Monday, March 15, 2010

Are small papers safe? Yes. No. Maybe.

Publishers in small and medium communities largely think they are safe from the readership and advertising declines that are eating away at most metro newspapers. Are they? Yes, no and maybe.

The ambiguity results from the fact that the outlook for any particular non-metro paper depends on the unique characteristics of the market in which it happens to be located. While there is no one-size-fits-all answer, a number of common considerations determine the outlook for a particular publication.

Here are the good, the bad and the unknown factors that every non-metro publisher should consider.

The good

The principal advantage enjoyed by most small papers is a degree of isolation from competing media, thus giving them the opportunity to be the leading vehicles for information and advertising in their communities.

Most small and medium papers have no meaningful print competitors. Typically, broadcast competition consists of a few local radio stations or television signals piped in from a neighboring area.

Many rural communities also lag the nation in the quality of Internet and mobile services available to them, reducing the usefulness of digital media to their residents. Although this represents a competitive edge for the time being for smaller papers, this advantage may decrease as the result of the $7.2 billion allocated in the Recovery Act to extend broadband connectivity to rural areas. The Federal Communications Commission also is scheduled to release a plan of its own tomorrow to extend broadband to rural areas.

Taken together, the above factors tend to support higher and more loyal readership in non-metro markets, thereby potentially leading to higher ad rates than are possible in highly competitive metro areas.

Owing to the strength of their defensible local franchises, sales fell 12.4% at non-metro papers in the second quarter of 2009, as compared with a 30.2% revenue drop across the rest of the industry. The small-paper sales figure was reported by the Suburban Newspapers of America and National Newspaper Association, which since have discontinued compiling sales results among their members. The national figure comes from the Newspaper Association of America.

But...

The bad

While isolation is a good thing when the local economy is going well, it can be devastating if something goes wrong.

If a community relies heavily on a particular mining operation, manufacturing complex, call center, prison or agricultural specialty, then bad news at the principal economic engine in town can be devastating for the paper.

Because small and medium papers are particularly dependent on advertising from local retailers, the arrival of a new Wal-Mart has been known to mortally wound the business of many a Main Street merchant even if the diversified local economy is doing perfectly well.

A number of rural papers face not just economic, but also demographic, exposure. That’s because non-metro communities have aged more rapidly than the urban markets since the 1960s.

By 2000, “the median age in non-metro counties was nearly four years older than the metro population,” said a study published in January, 2009, by the sociology department at Cornell University.

The aging of the rural population results from the ongoing out-migration of young people and the trend in recent years of a notable number of older Americans to move to non-metro areas for their retirement. (The map below, which appeared in the Rural America publication of the U.S. Agricultural Department, shows which areas between 1990 and 2000 gained or lost citizens aged 65 and up.)

In the short term, an older population is a good thing for newspapers, because (as previously reported here) half of newspaper readers are 50 or older, even though this cohort represents only 30% of the nation’s population.

Unless newspapers find a way to replace their aging readers, they will be in trouble as the seniors die off. With many rural papers having older audiences than most metros, the clock actually is ticking faster for them than for their big-city cousins.

Maybe

While non-metro papers typically may not be able to fully counteract the economic and demographic forces arrayed against them, they can fortify themselves by assuring their indispensability to their communities.

This means investing in the production of unique and compelling local content, as well as the creation of highly effective print and digital advertising products.

To the degree publishers emphasize short-term profits over long-term engagement, they will damage their franchises – and open the way to low-cost online competitors.

In the final analysis, the viability of small and medium papers will depend on how much publishers are willing to put into them.

19 Comments:

Blogger Matthew Terenzio said...

"This means investing in the production of unique and compelling local content, as well as the creation of highly effective print and digital advertising products."

OMG We've figured it out! Let's all just do this and we'll be fine as an industry.

Sorry for the sarcasm but practically everyone agrees with these kind of statements and very few can execute them successfully.

What we need is new leaders, period. Those with them will succeed. Those without will not.

8:01 AM  
Anonymous Anonymous said...

"Unless newspapers find a way to replace their aging readers, they will be in trouble as the seniors die off."

Has anyone studied the assumption that the aging population is a nonrenewable market? Is it possible that newspaper reading tends to be a habit that develops over the years?

10:39 AM  
Anonymous Anonymous said...

Small papers that are independent, maybe. But small papers that are part of chains are getting it in the neck. Take a look at Gannett's community newspaper division, for example, and you see they have been decimated.

11:02 AM  
Anonymous Solitude said...

assuring their indispensability to their communities.

Well, acomplishing that would appear to have a non waivable requirement of stopping a local dissabled, retired, or otherwise unoccupied person from creating a digital media competitor which they run for free. Just because they want to. which might eventually take on advertising but which does not need to

How is a local paper in a small town going to accomplish that exactly?

12:47 PM  
Blogger G said...

I have yet to see any publisher successfully run a small to medium sized newspaper.

About fifteen years ago, the Journal Register Co swept into my home state of Connecticut and bought up about 80 odd weeklies and a half dozen dailies.

