We were very honoured to have been asked by the European Business Press Association to deliver a keynote speech on the challenges facing their industry, especially from mobile and social media, and the ways in which to address these to safeguard the industry’s future. The event was held on the 1st February 2016 at The Wall Street Journal’s European HQ. We have set out below our keynote speech:
Thank you to the European Business Press for staging this event and getting us all here together to learn from each other how to tackle the challenges facing the business press industry.
Here’s the agenda for my talk:
1) The challenges facing the Business Press industry
2) How to respond to these challenges
3) Future business models
Steve Lazarus & Lazarus Consulting – Background
Before I start, let me tell you about my background. I have worked for various businesses within the media and tech sectors over the last two decades – that includes both traditional media companies and for digital media companies such as Warner Music, ITV, Sony Pictures, Dow Jones, MySpace and Yahoo. Having been both an insider at traditional media companies and digital trailblazers such as Yahoo and MySpace, I have worked on both sides of the fence and I have a pretty good insight into the issues that I’ve been asked to talk abut today. In particular, as a UK media consumer myself and a self proclaimed news junkie, I have also been observing first hand the warning signs and subsequent changes that this industry has gone through.
Introduction to Lazarus Consulting
I would like to briefly introduce you all to Lazarus Consulting which is a business I now head up. It is a UK based media and tech focused consultancy business (which originally launched in 2005) which I run with a business partner and a network of associates that uses all of the experience gained in our respective corporate roles, combined with a global network of senior media/tech contacts. We work with clients across Europe and offer the following services:
- Business Development
- Strategy and Corporate Development
- Sales & Marketing
- Legal Services
We frequently come across companies, including some global players, who are experiencing the same challenges as you all are. General interest newspapers and magazine publishers are especially hit by the same crosswinds that you suffering form.
- The Challenges
So let’s start with the challenges facing your industry. Five years ago in a book called The Vanishing Newspaper, the author Philip Meyer predicted that 2043 will be the moment when newsprint dies in America as the last exhausted reader tosses aside the last crumpled paper edition. Philip Meyer is a Professor of Journalism at the University of North Carolina and he is the author of a number of books.
Rupert Murdoch, owner of News Corp, who once described newspaper classified advertising revenue as providing “rivers of gold”, said in 2005: “Sometimes rivers dry up”.
Ad Revenue Decline
The threat to all newspapers (including business newspapers) has been evident for many years. From 1950 through 1999, US newspaper advertising revenues grew seven percent a year. Since 2000 it has been in dramatic decline and the same is true internationally.
The Reuters Report
In June 2015, the Reuters Institute for the Study of Journalism at the University of Oxford published their fourth annual Digital News Report. It is based on a survey of more than 20,000 people in 12 countries, which makes it the largest ongoing comparative study of news consumption in the world.
The report emphasized that new threats for traditional news organisations come from mobile and social media. As the smartphone becomes the defining device for online news, publishers will increasingly struggle to make money.
Many news brands are struggling to cut through on mobile with access to content increasingly controlled by third-parties such as Facebook, Apple and Google.
Generation Z are the generation of people born after the Millennials. The generation is generally defined with birth years ranging from the mid 1990s through to the 2010s.
A significant aspect of this generation is its widespread usage of the internet from a young age. Members of Generation Z are typically thought of as being comfortable with technology and interacting on social media websites accounts for a significant portion of their socializing.
So, the majority of Generation Z are on Facebook. A massive 41% of Facebook users use the network to find, read, watch, share and comments on news.
These problems are compounded by the difficulty of selling effective advertising space on small screens, and the increasing use of ad-blocker technology.
More widely, news providers have seen little increase in the number of people who are willing to pay for their journalism while there is evidence of audience resistance to so-called sponsored content – seen as a possible cure to the ailing ad business in digital news.
The Reuters Institute Director of Research Rasmus Kleis Nielsen commented: “Our research documents that most people like news and use news, but they don’t want to pay for it, don’t want to see advertising around it, and don’t want to see it mixed up with sponsored content. This means sustainable business models remain elusive even for those who succeed in building an audience.”
This challenge is compounded by the rise of digital only news publications like The Huffington Post, Buzzfeed and other, more business focused ones such as Re/code; Business Insider and Quartz. These are companies that have become masters at creating and distributing content in a social and mobile world.
