The future of national newspapers? Multiple revenue streams and partnerships

Freddie Ossberg, founder and managing director of Raconteur Media, provides his analysis and suggestions for the newspaper industry following MediaTel Group’s Future of National Newspaper event this month…

Newspapers are not the most popular kid in class right now. In fact they seem to be getting beaten up and bullied at every break. Everywhere you look there are people ready to write newspapers off.

New kids on the block such as social media, content farms and crowd-sourcing are heralded as the modern way of creating and distributing content in the 21st century. This has been set in a context of print circulations falling year on year, classifieds going online permanently and display advertising revenues taking a significant hit over the past five years – not least from money migrating online.

So what is the future of newspapers?

The answer to that is multi-faceted and complex. It is also highly subjective. As a passionate reader of newspapers, I looked closely at this issue when preparing my speech for MediaTel Group’s recent Future of National Newspapers seminar.

One of the surprising things that I found through my research is that operating margins for media companies have actually steadily increased since the dawn of the internet. They seem to be getting better at what they do, not worse. Given what we generally hear reported, this seems almost incredible, but it’s true.

So what is holding media companies and news brands back? Is it that journalists have failed to adapt to the web? Or that ad sales people can’t seem to grasp a new business model?

In many ways, the above is probably true. The media industry is evolving at a remarkable speed and managers, journalists and commercial departments at newspapers are in a period of transformation and experimentation when it comes to identifying the most successful approach for prospering in today’s environment.

But it is mainly the negative net margins media companies have shown that has accelerated the bad reputation of newspaper groups and media companies. The problem hasn’t generally been weak operations at newspapers; the real problem has been the strategies that were set in the boardrooms, which used the money their operations generated to go out on poorly judged shopping sprees during the good times. I am aware, of course, that this has not been the case everywhere.

The death of newspapers has been exaggerated

The below charts compare the writedowns during 2008 and 2009 by three of the world’s leading media companies and also three global technology leaders – another sector that has highly aggressive acquisition strategies and an industry of similar complexity:

The above public companies are just used as an example for comparison due to their size and availability of financial data. As we can see though, the difference between $48 billion and $795 million is too significant to not be conclusive.

Media companies made a lot of bad acquisitions, lost a lot of money, and as a result the doom and gloom headlines declaring the death of “newspapers” and “print” were greatly exaggerated in my view. Thankfully these also indicate to us that the downturn in the past few years is perhaps more cyclical than structural.

But of course one cannot ignore technology and the impact it has and will continue to have on the sector. Apart from the internet itself, tablets are quickly changing the face of media.

Strong Christmas sales doubled tablet penetration and, with just about every computer manufacturer coming out with devices to compete with the iPad, and Windows 8 entering the fray, that figure will quickly rise.

The rise of tablets represents both an enormous opportunity and a colossal challenge for publishers. The opportunity is that tablets will allow them to seamlessly integrate text, video and interactive graphics, and not only create more engaging products, but also – on the video side – gain access to big TV budgets. This is where my first recommendation comes in: newspapers focusing on multiplying revenue streams.

Ensure you have multiple revenue streams

I believe newspaper circulations will continue to decline until they find their bottom level – and classifieds will definitely never come back. But as long as newspapers are able to maintain a certain level of critical mass in print and online, there is a myriad of solutions available to them in terms of multiplying revenue streams. Here are a few examples:

• E-commerce & m-commerce
• Video
• Affiliate programs like Amazon & eBay
• Labelling content and images via Pinterest / Flite / Stipple

Embedded links in images and monetising video are things that I’m certain you have extensive awareness of already. But so far, it has only been retailers who have capitalised on e-and-m commerce.

A friend of mine helped start an online luxury magazine about eight to nine years ago called Jameslist.com. Maybe you have come across it? Like everyone else in 2004, they were going to monetise it via online display advertising. It didn’t work.

Today it’s an online luxury marketplace instead, making their money via brokering fees from people who want to buy used watches, helicopters and supercars. The content is essentially just there to improve SEO results and contextualise the products available in the marketplace section.

I am not suggesting that newspaper journalism is comparable to Jameslist’s superficial style of articles, nor do I want it to be, but it highlights very clearly how content and e-commerce can successfully work together online.

Another idea for newspapers to multiply revenue streams is to build “satellite” brands offline and on the web that leverage their content, brand or expertise further. This could be done by releasing weekly newspaper magazines in other distribution networks, creating events and communities around “sub-brands” or launching hyper-specialised microsites and video channels of existing sections of the newspaper (business, sport, gardening or travel for example).

Bleacher Report is the web’s fifth biggest sport destination with around 25 million monthly unique visitors and it’s essentially a video forum where they ferociously discuss the US equivalent of what colour socks Arsenal should wear next season. Or whether the Haye and Chisora fight should be allowed at Upton Park in June.

Newspapers already have the best resources and expertise in the business to create and curate such platforms. Newspapers in Scandinavia such as Aftonbladet are already capitalising on these kind of video forums.

Those are just a few new revenue streams. Others are sure to appear. Whichever way you slice it there are more ways to make money from publishing than ever before.

However, the major issue with multiple revenue streams is dealing with the complexity and integration. In effect, the editorial departments will have to start putting together their pages and videos with a mixed mindset of maximising editorial value and revenue opportunities at the same time. The Chinese Walls will have to be adjusted in order for that to work I think. The question is whether that is feasible or not.

A stronger emphasis on partnerships

My second recommendation for newspapers is putting a stronger emphasis on partnerships. Today you can walk into any five-star hotel in the world and if you need a massage, Six Senses or ESPA will take care of you.

Fancy a pair of earrings for your wife? The Bulgari and Cartier shops in the lobby can probably help you. Hungry? Have dinner at Gordon Ramsay’s latest outpost.

The point of this story is to show how hotels in particular (there are other sectors as well), have successfully adopted partnership strategies in order to enrich the experience for their customers. Yes, their core business is providing beds and bathrooms, but why not maximise the revenue opportunities of their “footfall”? Or “eyes balls” in the case of newspapers.

Although already in existence, news brands can get much better at using their powerful distribution network and subscriber base in this way. They could team up with companies and products that synergise with the newspaper brand and that add genuine value to their type of customers.

Don’t go for the commercial quick fix, which will alienate readers. The key is also not to see the partners as a threat and to realise that newspapers can’t be the best at everything. Taking a revenue share from specialists is better than trying to be a jack-of-all-trades.
Examples of potential partnerships are plentiful and beyond the areas I’ve covered in this piece. One way though is to team up with a premium provider of special reports and supplements such as Raconteur!