can-share audience just leapfrogged the NYT – has a mere 150 journalists but is starting to make waves with serious news reporting alongside the listicles and furry cats.
Hostages to printing
The trouble is that most daily newspapers simply can’t escape from the reality of their bureaucracies which own printing presses, warehouses, and trucks – which, of course, do nothing for their digital media. These legacy newspapers are inescapably dominated by printing. Nobody seriously doubts that there will be many fewer daily newspapers over the next decade and that, whereas many of the revenue numbers show they should not be in a hurry to pre-empt that wholesale switch to digital, they do need to ensure 1) that digital development proceeds competitively and is not shackled by the business of print and 2) that traditional costs and structures are continuously reduced and dismantled in line with the inevitable shift in earnings.
That could be a slightly easier task for The Guardian. The London-based paper now sells fewer than 200,000 copies, yet its digital audience exceeded 100 million uniques in March – a 12 per cent increase on February. Coverage of the disappearance of flight MH370 reached 12m unique browsers while the stories on Ukraine hit 4.6 m. Total web traffic was 30% up year-on-year, and the launch of Guardian Australia last year has created the opportunity of continuous coverage of global events for all time zones. The Guardian’s prestige as an international news service has been propelled in the past year by its exclusive coverage of Edward Snowden’s revelations.
Now that its UK, US, mobile and Australian digital editions have become a single web destination, The Guardian is becoming an increasingly international – and non-paper – service with less than one-third of the audience in the UK. While the 193-year-old loss-making UK news company still has all the trappings of its newspaper heritage including a world-wide workforce of 1,600 and 600 journalists, it is starting to get comfortable with its rising status as a news service, not primarily a newspaper. And digital revenues have been growing at twice the rate of the digital advertising market, offsetting the decline in print.
The whole strategic shift may (or may not) be made easier by its ownership (the not-for-profit Scott Trust) – and also by its £600m windfall from the sale of a 50% share in the UK-based Auto Trader classifieds. Those – and its left-leaning politics – make it one frontrunner in the chase to be a distinctive global news leader. It might still have to come to terms with the fact that the paperless future will be less profitable than the hard copy past (even though The Guardian anyway has only had short bursts of profit). But at least it doesn’t have shareholders to worry about.
Mail Online is pace-setter
At the other end of the UK newspaper market, stylistically and politically, is the 1.7m circulation Daily Mail which last month celebrated the 10th birthday of its MailOnline with record audience figures of 180m uniques in March. It is often described as the world’s largest newspaper web site but is not really anything of the sort. It is operated by Daily Mail and General Trust (DMGT), the long-established UK newspaper group founded originally by the world’s tabloid pioneer Lord Northcliffe and still controlled by his heirs. MailOnline includes the whole range of content from the Daily Mail, but has always sought to distance itself from the newspaper’s middle-aged, right-wing stereotype and to align itself with younger, more affluent – and more international – readers.
It became one of the first newspaper-owned sites to realise the global potential of search, using analytics to track – and cover – whatever was trending. Now, having built that global audience on the back of Google searches for celebrity gossip, Mail Online has a huge regular readership and an identity and staffing that is increasingly distinct from the newspaper that spawned it. DMGT is the master of media innovation among the established UK players. That is how the company has consistently won its many and varied bets including the hugely successful Metro free tabloid daily, Euromoney business information services, the Zoopla online property service, and the US-based Risk Management Solutions which alone accounts for 15% of DMGT’s £400m operating profit.
The success of such investments is what has changed the shape of the Daily Mail group, some 80% of whose operating profit now comes not from its flagship UK newspapers but from worldwide B2B information services and events.
Like so many other DMGT businesses, MailOnline has been developed patiently. Perhaps that is why the world’s largest English language newspaper web site is not yet profitable, by contrast with BuzzFeed, whose audience is at least 25% smaller. One reason is that BuzzFeed understood and applied the role of native advertising much sooner than MailOnline or almost anyone else – and certainly ahead of newspaper-centric organisations that had centuries of clear separation between editorial and advertising content. The other MailOnline constraint is, well, a rather traditional approach to staffing.
Even today, when it is (sort of) shaking itself free from some of the shackles of Fleet Street, MailOnline has some 500 staff – about three times that of BuzzFeed. But, despite this, the parent company may not have to be patient for too much longer. MailOnline increased its revenues by 45% to £28m in the six months to the end of March, which actually offset the revenue decline at the Mail newspapers. Its revenues doubled in the US and big things are now expected from Australia where it has launched in a joint venture with the owners of Channel Nine TV. But MailOnline revenues are still less than £5m per month which, presumably, shows the growth prospects for a business that – like The Guardian – now has more than two-thirds of its audience from outside the UK.
The debate about the longevity of print dovetails with one about how long it will be before “broadcasting” becomes something that is largely done on the web – presumably ending also the clear distinction between sites from TV companies and those from newspapers. Nobody doubts, of course, that this “media fusion” is fast approaching, spurred by the soaring appetite – among viewers and advertisers – for online video. And by the global ambitions of TV news companies.
UK’s ‘soft’ media power
Britain’s State-owned BBC has long been a global broadcaster. Its renowned World Service radio started as the quaintly-named BBC Empire Service in 1932. Until recently, the broadcasts in 28 languages had been directly financed by the UK Government’s Foreign Office, ring-fenced from the “TV licence” that still funds the BBC’s domestic services. That’s now all changed as the BBC pushes its television, radio and online services around the world in a determined push to make profits – including from advertising which is not permitted on its domestic channels. London governments which had long valued the “soft power” represented by the BBC’s worldwide news broadcasts, now see them more clearly as generators of export cash from (and promotion for) the country’s burgeoning creative industries – a 21st century version of the thinking that have tempted countries everywhere to get into making movies. And the BBC is one of the world’s largest media brands.
