IFRA

Riepl’s law, a central source in Horst Pirker’s and his colleagues’ excellent paper, is widely quoted and has proved remarkably robust over nearly 100 years.

But in today’s world its interpretation needs to be considered more carefully, for two reasons. The first is that, in the past, new media have been distinct, with different purposes and content and consumption patterns, whereas until recently too many newspapers have endeavoured to emulate their print content on line. The difference has been the lack of differentiation.

The blame heavily lies on the abuse of the word “convergence,” a technical notion reinvented in the 1990’s, then hijacked to cover all manner of species. Today we hear about “converged content,” “converged advertisers,” “converged readers.” It’s all consultantsplonk. The reality is, media demand is more diverged than ever.

The second point concerning Riepl’s law is that, as Horst et al’s paper correctly points to the mid 80s as being the time that circulations came under pressure, this was well before the emergence of the Internet. The reason for the change – and this is a vitally important issue, when considering the pressures on our industry – was that there was a revolution in consumer lifestyle. It was the consumer boom, where we all migrated to the golf course, and restaurants, and health clubs. We lost the time for media, and the media lost the time for us.

Pricing and daily publishing are increasingly related issues. In the United States, some newspapers are ceasing subscriptions on certain days. In truth they never made any money from circulation in the first place (with the costs of subscription management and distribution being higher than the revenue they generated). Why? Because US newspapers, relative to the wealth of their readers, are the cheapest in the world. Question: After the USA, which European countries most undervalue their newspapers’ prices? In order: Luxembourg, UK, Sweden and Germany. Message: If you don’t have confidence in your cover price, don’t have one!

But out of all this are reasons for optimism. First of all, free dailies – accepting the point above – now account for over 20 percent of European circulation and are overall increasing levels of readership, particularly among under-24s. Do they damage paid circulation? For every seven new free newspaper readers, one paid-for reader is lost.

And as Horst et al’s paper also points out, we are seeing the benefits of versioning and hybrid newspapers. This is a strategy that is long overdue.

Another reason for optimism is that reading of print is also on the increase. Book sales in France were up 2.4 percent in January, and book revenues were up 4 percent. In Germany sales are up 2.3 percent. OK, the UK and USA saw tiny declines (less than 1 percent), but they have not benefited from the well-established “Harry Potter effect.”

In the digital world, newspaper websites are regularly attracting many times the original readership of their print products – though importantly not the levels of intensity, hence the challenges in advertising off-take and pricing. In advertising, it is true that there are major structural changes occurring, caused by the arrival of digital media. In the recessions of 1991 and 2001, the US newspaper industry historically suffered the strongest negative and positive cyclical economic impacts. In fact the newspaper advertising economy recovered relatively well after the downturn but, in common with other newspaper markets, the structure of the revenue base changed. Newspapers lost advertisers to other media and marketing channels and they simply did not come back. The German newspaper market, having suffered particularly badly in 2002, is fairing better overall but the change in the structure of the advertising base will be identical. Research by iMedia suggests that in the last five years most newspapers have lost around a third of their advertisers. They have simply sold bigger advertisements to fewer customers at a higher price. And then they wonder why they are going to other media!

The bad news is that the Internet has had a demonstrably damaging effect on print newspaper advertising. But the good news is that, in the USA at least, newspapers are at last fighting back and in the last four years newspapers’ share of digital display and classified advertising has grown from 28 to 40 percent. Where newspapers need to work harder is for search, referral and transactional business, and this is coming.

Where newspapers are weak is that we overreact on the downside of the trajectory, and under-react on the way back. The cuts we make to achieve impossible targets inhibit our ability grow in the growth period.

Our confidence in our future is not being helped by the ludicrous valuations being placed on our companies by the greedy bankers – the very people who got us into this place in the first place. Share prices are currently down in many cases 85 to 97 percent on companies that are still generating 10+ percent profits. Why is that? Many newspapers are being valued at less than their net asset value. Now is the time to be investing in our business. All the signs are that the people who aren’t showing confidence in us are the people who caused our problems.

Today, too much is written and theorised about our industry by people with no or minimal experience, and whose ideas and solutions are conceived in the bath, or worse.

Horst’s (and his colleagues’) article provides insight based on both the highest level of practical experience in our industry together with robust academic research of historical real experience. It is an important analysis and contribution to the debate concerning our future, and more of it should be encouraged.