Redirecting the Paper Route: Why Publishers Face Extinction and How They Can Regain Control
Say goodbye to Knight Ridder, which just got acquired for billions. What does it mean for the industry? In sum, the sale, the price of which was far below expectations, reflects the increasingly tough position of traditional publishers at the hand of a powerful new breed of web-based media, which are taking readership and revenues right from under the eyes of this once dominant medium. With these mounting pressures—whether from Google or Yahoo!—once mighty news sources like Knight Ridder are facing a hard reality that demands they become better at monetizing their brands on the web to remain viable.
Knight Ridder’s sale is emblematic of a continuing trend. In the past, publishers could attract advertisers with the right content and distribution, thus ensuring long-term success. This reliable form of revenue has been changed by the evolution of the Internet as a vital means to communicating with consumers. Internet properties are quickly becoming a replacement for traditional publishing sources, as readers can now simply go online to one site and obtain all their daily news items without having to access multiple sources.
Online competition means shrinking readership for the traditional publishers, which ultimately translates into lost revenues. The Newspaper Association of America states that daily newspaper circulation is down 13% from its peak of 62.8 million in 1985. Consider that The San Jose Mercury News, one of the 32 daily newspapers owned by Knight Ridder, at its peak in 2000, had a Sunday circulation of 326,839 subscribers. Last September, the company counted 278,470 Sunday subscribers, a drop of about 15 percent.
While changing reader dynamics and a decline in 2001 in the technology economy had some bearing on circulation at the Mercury News, the publisher must also be concerned by the potential increased impact of online giants like Google and Yahoo!. Regardless, the problem they face is simple, a shrinking revenue stream for these publishers.
So what should newspapers do? For many the answer has been to partner with Google, Yahoo! and other providers of online marketing services as a means of monetizing their content on the web. The problem with this approach is that even as Google and Yahoo! are delivering added revenue streams, they could potentially decide to use the revenues they generate from this model to fuel their own growth and to ultimately build their own brand and website. In other words, this relationship could further strengthen the position of these industry giants.
As each day passes, Google, Yahoo!, MSN and other large web-media players gain a stronger foothold with the introduction of new services like Google Base. The advent of Google Base threatens the publishing community’s previously stable classified advertising revenue stream. In the case of San Jose Mercury News, revenue from the company’s help-wanted Ads fell to $18 million a year in 2005 from more than $118 million in 2000 (San Jose Mercury News).
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