Its global news audience increased 7% to a record 256m people last year. Cross BBC global news – which includes the World Service, the World News TV channel and the BBC News website – audiences increased by 10.7m.
He said that overall digital reach for BBC News and Worldwide outside the UK in March was about 150 million – more than CNN but “less than Buzzfeed’s peak of 160 million and only the same as MailOnline’s 150 million monthly audience in English alone. The BBC needs to think about how it can add character and personality.”
Stringer’s words made sobering reading for a generation of BBC executives that might just be up to making the change. If they are – and British politicians are pushing the BBC to reduce its dependency on UK public funding by earning more from its international operations – the global news business will get even more competitive. The BBC’s peers among TV news providers will, of course, be watching closely, none more so than the very first global TV news service.
CNN faces new world
It is 34 years since Ted Turner launched CNN as a pioneering 24-hour news TV news channel. The New York Times review of the new channel said: “It is evident so far that disasters are perhaps the best news the network can hope for. Volcanoes, airplane crashes and riots are ideally suited to CNN’s gritty, live coverage.” Its modern critics say very little has changed in the network which has become fixture of TV viewing in more than 265 million households, in five languages, and across more than 200 countries. The Warner Bros-owned network has annual revenues of some $1bn and profits of $200m.
While its US audiences have been eroded by the sharp-edged Fox News and even from Al Jazeera America, research last year showed that CNN dominates the global audience race amongst news and business networks. It remains the worldwide leader and, when hotels, bars and businesses have just one TV news channel, it tends to be CNN: the advantage of being first.
But it is now being chased hard by Sky News in another version of the US v UK race for international news leadership. It is 25 years since Murdoch’s Sky Television (now BSkyB) launched the UK’s first 24-hour news channel and the service has survived years of losses to become second only to the BBC as the country’s most trusted news source, having eclipsed the country’s once pre-eminent Independent Television News. More than that, Sky now has more European viewers than CNN.
Sky’s 24-hour news has local versions in Australia, ‘Arabia’, and Ireland; and Sky News International is available throughout Europe, Africa and the US. Overall, Sky News reaches 107m homes in 118 countries, Its Sky News Digital has seen significant growth with more than 6m unique monthly users across all platforms. It now has 500,000 subscribers via Apple TV and streaming platform Roku, and the channel is in talks with several US media companies to embed its round-up of the big American and international news on their websites.
It is the highly-rated but (still) loss making service that News Corp was prepared to subsidise and allow to be run independently as part of its abortive bid to buy the remaining 61% of the UK’s hugely successful pay TV network BSkyB. That bid was thwarted by the phone hacking scandal, which is now coming to a dramatic finale in London’s Old Bailey court. One early upshot of the scandals was the separation of News Corp and 21st Century Fox. We should expect 21st Century Fox to make a new bid for BSkyB. Timing may depend on whether the court verdicts are seen to compromise the position of Fox (chaired, like News Corp, by Rupert Murdoch) as a “fit and proper person” to hold a UK broadcasting licence.
Murdoch global news
Either way, Rupert Murdoch wants to mount a full-blooded assault on the global news market. The plan could join Sky News with his biggest news brands, the 230-year-old The Times of London, The Australian, and the Wall Street Journal.
This trio of scarcely-ever profitable newspapers is at the heart of the Aussie-born mogul’s emotional and financial attachment to the future of print, although his sites are now also among the largest “print” users of video. At the other end of the spectrum, his cash-rich UK tabloid The Sun, with 2million circulation in print and a similar daily digital audience and the forever loss-making New York Post could together become more directly competitive with MailOnline and BuzzFeed. The expected global moves from News Corp may not now be far away.
But the development of low-cost digital media remains a growing threat for legacy news brands. Newspaper people assert that print will continue indefinitely. That might be the problem because it may prevent the dismantling of the structures and staffing that are holding them back. In this respect, it is difficult to ignore Deseret Media’s smart plan to separate completely “new” media from “old” (see Flashes & Flames post on Clark Gilbert’s strategy in Utah).
Many daily newspapers – witness the UK – are now increasing cover prices sharply, reflecting the reality of smaller, but (hopefully) more committed readerships. But those “hard core” readers need careful handling. Newspapers, coming to terms with the dependence on readership, need to start rebuilding relationships after their 50-year, great-while-it-lasted advertising binge.
Who will pay for what?
This whole conflict of sales outlet has made even more complicated the question of ‘who pays for what’ digitally. Some newspapers charge for online access and some don’t. Some charge for the tablet edition and some don’t. Some have ‘freemium’ metered access. The search for a worthwhile business model may be as confusing for consumers as it is for publishers. But the most confusing thing is why retail buyers of newspapers (as opposed to postal subscribers) seldom get any kind of digital access as part of their purchase. Scan-codes would make it easy to treat all readers the same (whether retail or subscription) but publishers (mostly) choose not to.
Meanwhile, the fight for global news supremacy is underway. Next up may be further consolidation. And, in the push for leadership, we should expect some imaginative deals. Will the New York Times or even Jeff Bezos’s Washington Post link up with the Daily Telegraph, the UK’s most profitable daily newspaper which lacks a clear global strategy, despite its 61m digital readers. Or will natural buddies The Guardian and the Washington Post get hitched instead? And, with the US-UK-Australia axis crucial to most global news plans, will Murdoch rivals the Fairfax-owned Sydney Morning Herald and Melbourne Age align themselves with the Daily Mail? Or the Washington Post? Or will Bezos (or Murdoch) mix it up by acquiring, say, BuzzFeed? The battle has begun.
