Inc.

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1 Inc. Canadian daily newspaper trends, and three issues that will shape the future of newspaper brands Presentation by Kenneth J. Goldstein President Communications Management Inc. To the conference: Les modèles d affaires de la presse quotidienne: Une souricière numérique? HEC Montréal 25 March Communications Management Inc.

2 We are coming to the end of a century old economic model for the media industry We are experiencing a fundamental restructuring of the business models for the media, particularly newspapers. It is systemic. It is structural. And it is not likely to go back to the way it was before. We currently have the luxury of both the mainstream and the alternative. But what happens to the alternatives when the mainstream is gone or much diminished? 2

3 Media no longer have the advantage of protectable scarcity For most of the 20 th Century, the number of media players was limited. Borders and copyright could be protected. Technology has changed those previous realities. Media from other places, content producers, other consumers, and advertisers, are all able to send media like content directly to consumers. 3

4 And where does journalism fit in all of this? For the most part, journalism has existed within media bundles or packages. Journalism has benefited from internal cross subsidies within media. For many years, consumers have been paying prices for media that do not reflect the full actual cost of delivering the journalism they are consuming. 4

5 The fundamental question: Will current newspaper brands be able to make the transition to a post print environment? Three key issues will help determine if current daily newspaper brands will be able to make that transition: Unbundling. Unlimited competition. The relationship between creating content and aggregating content. 5

6 Unbundling Daily newspapers have been a bundled or packaged product a product that was able to use profitable parts of the bundle to subsidize unprofitable parts of the bundle. There are two kinds of bundling the bundling of content and the bundling of revenue sources. While the bundling of content continues in many newspapers, the bundling of revenue sources is getting more difficult as the Internet makes it possible for competitors to pick apart the traditional newspaper package. 6

7 McLuhan s prediction (from 1964): Marshall McLuhan foresaw this in 1964, when he wrote, in Understanding Media: The Extensions of Man: The classified ads (and stock market quotations) are the bedrock of the press. Should an alternative source of easy access to such diverse daily information be found, the press will fold. 7

8 Unlimited competition In 2001, Peter Drucker commented: The Internet eliminates distance. That is its impact. A simple statement, but with profound implications for media (or any other business) that prospered on the basis of defined geographic territories. By eliminating distance, the Internet dramatically increases competition, and reduces the gatekeeper role of local and regional newspapers. 8

9 The relationship between creating content and aggregating content An issue at both the macro and micro level. At the macroeconomic level if aggregators use content from the mainstream media to compete against the mainstream media, where will their content come from when those mainstream media are gone? At the microeconomic level, many legacy media have established online ventures that use the content still being produced for the legacy medium. How are those content costs being accounted for in assessing the viability of new ventures? 9

10 Circulation trends for Canadian daily newspapers Long term trends More recent trends Focus on paid circulation. Data presented in two ways tracking of circulation numbers, and circulation as a percentage of households. NOTE: The circulation trend data in the following slides are taken from two of our discussion papers, which may be found at media cmi.com. 10

11 media-cmi.com

12 Long-term trends,

13 1. Total daily newspaper paid circulation, and total households, Canada, Total daily paid circulation Total households 13

14 2. Total daily newspaper paid circulation as % of households, Canada, % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The dotted line indicates estimated % using the previous methodology

15 3. English language daily newspaper paid circulation, and English/Allophone households, Canada, English language total daily paid circulation English/Allophone households 15

16 4. English language daily newspaper paid circulation as % of households, Canada, (Based on English/Allophone households) 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The dotted line indicates estimated % using the previous methodology

17 5. French language daily newspaper paid circulation, and French households, Canada, French language total daily paid circulation French households 17

18 6. French language daily newspaper paid circulation as % of households, Canada, (Based on French households) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The dotted line indicates estimated % using the previous methodology

19 7. Comparison of English language and French language daily newspaper paid circulation as % of households, Canada, (Based on English/Allophone households for English dailies and French households for French dailies) 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% English language dailies French language dailies 19

20 8. Total daily newspaper paid circulation as % of households, Canada, USA, and Great Britain s national dailies, % 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Great Britain USA Canada 20

