Newspaper ad revenue plunged 18% in the third quarter, the sharpest drop in the 40 years that records have been kept. It's the sixth straight quarter of contraction, and the velocity of decline is accelerating. A $50 billion industry is hurtling into the ground at sickening speed.
It's too late to rescue the institution of the major metropolitan daily newspaper, but marketers and media professionals can learn from the industry's mistakes. Two in particular set newspapers up for this spectacular fall. Both were avoidable.
The first was the industry's failure to respond to changing media consumption patterns. The success of cable television and community publishing made it clear as early as the 1970s that readers craved choice. The best response would have been for newspapers to localize their products.
Instead, they consolidated. Mergers, joint operating agreements and leveraged buyouts put many of the largest dailies in the hands of professional financiers who cared little about their local markets. Dazzled by the prospect of predictable 20% net margins, these executives invested in economies of scale at precisely the time their customers were demanding localization. They also ignored evidence that a new generation was failing to connect with their products.
They milked a decade of great results out of the business. Now look what's happening. Today, only one in four Americans regularly reads a daily newspaper. The average subscriber is more than 55 years old. The financial outlook is a train wreck.
The industry's second mistake was failing to see the implications of new technology. When the Internet hit in the mid-'90s, newspapers rushed to join the party. The Web was seen as another way to deliver existing print content and sell more ads. That strategy worked for a while.
What executives didn't foresee was that technology would democratize media. The localized communities they had chosen to ignore years earlier suddenly had the means to serve their own information needs. As people learned to use the tools of publishing, the expensive, homogenized, mass-market product that landed on their doorstep every day became less meaningful. This trend was evident a decade ago, but the industry didn't want to believe that the rules could change that much.
Democratization will be the dominant trend in media for the next several decades. Brands will become more important; delivery channels all but irrelevant. People who can't find trusted sources will create their own. A new generation of buyers will expect to have access to trusted information whenever they want, and they will decide whom to trust.
These are the trends to which media and marketing professional must adapt. The newspaper industry saw them coming more than 30 years ago and chose to look the other way. Learn from its mistakes. M