One by one, big media companies are splitting themselves in two, holding on to their sexier, more lucrative properties — broadcast, film, digital — and casting off their print operations to sink or swim.
The trend reached a crescendo in the past week. First, E.W. Scripps and Journal Communications entered into a deal in which Scripps will own both companies’ broadcast properties, and a new entity, Journal Media Group, will own the newspapers. On Monday, Tribune Co. completed the spinoff of its newspapers into a separate, stand-alone company. And on Tuesday, Gannett, the nation’s largest newspaper company, and owner of USA TODAY, announced a similar plan.
We know what’s in it for the spinners. They are shedding declining print businesses to protect their bottom lines in the digital future. But what about the orphans, cast off into the big, bad world to make their way on their own, with no net provided by higher-rolling, more trendy forms of media?
Yes, analysts say, there is a path toward success, at least in the short term. It’s a steep and challenging climb, and there is no reason to believe everyone can make it to the summit. But while print’s inexorable decline is not debatable and its imminent demise has been predicted for many years, there are some ways out of the wilderness. With one huge caveat.
It’s true that newspaper circulation and ad income have been sinking for years, and overall revenue growth has been elusive since 2006. This can lead to the impression that the sky is falling and newspapers are dying quickly. But it’s important to remember that this remains a profitable industry, albeit more often in the 5% to 10% range as opposed to the eye-popping profits of yore.
But that’s largely due to cost-cutting. And you can cut only so far before you damage the quality of your product to the danger point. “You can do it for years; you can’t do it for decades,” says Ken Doctor, who keeps an eye on the media for research firm Outsell.
What’s the way out? Rick Edmonds, media business analyst at the Poynter Institute, sums up the challenge succinctly: “You have to find enough new products and revenue streams to make up for print advertising loss.”
Proponents of the go-it-alone approach say one advantage is that executives can focus entirely on newspaper companies and find innovative ways to preserve them. Another plus is that in most cases, the new entities are not plagued by the overwhelming debt that has been such a drag on Tribune and McClatchy.
Doctor, who says newspapers are in “a little better shape” than three years ago, says their challenge is to “get to zero”: They need to at least keep revenue flat after years of decline.
He cites two keys. A major plus for newspapers in recent years has come from charging for digital content, which led to circulation revenue growth after years of decline. That number seems to be flagging. The spinoffs need to find a way to increase circulation revenue by 2% to 3% a year, in his view.
The other part of the puzzle lies in digital ad dollars — print advertising isn’t coming back — and other revenue streams. As mobile readership grows at a rapid pace, papers need to learn how to monetize it. Many newspapers have found success in offering marketing services to local businesses, in effect, becoming regional digital advertising agencies. Some are staging events. As a result, a few are flirting with Doctor’s “get to zero” goal.
And thanks to the Boomers, that short-term future could extend 20 years out. The big risk: Newspapers cut so deeply that readers won’t think they’re worth paying for, regardless of platform.
Says longtime media analyst John Morton: “My fear is that newspapers’ cost-cutting culture of recent years will continue, which could doom even the smaller newspapers in an environment that will reward content quality more than ever.”