But not unique
This challenge is not unique to the newspaper industry; I witnessed it first hand whilst working in the music industry at Warner Music. The music industry was the first industry to be seriously impacted by the arrival of the internet and the profileration of free and pirated content.
The arrival of services such as Napster disrupted established business models.
Established music industry players had the right content and a hungry audience… but they failed because of outdated distribution channels.
The woes of the music industry and their inability to properly address those challenges is well documented. There are plenty of examples of other industries being disrupted by the likes of Uber and AirBnB. Financial Institutions are experiencing a similar threat with the rise of peer to peer lending, crowdfunding sites and other FinTech companies who offer lower cost services for traditional services, such as e-payments and online trading.
In 2002, the Harvard Business School professor Clark Gilbert commented that “Newspapers saw a threat to their livelihood from the Internet, and aggressively put their own competing products online. But they didn’t take advantage of the power of disruptive technology.”
A closer look at the decline of advertising revenues
So let’s take a closer look at the decline of advertising revenues.
WAN-IFRA is the World Association of Newspapers and News Publishers. As reported by them last year, in 2014 worldwide newspaper circulation revenues exceeded advertising revenues for the first time. Circulation revenues generated $92 billion compared to $87 billion for advertising revenues. Larry Kilman, secretary-general of WAN-IFRA summed it up nicely:
“The basic assumption of the news business model (namely, the subsidy that advertisers have long provided to news content, is gone.” He went on to comment: “This is a seismic shift from a strong business-to-business emphasis (namely, publishers to advertisers) to a growing business-to-consumer emphasis (namely, publishers to audiences).”
So, more than ever, your business should focus on the consumer rather than the advertiser because that’s where you can increase (or at least maintain) an important revenue stream.
What happens if you ignore the challenges and do nothing?
So, what happens if you ignore the challenges and do nothing? Doing nothing is not an option. I worked at MySpace during the time that facebook really took off. They didn’t respond to the threat – they didn’t improve their core product offering; they took a back seat, they simply watched Facebook grow year on year and were wiped out in a matter of years.
- How to respond to these challenges
So how should you respond to these challenges? I’m going to suggest 10 quite obvious steps to address these challenges:
1) Swot 2) Follow your audience; 3) Focus on your current consumers; 4) Innovate; 5) Strike strategic partnerships; 6) Focus on Pricing; 7) Invest in the future; 8) SEO; 9) Extend your brand; 10) Produce more video.
Conduct a comprehensive review of your Strengths, Weaknesses, Opportunities, Threats. This is the most obvious but frequently underestimated diagnostic tool.
2) Follow your audience
Try to make some of your content available in all those places where all this media is being consumed. In other words, on social media and on mobile.
Optimise your social media impact by having a dedicated social media team.
Make sure your business is mobile focused. Yahoo, despite being a member of the original team of digital disruptors, was very slow to properly develop their mobile offering and it has suffered ever since.
Strike content syndication and strategic partnerships deals with these platforms but make sure that they make sense and compliment your business strategy.
3) Focus on your current consumers
Try to reduce churn by improving your relationship with them. For instance, launch a membership scheme with clear benefits such as Times+ and WSJ+.
Don’t find expensive ways to sign up new consumers if those consumer will churn at the first opportunity. For example, if you combine one of your subscriptions with an expensive tablet or another bundled services, you may find that at the end of a fixed contract period, you’ll suddenly lose a large number of subscribers. That whole approach is too short term a view and is not a long term sustainable business model.
Produce new products that consumers want. Try new things. Try and capture the Zeitgeist. For example, Dow Jones has its very own Chief Innovation Officer to make sure that they try and stay one step ahead of the game.
5) Strike strategic partnerships
Having spent over 8 years working in international Business Development departments at 3 global media and tech corporations, I’ve seen first hand the incredible benefits that the right strategic partnerships can deliver for your business.
Here are 4 examples of the type of strategic partnerships that you could strike:
1) It might seem quite controversial, but try and work with digital start ups that have the ability to disrupt your business, such as the Dutch start up called Blendle or the Australian start up called Inkl – more on those two companies later.
Use the data and learnings from these type of deals to improve your offering. You might end up discovering an alternative way to connect with new audiences.
2) Work with like minded businesses. For example, try and strike a deal which involves sharing your subscriber database with other complementary businesses including other newspapers. This will help you to increase your subscriber base and grow your core revenue streams.
3) Strike deals to increase distribution of your offering, in your domestic market and internationally.
