Home Views Commentary

Go digital or die. Is print media really dying?

Tong Kooi Ong
Tong Kooi Ong11/27/2017 08:00 AM GMT+08  • 7 min read
Go digital or die. Is print media really dying?
(Nov 27): We have all heard of the cliché “You have to go digital or die”. The confluence of instant connectivity, anywhere and everywhere, to reach and be reached by millions, to make sense of both limited and limitless and unmanageable amounts of d
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

(Nov 27): We have all heard of the cliché “You have to go digital or die”. The confluence of instant connectivity, anywhere and everywhere, to reach and be reached by millions, to make sense of both limited and limitless and unmanageable amounts of data through artificial intelligence and big data, from which assets are better shared and utilised, making possible technologies that advance mass-customisation and creating monopolists because of the network effect, is changing the world faster than we had imagined possible. And this change will only accelerate, touching every aspect of our life and lifestyle and therefore every business.

Consequently, everyone is trying to find a digital solution. Either to defend their existing business or to disrupt other businesses. Of course, consultants fan these fears and promote shallow template strategies to advance their fees. Remember the Y2K scam, where it was said that money in bank accounts would disappear and aeroplanes would drop from the sky as the clock struck midnight on Dec 31, 1999?

How do we react to these onslaughts of innovations, new technologies, new behaviours and new engagements that threaten our businesses?

I will share my thoughts on coping with these challenges in a threepart series that focuses on the print media. Why print media? Because it was one of the first industries to face digital disruption. We therefore have sufficient evidence to dissect and lessons we can learn. Arguably, it is an industry of which I have some knowledge to write about credibly. I believe the challenges for other businesses are similar, as are the options available.

The media business is always interesting. It is high profile and sometimes owned not for economic returns. Could it be that Jeff Bezos (of Amazon.com) bought The Washington Post and Jack Ma (of Alibaba Group Holding) bought the South China Morning Post because they have found the “digitalisation solution” to turn the industry around or did they acquire these newspapers as a crowning glory? And what to make of the recent news that Rupert Murdoch, the godfather of the media world, may be calling it quits on an industry whose classifiedadvertising revenue he once described as “rivers of gold”?

We start by looking at the facts. Although global daily print newspaper circulation has grown from 614.5 million to 757 million from 2012 to 2016, the positive growth is attributed to China and India (see chart). Elsewhere, circulation has fallen. For example, according to a Brookings Institution report, in the US, the number of newspapers per hundred million people has fallen from 1,200 in 1945 to less than 400 currently. Circulation per capita declined from 35% to under 15%. Circulation numbers fell 12% in the last five years.

There is even an internet site dedicated to tracking newspapers closing down around the world: newspaperdeathwatch. com. What will be next? Bankdeathwatch.com, shoppingmalldeathwatch. com, jobsdeathwatch. com?

In Malaysia and Singapore, the Audit Bureau of Circulations’ (ABC) latest statistics revealed that with the exception of The Edge Malaysia, all newspapers saw a sharp drop in circulation (see Tables 1 and 2).

Globally, the total revenue of newspapers (advertisements and circulation) has declined from US$167 billion to US$154 billion from 2012 to 2016, or by a compound annual growth rate of -2%. Advertisement revenue alone for newspapers is projected to decline to US$60 billion ($81.4 billion) by 2018 from almost US$100 billion in 2011.

On the flip side, from 2012 to 2016, revenue for Google has increased from US$50.2 billion to US$90.3 billion, for Facebook from US$5.1 billion to US$27.6 billion and for Twitter from US$316.9 million to US$2.5 billion. Digital advertisement revenue for Google alone is US$79.4 billion and for all technology companies, an astounding US$190 billion.

The race was over even before most media companies got into it. The battle for digital advertisement revenue is already won by the technology giants.

Why did the newspaper industry fall so quickly and decisively?

The competitive advantage for newspapers was their ability to reach a wide audience at low costs with the printing press. The strategy for most newspapers was to add on more and more content with the goal of expanding their audience. It is much like serving a buffet meal — providing variety and quantity, but not necessarily quality. With a larger audience, newspapers were able to sell more advertisements and at premium prices. Even in the 1990s, some newspapers proudly proclaimed that readers were buying their newspapers to look at the advertisements.

Unfortunately, for the newspaper industry (and many other industries), the internet has the same advantages and more, as well as a many times more powerful reach, and at literally no cost. Free services such as Craigslist decimated classified advertisements in newspapers. Free online news aggregators, which operate at marginal costs and are able to deliver news as it happens versus yesterday’s news today on print paper newspapers, replaced many general newspapers.

Google also changed reading habits in searching for news and information, moving readers from curated news to specific interests and writers. This was accompanied by a change in behaviour towards social media, in terms of audience engagement and crowdsourcing, making it possible for the likes of Facebook, WeChat, Instagram, Twitter and Snapchat to grow at the pace they did. And, of course, the smartphone made connectivity and data all pervasive.

Digital technologies also made it possible for personalisation and customisation at low to no cost. Newspapers, limited by the printing press, could only print the same content for all their readers.

As a response to falling revenue, newspaper companies cut back on staff to reduce costs, resulting in a further decline in circulation as editorial content weakened. This triggered another cycle of loss in advertisement revenue.

And once the window closes, it is near impossible to fight back. Digital technologies create monopolists. They benefit from the network effect, becoming more useful, more efficient and cheaper as the number of users grow and more applications are connected. Take the cost of advertisements. For newspapers, every advertisement has an incremental cost of newsprint, a limit on the physical space available and higher delivery costs. For online portals, there are virtually no additional costs and no limit on the supply of space. How do you fight an industry where the long-term supply curve is almost at zero marginal cost?

And the fact that newspapers are increasingly relying on social media to promote their content and maximise their traffic is the ultimate admission of defeat by old media in reaching out to the mass-market audience. But is it dying and can it be revived?

Next week, I will write on how newspapers fought back, by putting their content online to expand their readership. The initial imitators blindly followed the blogs and low-cost news aggregators by putting all their content online for free. The objective was to secure a share of the fast-growing digital advertisements, to make up for the loss in revenue from print circulation and print advertisements.

One of the biggest bets on this strategy was taken by The Independent newspaper in the UK. It ran its final print edition in March 2016 and is now a paid digital-only paper. Its owner, Evgeny Lebedev, argued that other newspaper owners are in denial about print titles.

I call this the Media 2.0 strategy. The reason was simple and convincing. Newspapers are not about selling papers but news. That it is printed on a paper and sold is because it is the most efficient mechanism to deliver the product that customers want to buy. That product is news, not paper. The newspaper and the printing presses are only the technology. So, if the paper is old technology, why not replace it with pixels, which are cheaper and give a better experience?

As elegant and convincing as this sounds, it is too simplistic. I will explain why it is failing and will fail next week.

Tong Kooi Ong is chairman of The Edge Media Group, which owns The Edge Singapore

Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.