Within a couple of years, they completely gutted the newspapers, by jacking the price, reducing the content, reducing the page count, etc. etc. etc.

End result is that you now have about 6 dozen newspapers that are basically garbarge and a company who stock is worth less than a penny stock.

2:57 PM  
Blogger Howard Owens said...

You might want to ask the publisher of the Batavia Daily News how safe he feels.

As for anonymous @10:39 AM, I refer you to http://www.gradethenews.org/photos/readership.gif

Younger cohorts most decidedly do not become newspaper readers as they get older. I recommend "The Vanishing Newspaper" by Philip Meyer.

4:52 PM  
Blogger Donovan said...

I can't believe we are still having this conversation. We now live in a DIGITAL age. paper is done. While we are at it, let's debate if we should bring back the VHS tape.

7:47 PM  
Anonymous Randy Novak said...

A couple things... first, I agree that it is a "yes, no and maybe" proposition, which likely can be said for major newspapers as well.

The point about suburban newspapers being down in revenue less than majors is somewhat flawed in that participation in the SNA study was optional and not all companies opted to participate. My sense is that this may have skewed the results somewhat.

In terms of quality, most smaller newspapers who have the misfortune of being owned by debt-laden public companies have become nothing more than police reports, press releases and some local HS sports, with the last piece of Classified they haven't lost to the web... Legal Notices.

I love reading my local newspapers, but they are slowly becoming less relevant at a time when they have an opportunity to be a viable option... larger newspapers are contracting and the USPS is going to walk away from the weekend. There is an opportunity if they wake up.

Given my experience with most Publishers, they are number crunchers who are only looking to cut expenses and raise rates. The world has changed, and ROI dictates that new pricing models be employed. Throw out the old rate cards... they are useless, confusing and one-sided. Look at performance metrics, and ROI pricing. Sell "audience" to your local advertisers. Hire sales people, not order takers. And most imprtantly, stop running the business assuming what was there last year will be there again this year... it is the "annuity" philosophy that is slowly killing newspapers because they keeping judging advertisers by what they spend YOY. The time for new thinking is now.

8:10 AM  
Anonymous Anonymous said...

Alan, as usual your comments are dead on. I've published more than a few rural dailies and have the honor of doing so now. Ultimately we all face the same winds of demographic change.

As an industry we are too preoccupied with our own challenges to recognize the serious issues facing the retail sector. The sales of high margin items are increasingly migrating to the Internet leaving small retailers a rapidly diminishing opportunity.

We've generally held our readership numbers, but our ability to provide quality local news will ultimately rest upon finding the very elusive new revenue model.

With regard to hopes of salvation from Internet advertising, I'd suggest spending some time in the trenches talking with retailers. If they were half as interested in buying our web offerings as we are in selling it too them we would not be having this discussion.

9:25 AM  
Anonymous brendalynn said...

I think you left out a few important costs/benefits of small, rural newspapers. Specifically: The cost of distance, when it comes to print and delivery.

In a rural area, the cost of delivery is considerably higher per reader than the cost of print delivery in an urban area. More simply, each newspaper has to travel more miles to reach each reader. The costs of transportation are up and continue to head north, even if these are not currently prime concerns of news organizations.

Also, the cost to print: Owning and running a printing press is expensive. If you're only printing one small paper a day, you're losing money. One option might be doing side jobs (if folks were still interested in print products). Another option is farming out the printing to an outside press--which brings us back to the cost of DISTANCE.

This means greater cost to the small, rural papers. But this also presents an advantage to local papers as larger, regional papers withdraw delivery from rural areas. The larger papers are starting to cut back on these costs, which they recognize are higher. These small papers are losing their metro/regional competitors.

For rural papers, the cost to do business is going up, and competition is going down. As with any other news product, that means the question is: Is it worth it to stay in business?

The revolution is coming to rural areas, only more slowly and with warning. Small papers need to harness rural readers' support to move forward.

12:20 PM  
Blogger yelvington said...

"Anonymous" asked "Has anyone studied the assumption that the aging population is a nonrenewable market? Is it possible that newspaper reading tends to be a habit that develops over the years?"

The answer is: Yes, it's been studied. No, it's not a renewable resource.

Tons of data indicate that media consumption patterns that are set in the 18-24 age period tend to persist throughout life. As succeeding generations read less, the net market penetration of printed newspapers declines.

Background info and graph are on my website, from a post about three years ago.

9:27 AM  
Blogger Magister Ludi said...

I've been saying for years that even if we were to become super-wired tomorrow, it'd be a long time until small town papers would be a relic of the past.

Larger media outlets don't have the time, space, resources or the funding to cover every little place and though hyperlocal blogs may someday supplant the local bi-weekly, they still don't have a viable monetization method and they're not as know, avaiable or reliable as a century-old paper.

Also, something which is often overlooked by the thinkers from the cities is that Craigslist doesn't have quite the reach into non-urban areas.

While it's true they've been expanding and maybe some combination of Craigslist and eBay might someday take a larger bite, but if you have something to sell or if you need to hire help, the local paper and the old-time community bulletin boards are still the way to go.

12:10 PM  
Anonymous Anonymous said...