21 Trends since

22 9. Total daily newspaper paid circulation, and total households, Canada, E Total daily paid circulation Total households 22

23 10. Total daily newspaper paid circulation as % of households, Canada, % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% E 23

24 11. English language daily newspaper paid circulation, and English/Allophone households, Canada, E English language total daily paid circulation English/Allophone households 24

25 12. English language daily newspaper paid circulation as % of households, Canada, (Based on English/Allophone households) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% E 25

26 13. French language daily newspaper paid circulation, and French households, Canada, E French language total daily paid circulation French households 26

27 14. French language daily newspaper paid circulation as % of households, Canada, (Based on French households) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% E 27

28 15. Comparison of English language and French language daily newspaper paid circulation as % of households, Canada, (Based on English/Allophone households for English dailies and French households for French dailies) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% E English language dailies French language dailies 28

29 16. Total daily newspaper paid circulation as % of households, Canada, USA, and Great Britain s national dailies, % 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Great Britain USA Canada 29

30 One impact of unbundling: The collapse of the classifieds For many decades, classified advertising was one of the most important and most profitable daily newspaper revenue sources. Classified advertising also had a role in building circulation. The Internet made it possible for alternative suppliers of classified advertising to compete with daily newspapers. Impact of this unbundling is that classified ad revenue has declined faster than circulation. Even if there are brief pauses in the circulation declines, unbundling can still have a major economic impact. 30

31 17. Total classified advertising revenue, Canadian daily newspapers, $ million

32 18. Comparison of paid circulation trends and classified advertising revenue trends, Canadian daily newspapers, , Index basis (2000=100) Total paid circulation Classified advertising revenue Since 2000: 29% Since 2000: 66% 32

33 Responding to change Most legacy newspaper publishers were slow to respond effectively. Recent solutions include paywalls, native advertising, digital first, or attempts to become world news brands. But paywalls is simply a new term for subscriptions. And native advertising is simply a new term for advertorial. Some of these strategies may work for some newspapers, some of the time. Any strategy must be assessed in the context of unbundling and unlimited competition. 33

34 And what about La Presse+? 34

35 La Presse a long history of innovation and adoption of new technologies One of the first newspapers in the world to establish a radio station CKAC in Launched the first experimental television station in Canada in Was one of the earliest applicants for a commercial television licence in From The Gazette, Montreal, Wednesday, July 20,

36 Source: presse plus analysis/ 36

37 No, but 37

38 Can La Presse save La Presse by doing everything wrong? The answer to that question maybe if La Presse regards La Presse+ as the first step in a journey of discovery, not as an end in itself. La Presse+ visually pleasing, but does not make full use of the available technology. Could add utilitarian and reference features that would enhance its value and increase consumer time with the product. Planning for the future must take into account the three questions noted earlier unbundling, unlimited competition, and content creation vs. content aggregation. 38

39 Looking ahead five to 10 years Fewer print newspapers perhaps dramatically so. Smaller number of surviving newspaper brands in various digital formats. Some world brands that will have left their roots behind. A variety of subsidized or endowed ventures. Internal cross subsidies wrung from the system. Harder to do local news and investigative reporting. Local news might come to be delivered by, and attached to, a variety of other online services. 39

40 Five to 10 years from now The transition will not be over. We will be entering the next phase. New models will continue to emerge, combine, and emerge again. Many of the solutions being proposed or tested today will not yield long term viable business models. BUT they may be necessary to enable access to tomorrow s opportunities. 40

41 Is there une souricière numérique a digital mousetrap? At this stage, the digital mousetrap is still a work in progress. The old saying: Build a better mousetrap, and the world will beat a path to your door. But that world has changed. Very few would actually beat a path to your door. They would read about the mousetrap on Facebook. They would watch a demonstration on YouTube. And they would order it from Amazon. And each of those three companies now is also part of the media ecosystem. 41

42 Inc. Canadian daily newspaper trends, and three issues that will shape the future of newspaper brands Presentation by Kenneth J. Goldstein President Communications Management Inc. To the conference: Les modèles d affaires de la presse quotidienne: Une souricière numérique? HEC Montréal 25 March Communications Management Inc.