4) And finally, try and strike deals to plug content gaps. It doesn’t necessarily have to cost you any money – try striking a smart deal by finding a partner who’s interested in swapping content with you.
6) Focus on Pricing
As you can see from this graph, there’s always going to be a percentage of consumers who will never pay for news.
But, for those that are willing to pay for news, make sure that you regularly review your pricing strategy and that you remain competitive.
7) Invest in the future
Make sure that you devote enough resources for your own products (such as your website and apps) but also consider investing in businesses that are capable of digitally disrupting your business – The NY Times and Axel Springer’s investment into Blendle is one great example of this.
Make sure your site is fully SEO optimized but, be careful that you don’t end up giving too much of your audience to Google. Their requirement that news publishers abide by a 5 clicks free rule can result in a substantial hole in your paywall, should you have one.
9) Brand extensions
Extend your brand by exploring alternative revenue streams. For example, Yahoo built the majority of their own web channels (such as Yahoo News and Yahoo Sport) but chose to partner with other businesses to launch web channels such as Yahoo Dating, Yahoo Jobs and Yahoo Cars.
Also, think about maximising revenues from your audience and subscribers by integrating relevant partners.
10) Produce more video
And finally, produce more video. As highlighted in the Reuters report, your audiences want more video, so you should produce more video. But make sure its properly promoted on your site (and off your site via syndication deals as that will help to promote your business).
So here’s the problem:
Firstly, you need to try new things, extend your business, but be careful not to cannibalise your existing revenue streams. It’s a tricky balancing act of trying new things but, at the same time, making sure that you protect your existing business.
And secondly, be careful not to strike a deal with any business that wants to directly compete with you, take over your subscribers and seriously impact your ability to secure advertising revenues for your business.
- Future Business Models
So let’s now take a look at some future business models. I’m going to talk about 4 businesses that are extremely well positioned for the future:
My first example of a well positioned business is NRQ Q, which is owned by NRC Handelsblad. NRC Handelsblad is a daily evening newspaper published in the Netherlands by NRC Media. The circulation of NRC Handelsblad in 2014 was just under 200,000 copies, putting it in 4th place among the Dutch national dailies.
In 2014, NRC Handelsblad launched NRC Q. It’s a digital only mobile first business publication, made for phone, tablet and PC and includes a lot of shortform videos.
It’s a great example of a traditional business newspaper using some of its existing assets, building a new product, acquiring new content to fill a content gap and trying its best to appeal to a mobile, video hungry news audience.
My second example of a well positioned business Is Blendle. Launched in 2014, this Dutch based online news startup has been labelled in the media an “iTunes for news”. It aggregates articles from a variety of newspapers and magazines and makes them available to registered users on a pay-per-article basis. Registered users can easily pay a small price per article and they also can get a refund if they didn’t like the article or made a mistake in buying it. It has a very clean and easy to use interface.
Blendle launched in the Netherlands and Germany with the US next on their roadmap. They have 550k registered users paying between 9 and 25 cents (with Blendle taking a 30% cut).
All major Dutch and German publishers are on board as well as international ones such as The New York Times; Wall Street Journal; The Economist; Washington Post and many others.
My third example of a well positioned business in Inkl. Launched in 2014, this Australian startup Inkl has adopted a ‘Spotify for news’ model that ditches the single publication paywall in favour of aggregated news content from multiple publishers which users access with ads for free; and without ads for either 10c per article or unlimited access to all the news they want by paying a monthly $15 subscription.
A significant number of Australian and international publishers are on board such as The Guardian, Washington Post and USA Today.
My final example of a business well positioned for the future is Blinkist. It’s a start-up in the book publishing industry – it’s not in the news industry but its interesting nevertheless.
Based in Berlin and launched in 2012, Blinkist lets you read the key lessons from over a 1000 nonfiction books in 15min or less. They create the summaries themselves. Registered users have three options: They can use the service for free but are limited to one pre-selected book per day, they can pay $50 per annum for unlimited book summaries or they can pay $80 per annum for some premium features (which includes audio versions of summaries).
I’m now to wrap up this talk with a strong statement and a great quote. Quite simply, “Do not despair”!
In the words of Jeff Bezos, owner of The Washington Post and an inspirational business executive:
“It’s all about quality journalism. Even here in the Internet age, in the 21st century, people really care about quality journalism.”
Thank you very much for your time.