UK dailies pay future price for their glorious past

Britons are proud of their national newspapers, even those who no longer read one. The country, whose pioneering railway network helped to create a host of newspapers that reached all parts of the kingdom by breakfast, can’t shake off its love affair with newsprint. Or can it?

The fact is that the UK’s 11 paid-for daily and 10 paid-for sunday newspapers have been losing sales as fast as anywhere else, now averaging 8-9 million copy sales per day – down some 30% in 10 years and still falling. And those figures are padded by the frantic promotional costs of free copies, free CDs, DVDs and magazines. More to the point, only 50% (at best) of the UK’s national newspapers are profitable, with advertising down as well as copy sales. The gloss and glamour of Fleet Street is long gone.

The country’s 1,000+ regional newspapers are in an even worse state with most of the major publishers either desperate to sell or merge operations savaged by online sites that have gobbled up their one-time monopoly classified advertising for cars, jobs and houses. That, in itself, confirms this is no recession-hit industry but one in a systemic decline that will stop only when it is substantially smaller than it is now: fewer newspapers, smaller circulations and less revenue.

And that is the point. The competition has exploded: news has become freely available – and frequently free online, on TV and increasingly in free newspapers too. It’s the same story with the other 50% of UK newspaper revenue: online advertising has hit ad rates and changed the whole character of a market once dominated by newspapers. Historically high barriers of entry long enjoyed by newspapers have been replaced by easy-access to audiences online.

In almost every industry in almost every country, this story would simply pose the question only of capacity: the fittest would survive. Some 10-15% of the adult population do still regularly buy a UK national daily newspaper and a total of perhaps twice that are reading one. So, imagine how much smaller but stronger the industry could still be if the unprofitable 50% of those newspapers closed, leaving even even some of their readers and advertisers as additional revenue for those who remained? But newspapers have never been quite that coldly logical. This is a business like no other.

That’s at least partly because daily newspapers (even in the digital age) give their proprietors disproportionate power and influence. Although Rupert Murdoch’s once 5m-circulation Sun newspaper is now selling half that, its (ie his) election time decision on which UK political party to endorse makes headlines on television, online and wherever voters get their news. Similarly, the Daily Mail‘s campaigns on the inequities of the social benefits system or of immigration are more widely read and communicated than just to the newspaper’s own readers. However, it is not totally without significance that these two tabloid newspapers are among the UK’s most profitable dailies. Perhaps the best proof that proprietors prefer the influence and prestige of newspapers over profit, comes from The Times (prop: R. Murdoch), perhaps the world’s most famous newspaper but which has seldom been profitable in the last 50 years

However, newspapers are in the marketing business. They are good at selling to their customers and are even better at selling to themselves. With that self-confidence comes a sense of entitlement. Newspapers (whether local papers, now with less of the news that people want or need; or paid-for national dailies packed with news people can now get for free) enjoy being courted by the great and good in government and beyond. For all the fact that the popular tabloid newspaper (on which the great British newspaper-buying habit is based) is only about 100 years old and, arguably, only post-war in large-scale, many newspaper journalists and proprietors talk as if they have a right to exist. As if Society needs newspapers so much, it cannot afford to let them go.

That is only part of the special pleading for government support or encouragement (especially in relation to competition laws). Much of that entitlement feeds into a sense that a “new” role awaits newspapers in the digital world. Some newspapers have developed fairly strong digital offerings but most are frankly embarrassing. And none is yet to find an economic model to guarantee its future. An industry figure of less than £200m of newspaper online revenues (perhaps less than 15% of national newspaper advertising revenue) strikes many newspaper executives as not justifying the many hundreds of millions being invested in online systems and people. But what do they expect?

You only have to look at some newspaper apps on the ipad, which is the product that many media people complacently assume gives them a lifeline to the future. As ever , Rupert Murdoch (who has historically best used newspapers for cashflow and influence across the US, UK and Australia) provides the clearest picture. The Sunday Times (whose bulky multi-section and magazine package has sharply cut hard copy profits in this advertising-reduced era) has loudly trumpeted its ipad edition. But the need to download each section individually means that it can take readers a ludicrous 10-15 minutes to download the whole newspaper. It makes laughable Mr Murdoch’s own extravagant claims on behalf of his ipad editions. But what would you expect from the ultimate media mogul – who personally uses neither email, nor internet nor mobile phone? Unlike almost all his existing and prospective customers.(Perhaps, incidentally, that helps to explain News Corp’s sale of My Space this week for a price equivalent to 5% of the $500m it paid for it).

That example, though, is a classic case of what has been such a strong “legacy” business trying to shoe-horn its existing product (in this case the multi-section Sunday Times) into a new format for which it was not designed. The expected explosion of Huffington Post-like “aggregators” of news content risks changing the game so completely that newspapers will have nowhere to go – unless they forget the past and plan for a quite different future.

In some ways, the Daily Mail (the original popular newspaper, created by Lord Northcliffe in 1896 and still controlled by his ancestors) provides a more exciting picture. It operates what is now the world’s most visited online newspaper site and it is succeeding because the site (and an excellent ipad app) are not versions of the newspaper at all. Mail Online includes what the Daily Mail publishes but much more besides and is clearly building huge, new audiences especially among celebrity-struck young people who are no longer buying newspapers. And that is in addition to the company’s profitable and totally modern Metro free daily, published in urban centres throughout the UK.

The truth is that the UK’s national daily newspapers – with their historic ‘investments’ in printing presses, in teams of hundreds of journalists, in final-salary pension deficits, and in prestige and power-broking – cannot expect to survive on anything like their current scale. And they should not expect too much from the apparent ‘new’ media opportunities because most won’t make it there either.

Newspapers can never be as dominant online as they once were in print. News is a commodity that is consumed and valued differently in this generation. Newspapers need, among other things, to understand that the functionality of digital platforms is about much more than design and presentation. Can you imagine an online operator devoting acres of space to analysing and lauding the redesign of its site, in the way that daily newspaper editors still love to do?

The UK’s long-established national newspapers do, of course, have strengths and advantages, and many still have strong (if declining) cashflows. But they need to be realistic about “their” possible role in the digital world. They do, among other things, have platforms and brands from which to build new businesses But they do still have to build those new businesses. Trying to move a newspaper ‘as is’ onto this or that digital platform will not be any more effective or profitable in the future than it has been so far.

As the emerging winners and losers in retailing increasingly appreciate: the glories (and investments) of the past can count for surprisingly little in this new world. The future belongs to those who are looking forward to it – and are moving fast enough to get ahead.

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