UPDATED on October 29, 2009.
Had a great email conversation with the author, Martin Langeveld, of the Nieman Labs article reporting that "Newspapers take a bus plunge: circulation drops 10.6%". Helped me to understand his point of view better, and therefore to make my points clearer.
I hope Martin's headline gets the attention of the industry, but in my opinion, this circulation drop is the last straw, not the whole story. The door has been slowly closing for a long time. As long as advertising dollars were coming in, no one heard the sound of the door creaking shut. More importantly, no one has been listening to the new doors opening up.
This is an exhortation to Journalists to investigate the story behind the historic numbers - understand the real story behind today's problems and look for the opening doors which have gone unnoticed so far.
Really "free news" - over the air television and radio news - should have devastated the newspaper business a long time ago, but it didn't. Reach (daily morning & evening circulation as a percent of US population) steadily declined from 1950 until the internet emerged in 1990. Martin confirmed my suspicion that this is because young adults did not adopt newspapers at the same rate as their elders. The reach decline pace doubled even before internet penetration rose, in 1990. The pace of the reach decline remained the same, even slowed, from 2000-2008, when, reportedly, free news grew more abundant. In the last 6 months, the accelerated circulation decline must be influenced by more than the abundance of free news.
TV and Radio Free News took an average 0.25 percentage points per year from newspaper reach, over 40 years, from a high of 35.4% in 1950 to 25% in 1990. During the first decade of the internet, the reach decline doubled its pace to 0.50 percentage points per year, from 1990 to 2000, to lose another 5 points to 20%. Since, (although there's more free news than ever on the internet) reach declines have slowed slightly, averaging about 0.47 points per year, losing 3.8 percentage points to 16.2% in 2008, in 8 years.
Advertisers announced a dramatic shift from eyeballs to engagement in 2005. But until then they remained loyal supporters of newspapers even though they do not deliver a good value. Local Radio and TV are negotiable and offer makegoods when ratings perform below the negotiated cost per point. But National and Retail (with subsidies from National brands) Advertisers steadily increased spending, even when the pace of newspaper reach declines increased after 1990.
Advertisers spent an average of $125 Million more per year from 1950 to 1970, from $1.7 to $4.2 Billion. Then annual newspaper advertising spending increased an annual average $830 Million over the next twenty years, from 1970 to 1990, to $20.8 Billion. Advertising continued to increase by $829 Million even though the pace of reach declines doubled from 1990 to 2000, further eroding value. Perhaps realizing the value erosion, advertisers slowed spending increases to only $207 Million per year on average, from 2000-2005, when newspaper ad spending hit an all time high of $30.1 Billion. For the past three years, even though newspaper reach declines haven't increased their pace, advertising revenues have dropped an average of $1.8 Billion to $24.8 Billion in 2008.
But there are doors opening for newspapers:
1. Total print and online newspaper Audience is growing. The problem is converting that traffic to revenues.
2. Newspapers have something to learn from why morning newspaper subscriptions grew, while evening news disappeared, despite competition from free over the air news on TV and Radio grew.
- ‘for the 6 months ending Sept. 2009, newspaper paid circulation dropped 10.6 percent to about 30.4 Million.’ (http://www.reuters.com/article/BROKER/idUSN2633378520091026)
- That’s a drop of 3.6 Million paid circulation, or 0.6 Million/month
- By the way, some proportion of this lost circulation is represented by the newspapers which shut down since the same period year ago (According to Martin this is small)
- According to Nielsen, Unique Visitors to newspaper websites were 74.8 Million in August 2009. Since the reporting method changed in June 2009, we can only accurately report that unpaid newspaper visitors online increased 4.5 Million since June, or 2.25 Million/month. (http://www.naa.org/TrendsandNumbers/Newspaper-Websites.aspx)
3. Newspapers have the community connections to create high engagement events that advertisers will pay a premium for.