Among its other effects, the global recession of 2008–09 is catalyzing a permanent change in the media landscape. After years of gradual audience erosion, the pressure on newspapers and magazines has accelerated. Severe cutbacks in conventional advertising — even when subscriptions or newsstand sales are robust — are slicing deeply into publishers’ revenues and shredding profitability. And it has affected print more than any other medium: Although overall advertising revenues fell by mid-single digits in 2008, newspapers, consumer magazines, and business-to-business trade publications saw print advertising declines of two to three times that. Performance has worsened so far in 2009.
Print players have faced other cyclical downturns in which their businesses declined faster than other ad- supported media. But few print media companies can afford this time to simply batten down the hatches and ride out the current storm. The two major forces that are washing away the profitability of print media were at work long before the current recession and are now being exacerbated by the downturn.
The first force is the ongoing shift in where marketers focus their spending. Marketers have accelerated shifts in spending away from paid advertising to other priorities — including their own Web sites, in-store marketing, loyalty programs, and word-of-mouth campaigns — and they aren’t likely to switch back. Spending on this type of “below the line” marketing (the industry term for categories other than paid media advertising) already represents three-quarters of most marketing budgets, having grown faster than paid media since well before the current recession. Below-the-line programs will continue to capture the bulk of marketing spending as the economy recovers, placing a limit on the ad recovery that print media are counting on to restore their profits or even to ensure their survival.
The second long-term trend devastating print profitability is the rise of digital media. Print has been hardest hit by this shift, since print ad pages are priced at a significant premium over other kinds of advertising, and marketers have been slower to cut broadcast and cable TV ad spending because of the value they place on sight, sound, and motion for brand campaigns. Even in the most optimistic scenario, print advertising would take many years to return to pre-recession levels. More likely, print media will follow the path seen in technology publishing, where more than half of ad pages disappeared after the tech bubble burst almost a decade ago, followed by declines in print ad revenues ever since. And although print media companies have taken a slice of the digital ad revenue pie, they must compete with a much broader, and expanding, set of rivals. These range from Google, Yahoo, Facebook, and Hulu to television networks’ online properties to ad networks that aggregate “eyeballs” from many sites to blogs and social media.
The steps that print media companies have taken to expand their share of marketing budgets and to succeed in the new digital environment have been largely unsuccessful. One obvious approach — which many media commentators have called for — is for publications to charge for their content online the same way they do in print. But journalism and information have become commodities on the Web. Only a few print publications, such as the Wall Street Journal, the Financial Times, and the Economist, are successfully charging for their content online. They are all specialized and oriented toward business professionals. Conversely, most general-interest publications that have experimented with paid content models have failed, including the august New York Times. A second approach — moving entirely online without charging for content (shedding the costs of paper and distribution and counting on online advertising to make up for the loss of print revenues) — has also had little success. The status quo approach, of making content available free on the Web while continuing to charge for it in print, may well be the best path currently available for most print publishers, but it does nothing to change the underlying trend toward lower revenues and profits. And although many new pricing models for online content have been suggested and are being experimented with — including multi-title subscriptions, day passes, and micropayments — the evidence so far suggests they are unlikely to succeed on a scale that would replace any significant fraction of the revenues from traditional but fast-disappearing print advertising.