My un-predictions for 2010

I am not a fan of yearend prognostications, because they usually are no more than statements of the obvious or retrospectively fortuitous guesses.

Even though I usually sidestep the idle midwinter idyll of predicting the upcoming year, I am going to make an exception for 2010, because several friends and correspondents have pressed me for answers to three significant questions.

In a moment, I will provide you with the same weaselly answers I gave them, but first here is some insight into the thinking underlying each response.

We are in utterly uncharted territory with respect to the four factors that make a market: (a) the global economy, (b) consumer behavior, (c) advertiser behavior and (d) the potential response to the above variables by the captains of the media. In addition to these known unknowns, any number of unknown unknowns could be lurking out there, too.

Because reliable business predictions can be extrapolated only from well-documented prior experience that reasonably can be presumed to repeat itself in the future, the absence of solid assumptions makes it impossible to offer anything other than the following impressionistic un-predictions:

Will we have to pay for online content in 2010?

In some places, yes. In some places, no. The answer depends on the type of content and the publisher.

While some publishers may get around in 2010 to successfully launching subscription Internet and mobile products, most publishers are likely to adopt hybrid free/pay solutions, with the emphasis on free instead of pay. The few publishers who try to put everything behind a pay wall will be business-to-business publications (like the Wall Street Journal) or those who provide truly unique content to an isolated bit of geography where they have unrivaled control.

Notwithstanding the best efforts to charge for content, interesting and valuable information almost always will turn up in the clear on the web in short order. This unavoidable phenomenon will further incentivize publishers to play whack-a-mole with copyright poachers instead of developing compelling products and services to attract readers and advertisers.

Will advertising sales rise, stabilize or continue to dive?

The answer depends overwhelmingly on whether and how much the economy improves.

If you believe the economy will improve vigorously, then it stands to reason that retailers and car dealers will step up advertising. If the economy expands vigorously, employers will start buying ads to fill jobs. If the housing market revives vigorously, then real estate agents will resume advertising.

Even if all this occurs – and there can be no guarantee that a recovery is imminent or will be sustained – it does not follow, however, that advertisers will return to their former behavior. After being forced to do more marketing with less money during the worst economy since the 1930s, advertisers in every key newspaper and broadcast category have learned to become increasingly proficient at low-cost, highly-targetable, meticulously-measurable interactive advertising.

The thousands of retailers and car dealers who succumbed to the most difficult economic conditions in generations simply aren’t there to buy advertising any more. Several of the remaining big-box retailers use little, if any, newspaper or radio advertising, relying instead on rock-bottom pricing to draw patrons away from independent merchants – the ones who still buy ads – who cannot compete with them.

Auto dealers know that eight hours is the median amount of time consumers spend shopping on the web before contacting a dealer. Car manufacturers and sellers are focusing their efforts on intercepting customers online, not luring them with broadcast or newspaper ads promising free hot dogs and pony rides.

Employers have learned to post vacancies on their own websites or at low- or no-cost job boards targeted to their particular industries.

Real estate argents know they don’t sell houses with newspaper ads. They buy them to please sellers, who want some tangible proof that the agent is trying to market their houses. As more sellers and buyers become accustomed to shopping for homes at sites like Realtor.Com and Zillow, newspaper advertising will become increasingly irrelevant.

In other words, a rebound in the economy will not necessarily translate into a recovery for newspaper, radio or local television advertising.

Will more media companies go out of business?

Some will. Most won’t, absent a complete meltdown of the economy. The question is how wounded the survivors will be and whether they have the imagination, the wherewithal and the will to reclaim anything near their former strength.

Both consumers and advertisers are forsaking the mass media model that made newspapers and local broadcasting such powerful, lucrative businesses in the post-World War II era. Not many years ago, newspapers and broadcasters respectively were able to generate profits of 30 cents to 50 cents on a dollar of revenue.

The abundant profitability of those monopoly-like businesses made it possible for them to stay in the black by whacking expenses when advertising began contracted in 2006 (well before the economy drooped). Some operators were so good at expense management that they were able to sustain amazingly respectable levels of profitability in 2009 in spite of the worst ad recession in modern history.

But even the companies that weathered the storm are far from being out of the woods, to mix a pair of metaphors.

If advertising demand fails to rebound when the economy does – or, worse, continues to contract because of secular changes in consumer and advertiser behavior – then, regardless of how skillfully media companies slash expenses, the high fixed costs associated with operating the legacy businesses eventually will eat them alive.

The long-term survival of the traditional media companies will depend on their ability to create products and services to attract and delight the consumers and advertisers of the interactive age, whose loyalties last no longer than it takes to click a mouse.

To date, the energy and creativity of most publishers and broadcasters have been focused on trying to salvage the increasingly anachronistic business models of their forefathers. If they don’t change their behavior in 2010 and beyond, they may pass the point of no return – assuming they have not done so already.

Happy new year.