Wednesday, March 11, 2009

The newspaper crisis: very easy to explain

The crisis and occasional closures of newspapers in the USA
and here in Europe can, from an ironic perspective, be explained
very easily, summarized to: circulation down and ad rates up.
Just recently the Rocky Mountain News in Colorado shut down
and staged the end pretty media - typical, as not many other
businesses going bust would do.

In 2004 an article appeared in a biz - journal, written by Amy
Bryer, who told of the falling circulation of the two Denver dailies,
the RMN included, that was down by 11,6 % while ad rates at
both papers were increased by 189%. This article made inter-
esting and lucid reading and got noticed also here in Europe,
inlcuding the editorsweblog.

Ever since then some sort of drama, a ratrace took place. Two
opposite strategies were pursued. The one by the more serious
ad professionals, business and tax consultants who know of the
pitfalls of advertising and ad expenses. And of course business
managers, etc. themselves who calculated and decided different
from how the media would want.
The media increased their efforts to get as much ad revenue as
possible. The efforts of ad sales reps were obviously intensified
as much as possible. And all over the place they all had the same
instrumtent: the forecasts of national as well as the global media
consumption and ad expenditures. Both were rising steadily and
permanently, like in this one by the WAN.

That was their tool, mass psychology and instrument of
persuasion at the same time. And that was the only, the
absolutely true, the holy, the only legal and anyhow best possible
criteria for businesses on which to base their advertising
The media would not know any other criteria for ad spending
than that. And would make sure no one has any other ideas in
this universe.

For a long time advertising increased like the arms race decades
ago. It was often merely to make more noise than the others.
Consumers on the other hand were not so enthusiasitic, would
all the time long not have minded somewhat less of that.

Convinced that the whole world decides and spends like told on
ads, some businesses spent like that. For a longer time they
were pretty careless and complacent about that. But only to some
extent. Basically it was clear that it was an unsustainable
situation that would come to an end eventually. The Denver
papers are surely more extreme cases of ad expenses getting
too expensive. But similar pricing strategies can certainly be
found in Europe as well. Usually it is small businesses getting the
worst deals.

For a long time printing a newspaper was considered to be some-
thing like a licence for printing money. In the USA this was more
openly talked, even bragged about, while high - earning papers
in Europe were more discreet about that. The media are not that
holy or very good people when it comes to their revenue. It is
widely known that they are fleecing their clients.

Critical investors consider newspapers risky since a longer time.
Their pricing strategy, revenue policy made it all too clear. The
share prices of newspapers have declined dramatically over the
last two years. A sure bet for short sellers. Bets that were
confirmed time and again.

The unsustainablility of advertising expenses was brought to
a climax last Christmas. For instance, both in New York, USA
and Londong, UK, shops began selling at discount prices weeks
before Christmas. Even the luxury segment had to sell at
discounted prices. A page in the New York Times costs about
$140 000,- (superficial research). A page in The Times, UK,
(circ. 1,2 million) goes up to £ 98 700,-
A page in the Irish Times (circ. 105 000) goes up to about
Euro 32 000,-, in the property even over 34 000,-. That's
(examples of) ad expenses which were splashed out rather
easily as long as people were on the spending spree, before the
credit bubble burst. But such expenses weigh heavy on shops
when the going gets tough and they have to discount prices.
Then even ten or twenty percent of former ad spending burns
a hole in the pockets of firms.

It is further possible to take a critical look at the role of the
media in the years leading to this financial / economic problems.
What Danny Schechter writes about the US media is just as
valid for European media.

Now the media companies, newspapers first of all, have to
face the music, are having the "blues". Here a look at the
stock market of a few, just as examples.
New York Times, NYT, News Corp, NWSA, or INM,
owner of, among others, the Irish Independent.

When the outgoing media threaten with doomsday scenarios,
no life on earth without them, the end of democracy and what-
ever, new media inreasingly come up. And this is probably
continuing. The more old media go out of business, the more
chances and opportunities there are for new start-ups. And
probably doing a much better job than the current ones,
even if it is just something nice centred on crosswords, sports,
recipes, etc. And also journalists are likely to find new chances
in maybe even better circumstances than now.
Intellectual sincerity is most likelyan important criteria for the
future. Not much chances for manipulators, people without any
critical reflection of media drivel, rather problematic money
and finance advising, and so forth.

No comments: