Over the past number of decades, a number of newspapers have become sluggish. The newspaper industry has been accustomed to making revenue without much competition. The onset of the internet and technology have brought newspapers to a realization that they are bound to encounter a financial crisis if they do not keep up with the new technology of their competitors. Several newspaper companies have not been able to keep up with competition and technological changes due to financial constraints. It has forced a number of them to be out of business while the big companies in bid to remain competitive have merged with the smaller newspaper industries. Nonetheless, this has not been adequate to tackle the challenges that are facing this sector. The existence of several options for catching up on the latest news has made the newspaper readers reduce in comparison to some decades back. However, the newspaper industry has not gone extinct, as some have been able to evolve with the rise off digital media successfully. This paper will make a description of the industry focusing on the history of the sector; the present trends in the industry and the challenges that the industry is facing currently. It will further look at approaches that can be put in place to ensure that the industry remains profitable and competitive despite the challenges that it is facing today.
Description of the Industry
A newspaper is a periodical that contains written information on specific events within geographical confinement or news of the world. They cover a wide variety of fields including business, sports, politics, and art. They further may include columns of weather focusing, public opinions, obituaries, review of local services, comic strips, crosswords, editorial cartoons, advice columns and so many more depending on the newspaper.
The history of the Newspaper industry dates back to the 17th century. The modern Newspaper traces its roots to Europe with the first real newspaper printed in England in 1665, which was followed by successful printings of Newspapers in 1702 (Picard, 2003). The ancestry of Newspapers, however, are closely linked with handwritten news sheets that were being circulated widely as early as 1566 in Venice. They were weekly news sheets that were filled with information concerning wars and politics in Europe and Italy. Early newspapers were published weekly and were highly censored by the government with most of its news being foreign and current prices of commodities in the market. Censorship of newspapers was relaxed later on in 1695 by the British government hence the beginning of flourishing of the newspaper industry in London and other cities which included Philadelphia and Boston. By the 1830s, newspaper industry had picked up so well that high-speed presses made it possible to print thousands of papers cheaply allowing for a low cost of production and a shift from the weekly production to the daily production of newspapers in many cities and countries (Lambert, 2019). The news of the world was first published in 1843. Newspapers have begun to become very common in the late 19th century, which saw the introduction of century stamp duty on Newspapers making them expensive.
The newspaper industry reached a stagnation point in the twentieth century. There were so many newspaper industries in a given country. The newspaper industry was actively facing a changing world, which challenged its dominance as they were in the 1800s. In the 1920s, radios had started taking center stage in news production until televisions came in place to take up the position of radios. The silent film industry was thriving, as magazines became more sophisticated adapting quality color printing and a general improvement to its overall look. A number of newspaper industries adopted to the changing environment (Lambert, 2019). A few that were not able to adopt to the changing environment were kicked out of business due to low profits, losses and stiff competition in the market.
There are new trends in the Newspaper industry today. Traditionally newspapers have been published on print. However, today most newspapers have included their publications on websites and online newspapers with some abandoning their print versions entirely. The newspaper industry was the first news sector, which was hit hard in many ways by the advent of the digital age. Readers have begun to move online, even products that had a legacy in their production. It was only a matter of time before the technology age caught up with them. In an industry that was used to content creation rather than engineering change and adoption to the new technological environment came very slow. In a few years, the newspaper industry found itself far behind in technology and behind their reader’s changing news habits. The sad fact for the industry that is still hitting them hard to date is that the change is only accelerated and every day they try to keep up with this change. To keep many of these industries functional the industry is experimenting on new ways of generating revenue as well as new ways of creating content so that they can engage with the audience much better.
Challenges facing the Newspaper industry
The threat of newspapers appears now from nearly every indicator. The growth of the Newspaper industry from 1950 to 1999 was at seventy percent and this has been decreasing since the year 2000. From the year 2000 to 2006, the industry recorded a growth of 0.5 percent and the growth dropped even further in the first quarter of 2006 to o.35 percent. Despite numerous efforts made the industry to venture into the online sector and other revenue sources, they only account for 5 percent of the total company’s revenue. In addition to this apparent sluggish growth, the newspaper industry faces challenges in circulation declines, ownership changes and a decline of its consumers.
The economics of the industry has further been challenged by the rise of internet and cable news, which has rendered newspapers to be no longer the biggest beneficiaries of reporting a story. Cable news networks and bloggers are able to take up stories much faster than the Newspapers can; hence, much of the profits of the hard work of newspaper reporters go to other players (Everett, 2011). This has served to the significant reduction of the profit margin of most newspaper industries and has seen others close down. Competition in the news industry has also increased significantly. The sector has further faced a reduction in the number of the consumers as the majority of the population is made up of the youth who are heavily reliant on social media and other online platforms to get their news. This has transferred to the revenue of the industry that has also been affected negatively. The newspapers face competition from different platforms including the television, radio, online platforms. Competition has been one of the significant challenges that are facing the industry especially with the down of new technologies that have revolutionized the industry.
Despite the struggling nature of the industry, they are still some companies that have managed to rise above the challenges and to stand tall in the market. This, of course, has come at a high cost of technological advancement and keeping at par with the changing technology and environment. It is possible to ensure that the newspaper industry remains afloat by the incorporation of approaches that will ensure they compete effectively on the market and stay profitable. The other section of this paper will look at several methods that can be used in the newspaper industry to ensure that they remain productive and compete effectively in the market to ensure their survival.
Approach to Remaining Profitable and Competitive
A mentioned earlier; newspaper industry has suffered drastically from the rise of the internet which allows online access to news, instant update of content and often use for free luring many leaders away from print media. The economic realities in the Newspaper industry, coupled with the strength of digital-only publications, are suggestive that a strategy that embraces online editions is a way forward for the newspaper industry (Purdy, Wong & Harris, 2019). In fact, recent economic trends have seen a wave of newspaper consolidation where larger chains have acquired smaller competitors. Despite this step, it has failed to strengthen the industry’s profit to any great degree caller for a better approach in solving the problems that are facing the industry. Using the five forces model to analyze the industry laying emphasis on the first point of competitors in the industry, we are able to identify that the Newspaper industry has a number of competitors who are undercutting the industry. Porter in his five models indicates that an industry that has a large number of competitors offering an equivalent number of products or services reduces the power of the company (Purdy, Wong & Harris, 2019). This statement is directly relating to the case of the Newspaper industry. The number of competitor s is many, including television, radio, social media, and online platforms, to mention a few. The increased number of competitors have reduced the power of an industry that once in history was leading in news production to now where it is a struggling industry. Porter offers a solution to such a scenario by advising such an industry to either offer a better deal or lower their prices so that they can compete favorably in the market. Transferring this solution to the Newspaper industry, embracing online editions will be a step towards dealing with the challenge of competition. Now, print spinoffs and other newspaper companies do not have the adequate financial resources to pull off a pivot new digital model that is equal or even better than that of their competitors. However, the possibility of consolidations enables the pooling of resources and enhancing scale so that these newspaper companies may be able to offer opportunities for investors hence gaining the ability to prosper in an increasingly digital world.
Large media companies that own television print and other types of assets can spin-off their newspaper operations. Separating publishing units segregates the print products and enables the company to keep its performance separate. In many news companies, when conglomerates are held at different kinds of media together, newspapers are often at lower growth and margin and starved for investments and resources — observing the growth and finances of a newspaper independently in a company rather than collectively ___ enables the company to identify its weaknesses and needs. It makes it possible therefore, to address these challenges directed to the Newspaper sector. It also ensures close monitoring of the department in the company so that it is easy to track changes and trends. Doing so also enables us to gauge it in relation to the market and put plans in place to ensure that they remain profitable and compete favorably.
In porter’s five forces, the fourth force addresses the power of customers. This force speaks to be the power of customers to drive the power of the industry up. An industry, therefore, is affected by how many buyers or customers that it has and how significant each consumer is. It also looks unto how much it would cost a company to find new customers or market for its output. A company that has much smaller, independent customers have the potential of having an easier time charging higher prices to increase profitability. Looking at the Newspaper industry today, the number of customers has gone down which makes it nearly impossible for the industry to increase its profitability. Towards better profits for the industry, it is vital to seek and identify ways of increasing the number of consumers by reaching more people in the market. Technology offers the best solution to this problem. The growing presence of technology may be used to influence the way newspapers distribute their news. In a survey study involving 109 participants, 63.9 % of the participants indicated that newspapers they are using technology are doing a good job.97.2% of the participants stated that they were using websites, 70.6 percent were using social media42.2 percent were suing instant messaging awhile 37.6% were using smartphone applications (Bird, 2017). Newspapers may take advantage of this large number of individuals in websites, social media, messaging and smartphone applications to increase its number of customers. This may be achieved with blogs, free text message subscriptions. Research indicates that mobile technology has a promising future, although potential technology is yet to be discovered by the Newspaper industry. Direct channel allowing contact with mobile internet customers is essential and it further promises an increased number of consumers for the industry. These new technologies above mentioned are sweeping across the news industry and it would be wise and profitable for Newspapers to adopt these new technologies to enhance their business.
The Newspaper Company can focus on the few areas that are still working for them to improve on their profitability. An example is the New York Times where advertisements remain a primary revenue source and it has maximized on this enabling the company to stay afloat despite the challenges facing the industry. The annual report for New York limes for the year 2016 indicated that 89 percent of advertisement revenue came from displays advertisements in both digital and print versions (Bird, 2017). Five percent of the Newspaper advertisements both printed and digital were attributed to classified advertisements, and finally, 6 percent came from other advertising like freestanding inserts, branded bags and so on. Digital advertising for Newspapers has held quite steady, with only a 2 percent drop between 206 to 2015. Digital advertising increased from 1.2 million dollars in 2003 to 3.5 million dollars in 2014. Digital advertisements are a great contributor to the industry’s revenue (Bird, 2017). Newspaper industries ought to maximize their strengths to ensure that the company is profitable. Maximizing on strengths begins with the overall analysis of the company and identifying the areas of strength and those of weakness. Maximizing these areas of strength enables the industry to compensate for the areas of weaknesses eliminating losses in the sector.
Newspaper companies may also increase their profitability by tackling the threats of new entrants. They may do so by coming up with new products, which will not only bring new customers but also give the old customers reason to buy from the Newspaper industry (“The New York Times Company Porter Five (5) Forces & Industry Analysis [Strategy]”, 2019). They may also build economies of scale so that they can lower the fixed cost per unit, which goes a long way in increasing their profit margin. It is difficult for new entrants to enter into a dynamic industry that has established players who keep defining the standards regularly. This may be made possible by building capacity and spending money on research and development of the industry. T reduces the window of extraordinary profits for the new entrants discouraging new players in the industry. Discouraging new entrants in the industry also have the effect of reducing the number of competitors in the industry through the control of the number of players. It becomes difficult for the industry to flood, which encourages too much competition that some companies cannot withstand.
The newspaper industry has undergone several changes from its early years until now. In the first years, it enjoyed enormous profits and less competition being the primary source of news at the time. Over the years however, the industry has become flooded increasing competition on the market and reducing the profit margin of the entire industry. The down of the internet days and improved technology hit the industry the hardest as it struggled to remain relevant in a world where people preferred online sites to obtain their news from. Some of the newspapers successfully adapted to the change while a number run out of business. Apart from the challenge of technology and the internet, the industry also had its consumers significantly reduced and competition in the market heightened. The sector however can remain profitable and competitive by embracing the new technology of their competitors, increase the number of their consumers, improve on their services that they become more desirable among their customers, tackling the threats of new entrants and capitalizing on their strengths. These approaches and more are able to provide the much-needed strength for the newspaper industry to ensure that they remain afloat and keep up with the changing trends as they still make enough revenue to certain them in the market.
Bird, B. (2017). How the Newspaper Industry Is Profitable Today. Retrieved 19 December 2019, from https://www.gobankingrates.com/making-money/business/newspaper-industry-surviving-today/
Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229.
Everett, E. (2011). Transformation of Newspapers in the Technology Era. Retrieved 19 December 2019, from https://www.elon.edu/docs/e-web/academics/communications/research/vol2no2/09EverettEJFall11.pdf
Lambert, T. (2019). A History of Newspapers. Retrieved 19 December 2019, from http://www.localhistories.org/media.html
Picard, R. G. (2003). The economics of the daily newspaper industry. In Media economics (pp. 119-136). Routledge.
Purdy, S., Wong, P., & Harris, P. (2019). Stop the presses!. Retrieved 19 December 2019, from https://assets.kpmg/content/dam/kpmg/co/pdf/co-17-01-08-tmt-stop-the-presses.pdf
The New York Times Company Porter Five (5) Forces & Industry Analysis [Strategy]. (2019). Retrieved 19 December 2019, from http://fernfortuniversity.com/term-papers/porter5/analysis/3032-the-new-york-times-company.php