INMA 2009: New business models are the way forward

By Sumantha Rathore , afaqs!, New Delhi | In Media | September 01, 2009
The session highlighted some of the business models that will ensure viability in the future

The final session on Day 2 of the third Annual South Asia Conference of INMA was started by Earl J Wilkinson, CEO and executive director, INMA, USA. In the session, titled, 'Outlook 2010 - The newsmedia future', Wilkinson focussed on what the newspapers that want to be newsmedia companies must do, to turn danger into opportunity.

Looking forward at the future of newspaper and the present state of the member countries, he shed some light on: Are we facing the death of newspapers? What is the future of newspapers and newsmedia? Which business models to look out for? How can danger be turned into opportunity?

He also emphasised the need to confront three crises: capital, culture and process, the emerging values of content and preparing for the business revolutions ahead.

He started his presentation by talking about the history of INMA in India. The India chapter of INMA started five years ago, in 2004, when the association had only one member from the country, The Times of India.

Since then, there is no looking back.

He said that in the last few months, during his talks with INMA publishers across the world, he learnt that there are two types of newspapers -- recession-ridden newspapers and debt-ridden newspapers. "Most debt-ridden newspapers are concentrated in the US and the UK," he said. He added that what is unique to these markets is the fact that their debt loads are astronomical; poor public perception of news on paper and the brand is also affecting them.

Wilkinson pointed out that though newspapers are going through rough times, they are definitely not dying. It's just that the medium is facing competition from the digital medium. "Recession accelerates the trends that are already present in the market."

He emphasised that the business models followed by a particular company decide, to a large extent, the threshold of risk. The business models that are low risk are: subscription led, paid, distribution in tight geography, less than 60 per cent of whose revenue comes from advertising, have low reliance on classifieds in the advertising mix; as well as those low on debt; whose capital expenditures are not tied up in print operations; and those present in markets that have low penetration of broadband internet.

The ones who are facing more risk include: single-copy based and free newspapers; those who distribute in a broad geography; more than 60 per cent of whose revenue comes from advertising; have high reliance on classifieds in the advertising mix; are high on debt; and have high penetration of broadband internet.

He said that not there is a wide variety of newspaper models present in the market. Citing a few examples of the wide variety, he said that in the US, 85 percent of the revenue comes from advertising (of this, around 40 percent advertising comes from classifieds), while 15 per cent comes from circulation. In Japan, on the other hand, 40 percent revenue comes from advertising, 60 per cent from circulation and virtually none from classifieds.

The UK has a different model altogether. For its regional dailies, the models are largely dependent on classifieds, which contribute more than 60 per cent of the advertising revenue. Advertising there contributes 75 per cent of the revenue and 25 percent comes from circulation.

He said to sustain in the long run, the business model should be driven by mission and passion. "The publishers need to focus on how to make their geography sexy, passionate, and relevant." Though transition is a painful end game, it is the need of the hour.

Wilkinson emphasised that publishers across the world must adjust cost structures according to the new economics. He also stressed on the need to reduce editorial department headcounts and printing costs as a percentage of revenue, reduce publishing frequency and page counts consistent with consumer demand. "Don't cut into the bone, but don't unnecessarily over-feed the market," he added.

He added that the newsmedia should shift operational costs to business-building exercises like digital experimentation, shifting the capital expenses from printing presses to digital and others.

Making an observation about Indian newsmedia, he said that here the investment in sales and marketing is much more than in other parts of the world.

There are three crises to be faced by the newsmedia companies across the world - capital, culture and process. The publishers need to look at doing away with capital budgets tied up in big items that have questionable ROI in the coming years; revenue and expense structures that don't reflect the emerging digital era; and ownership structures that encourage 'getting smaller', than 'getting larger'.

"Crisis in culture are triggered by the fact that the editorial think more like artists than marketers; also the sales, aims at meeting numbers rather than growing the numbers," he added. Wilkinson also pointed out that the companies are not spending enough on research and marketing. The publishers are missing one fundamental in the value of content, which is readers: "It's about what they value."

The crisis in process is due to rigidity in editorial systems, ad sales systems and circulation systems. "Systems and processes of newspaper publishing in 2009 are similar to those used in 1969. There is no room for digital, innovation or transformation," he stated.

Quoting John Puchalla, an analyst, he said, "If newspapers can't monetise the content in new digital channels at the same level as with print, or cut structural costs enough to keep up with the changing competitive environment, the prospect of additional recapitalisations or shutdowns will grow, adding further pressure to ratings."

He added that at the moment, newspapers across the world are dependent on narrative and photo journalism, but in future, we are to witness a lot of mash-ups, videos and interactive journalism.

Another thing which the publishers largely tend to ignore is "the value of content". The pure value of content is declining. Those associated with creating content need to understand that neither is all content of equal value, nor are all platform experiences the same.

"Understanding the value of content will unlock conversations about various things, like what consumers will pay in print and online, what raw content advertisers want to be associated with and non-traditional ways of generating revenue outside the print bundle," he said.

In conclusion, he listed the trends that should prevail in the coming years. Though this is not the death of newspapers, but clear trends through 2020 with internet disruption will emerge. The industry will not be dominated by a single business model, but many to fill the passionate niches, and the industry needs to prepare for revolutionary times ahead.

© 2009 afaqs!