Media and Markets

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Media and Markets

• Thomas Abraham

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The newspaper business model An unequal triangle
Advertisers

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Newspaper revenues- an unequal relationship
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Newspapers face a double crisis
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The vanishing reader
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(No Transcript)
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Advertising follows readers
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How paid newspapers responded to falling revenues
Cutting costs-mainly journalists and news
operations
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How else have newspapers responded?

• If its circulation is falling, what can a
  newspaper do to increase circulation?
• Give it away free

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The free newspaper movement

• Contemporary free newspapers began with the Metro
  in Stockholm, Sweden. Metro International today
  is the largest publisher of free newspapers in
  the world
• 240 titles in 60 countries worldwide, total
  circulation of 44 million copies a day.
  Circulation growing

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Free newspapers in Hong Kong

• Metro ( 2002)
• Headline Daily ( Sing Tao News) 2005
• AM 730 (Centaline Reality)
• The Standard ( Sing Tao) 2007
• Headline Daily is the largest circulating
  newspaper in Hong Kong ( 700,000 copies)
• Paid papers Oriental Daily News (500,000)
• Apple ( 300,000)

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Strengths

• Has expanded the newspaper reading market, and
  attracted younger readers
• Innovations in terms of design and format the
  tabloid format will probably the future of
  newspapers

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Weaknesses of the model

• Business model based on low cost content, with
  minimum editorial staff
• Based on only one source of revenue- advertising
• Content is not deep no place for in depth
  reporting or analysis. Short stories reporting
  events
• Focus on entertainment
• Weakening traditional newspapers?

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For more on free newspapers

• http//www.newspaperinnovation.com/
• ( A website run by Piet Bakker, a professor in
  the Netherlands who specialises on free
  newspapers)

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Many news organisations listed and became
publicly traded companies in the US in the 1970s
and 1980s
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What exactly is the problem?

• Newspapers continue to make money and remain more
  profitable than many other business sectors
• But investors and stock markets are uncertain
  about how the news industry is going to continue
  to grow because of
• Falling readership
• Migration of advertising to other media

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How a highly profitable newspaper group was
forced to sell its assets

• Knight Ridder, the second largest newspaper group
  in the United States was in 2006 forced to sell
  all its newspapers even though they were
  profitable. Why?
• Forced to do so by Bruce S Sherman, a fund
  manager based in Florida who had bought 19 of
  the companys stock.

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Shermans problem

• Sherman had begun buying Knight Ridder stock in
  2000, when it was around 50/share. The share
  rose until it peaked at 80 a share in August
  2004.
• It then fell to around 60 a share.
• Shermans average purchase price 65/share
• Shermans expected a rate of return on investment
  around 20-25 percent. He needed to do something.

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Why was its share price falling?

• The company itself is healthy in 2004 it made a
  profit of 540 mill, profit margin 18.4) and in
  2005, 514.0 mill ( 17.1 )
• Markets look at profit growth analysts did not
  see a faster rate of growth in profits.

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What could Sherman do?

• Selling the stock would depress the share price,
  increasing his losses
• The value of the companys assets was greater
  than its share price, and therefore selling it
  would realise a lot of money for Sherman.
• He and three other fund managers with stakes in
  KR persuaded management to find a buyer.
• Eventually the McClatchy group bought Knight
  Ridder newspapers, but has sold several titles.

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The demands for ever increasing revenues puts
pressure

• Editors of newspapers now spend most of their
  time worrying about increasing circulation,
  cutting costs, managing budgets, leaving little
  time to think about the quality of journalism.

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Advertising, a second source of conflict

• Given that advertisers are the main source of
  revenue for a newspaper, advertisers sometimes
  try and ask for privileges like favourable
  coverage, or no unfavourable coverage in return
  for advertising. Owners and business managers
  sometimes ask their journalists to help
  advertisers

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The power of owners

• Newspaper owners tend to be powerful
  personalities with large egos.
• They are in the media business because it gives
  them power.
• Owners have their pet likes and dislikes, and
  expect their newspapers to follow their thinking

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Corporate ownership has also produced great
journalism

• Many of the best news organisations in the world
  are owned by publicly traded corporations The
  New York Times, The Washington Post, the Wall
  Street Journal, to name some
• The financial resources at their disposal has
  allowed them to spend a lot of money on
  journalism
• But they are vulnerable to the vagaries of the
  market.

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Who should journalists work for?

• The owners of their news organisations or the
  public?

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Other forms of ownership

• State ownership in authoritarian states the
  mouthpiece model
• State, or public ownership, in democratic states
  the BBC and other public broadcasters in Europe
• Ownership by non-profit trusts and foundations (
  the Guardian in the United States, the St
  Petersburgh Times in the US)
• Ownership by families or individuals with a
  commitment to journalism
• Community owned ventures radio stations
• Internet ventures

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A period of tremendous opportunity

• Technology has opened up the possibility of
  creating a diverse, pluralistic media
  environment, allowing different voices to be
  heard
• As societies democratise, possibilities open up
  for a pluralistic, mixed media environment which
  is the best guarantee that journalism will grow
  and survive

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Future trends

• Online news could overtake television as the
  major source of news in many wealthy countries
• News organisations will increasingly reach
  audiences through their online sites.
• They will use a mixture of print and online to
  reach audiences- perhaps a weekly print product
  and a 24 hour online news service
• More and more free newspapers often catering to
  special interests ie sports, finance and
  business

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An exercise

• You have been given enough money to start a news
  organisation by a wealthy tycoon
• He attaches the following conditions
• -The organization should promote good,
  professional journalism and be of service to the
  public
• -While he will continue to fund it for the long
  term he expects a business model that indicates
  how the organization will at least make enough
  money to cover its costs within 5 years

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He wants your ideas on the following

• Should the new organization be a newspaper, TV
  station, radio station or web site? If a mixture,
  what kind of mixture?
• What strategies do you have to make it
  financially successful? (Eg. Should it be free,
  what kind of advertising would you target, what
  kind of readership, how large a staff)?