"I can't believe we are still having this conversation. We now live in a DIGITAL age. paper is done. While we are at it, let's debate if we should bring back the VHS tape."

The only way forward for all print media is to find a way to make money off the internet. Most small papers, like ours, are caught in the unfortunate conundrum of innovating ourselves out of money.
Our editorial department has become so Web-oriented that we're not giving people a reason to still subscribe to the paper when they get everything online for free.
What's sad for the whole business is that the entire new ecosystem is dependent on newspaper newsrooms. We're the only ones with the resources to do broad, community-based reporting.
Radio, television and bloggers cannibalize our stories and regurgitate them for their audiences.

7:56 PM  
Anonymous Richard Kendall said...

In the current news media climate, all local news publishers could do with some decent competition to force them to plan for the future and innovate to find new revenue streams.

Focus on niches, strong areas of content and services: 'do what you do best and link to the rest' in the online world [thanks Jeff Jarvis)

7:30 AM  
Blogger yelvington said...

"Anonymous" wrote:

"The only way forward for all print media is to find a way to make money off the internet."

Many have found the path to wealth on the Internet. If your newspaper hasn't, whose fault is that?

If you have a reasonably well organized sales effort and you properly analyze your traffic, you'll discover that you are making as much ad revenue from a committed Web reader as you do from a committed print reader, and that your real problem is a painfully low number of committed (frequency => daily) Web readers. You'll also figure out that YOUR Web site is not "cannibalizing" your print product.

Of course, if you're still running your ad department like it's 1985, you're not going to be making any money on the Web.

"What's sad for the whole business is that the entire new ecosystem is dependent on newspaper newsrooms."

Newspaper people love to say that. It feels good and puts the blame on everybody else in the "ecosystem." But there are other forms of journalism than that found in printed daily newspapers, and printed daily newspapers routinely fail to cover news that is relevant to large segments of the population.

"We're the only ones with the resources ...."

Before, or after, the layoffs? Are you paying a living wage and benefits sufficient to attract and keep competent professionals? And are they, in fact, producing "unique and compelling local content?" Some clear-eyed accounting is in order. The marketplace has been wandering away from newspaper journalism.

11:42 AM  
Blogger Wyatt said...

The cost of printing a delivering a local newspaper to a house is somewhere around 25 cents. I don't think that the problem is the cost of paper, ink and gas. It's a question of what medium readers prefer. If you publish a well printed, attractive local paper with good local content, you will have readers. Unfortunately for newspaper publishers, print has a new competitor on the block. That means the pie is split more ways. Print will always be there, but the competition is much tougher now. This pattern has existed for 100 years as print had to welcome radio, tv, cable, direct mail, etc to the scene. That being said, the same technology that gives rise to new competitors gives rise to new efficiencies. Print must readjust to the new environment, as it always has--leaner, meaner, smarter.

8:34 AM  
Anonymous Anonymous said...

As someone who has owned or managed small newspapers for most of my life, it seems to me there are several factors leading to their decline:

(1) The greatest challenges have come during an era when a great many newspapers were under debt-laden mediocre chain ownership. They cut content and service to save money, which caused loss of income. To compensate, they cut content and service...and on and on.

(2) The internet has taken away readership, but it's more than that. The internet is just part of the proliferation of competitors that have fragmented the audience. It is affecting broadcast TV and radio, too.

(3) There is a decline in interest in "being informed." It's not as if many of the people who have quit reading newspapers are informing themselves about vital community issues via the internet. They don't seem to be interested in being informed.

(4) Finally, I think there is tremendous animosity toward the large metro newspapers because many in the public feel they are biased in their news coverage. Many feel the same way about community newspapers, and, unfortunately, the perception has some truth to it.

11:31 AM  
Anonymous Anonymous said...

I'm still struggling with the answer to all of this, but I do know one thing...no newspaper-operated Web site has nearly the "gravitas" of the newspaper in its heyday.

I know of a small, struggling daily here in the Midwest that ceased publication of its print edition. It is now online only, and it is owned and operated by ONE person.

If it were just a matter of the delivery system, a print newspaper could convert to online and keep all of its editors and writers...and presumably hire even more. After all, online is where EVERYONE is getting their news, right?

But that's not what is happening.

11:40 AM  
Blogger robb said...

My wife and I own four small weekly newspapers in the Midwest. By choice, I'm pretty much isolated from those in the business. My product direction comes from customers and neighbors.

About three or four times a year I will read this column or something like it to see what others are doing.

Our gross in 2009 was down 5 percent from the year before. Our newest acquisition grew 20 percent in 2009 over the year before. Every morning I get up and think about how we will generate revenue to keep our 13 employees working and the bills paid. I don't care where the ads land, if it's on the web or in the newspaper (where most of it lands) or a full color chamber of commerce guide we are producing.I just seek the revenue and seek things that gets the advertiser the right exposure or response. We are a week away from launching a coupons service that delivers coupons through mobile phones and e-mail and the newspaper. Good stuff for little weeklies.

While often tough and rugged, this is a great time to be in the business.

4:41 PM  

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