Article


2017: What media shifts in the next five years mean for newspapers

by Shawn Riegsecker        

By 2017, there will be no printed metro newspapers, no local network TV stations, and few printed magazines. Weekly newspapers and video will be thriving. Tablets will be common and cheap. WiFi and WiMax will be everywhere. What do these and other predictions mean for the newspaper industry?


Click the image to view a larger versionHey, Van Winkle. Wake up, sleepy head! It’s 2017 and you’ve got a busy day ahead.
 
Imagine simply that. You awaken and suddenly it’s five years from now. It’s not nearly as long as Rip slept. Still, how’s your day going to go?
 
First, you’ll check your mobile phone. But not that piece of junk you carried in 2012. Your new device may look similar, but it’s more powerful than your current-day laptop (which now is an inexpensive and limited media consumption tablet). That’s essential, because everything you do personally and professionally runs off this mobile device, with all the data you need stored in the cloud. 
 
So, peruse your emails, check Twitter, and, well, wake up. A bit later, you’ll connect with the only other device you will carry: that reading tablet. You’ll check the local metro daily online. No need to retrieve a newspaper off the lawn; printed metro newspapers will have vanished. Next, you’ll watch the local TV news but not on a local network affiliate station; they’ll have disappeared, too. You’re streaming a 24/7 local news channel with far more coverage than you ever got from the local TV newscaster. 
 
At the office, you will connect your mobile device to the back of a high-definition screen (screens are very important in 2017) and work off the device’s operating system. Everything now moves through this handheld mobile device. On the train ride home — that’s right, you’ll still commute by rail — you can watch the latest “Mad Men” episode by connecting your phone to your reading tablet. Oops, if you drop and damage the tablet, don’t worry. They’re relatively inexpensive and disposable in 2017. 
 
Back at home, you’ll again plug your phone into various screens. Thanks to bidirectional and segmented data streams, you’ll be able to take a phone call via a wireless earpiece running off of the same hardware that your kids are using nearby, say the 60-inch, high-definition gaming screen. If you’re relaxing and want to peruse People magazine, again you’ll view it on a screen. The print magazine industry, of course, is crumbling. 
 
Implausible? Or 80% likely?
 
Is this all too far-fetched? Actually, I figure at least 80% of the picture I’ve painted will occur. How? Because moving into 2017, we’ll have high-definition Wi-Fi and WiMax streaming anywhere, anytime, on any device. Tiered, broadband pricing will be in effect, as well. If these somehow aren’t possible in the time frame given (although I don’t expect a delay), then the timing of the dramatic changes will only be off by just a bit.
 
I’ve just exposed the tip of the proverbial iceberg when it comes to the profound media industry shifts I expect by 2017. Picture these, as well:
  • At home, a telco/wireless/cable death match will be occurring as we decide who to pay for content. Voice-over IP, IPTV, and the Internet will serve as our content purveyors.
     
  • Twitter will be huge (and probably owned by Facebook).
     
  • National dailies still breathe, but weekly newspapers thrive. For printed metro and national dailies, an implosion of advertising preprints in 2014 or so will devastate their revenues; preprints now account for about 30% of many newspapers’ revenue. 
     
  • Radio will be a real mess as, at this point, nothing has killed anything. Everything remains: terrestrial, satellite, streaming, cloud-based libraries. But we’ll see the obvious trend that cloud-based libraries and streaming audio will win the battle long-term.
     
  • Prices of tablets, which primarily will act as a reading device or just a larger screen for our phone, will have dropped significantly and achieve 70% penetration of adults 18 and older by the start of 2017. Tablets will prove terribly disruptive to print newspapers and magazines.
     
  • Based on advances in compression technology and data-transfer technology, the actual cost of distributing information will decline markedly. Tiered broadband price will be in effect, so the more data an individual consumes, the more he or she will pay. But consumers won’t feel the pain much because the cost of distribution will have fallen considerably. 
     
  • Digital out-of-home technology — such as video-streaming billboards — will be on fire and so will video viewership. 
     
  • How do you know?
How can I make and believe such outlandish predictions? Especially me, the CEO of Centro, a rapidly growing Chicago-based digital media logistics company (tagged among the 250 fastest-growing technology companies of 2011 by Deloitte Development LLC) that is the largest independent buyer of display media in the United States? Me, who was named the National Association of Newspapers 2008 Advertising Person of the Year? 
 
Because as a successful entrepreneur striving to make it in an industry changing at Mach 4 speed, I must develop a solid point of view now about what the particular world my company inhabits will be like in five years. Why? So I can make intelligent decisions today. Successful entrepreneurs and entrepreneurial companies must have a solid point of view of five years from the day they’re standing in so they can successfully grow into the future.
 
How did I develop these improbable prophecies? From a knowledge-gathering and prognostic process that sprang from a solitary nine-day sojourn in July 2011 in the Utah desert, a retreat I try to take annually. Please don’t picture a wandering prophet surviving in the wilderness. I stayed in a hotel room where, aside from a few desert strolls, I holed up. Soon its walls were covered with flip chart pages and the floor was strewn with research papers and other materials. I worked most of the day beginning at 9 a.m. and downloaded materials in the evening, often past midnight. 
 
You must consider the context for this non-vacation. 
 
From 2001 to 2007, I had run a very successful company. Then the Great Recession hit. Suddenly, my plans focused on survival rather than thinking five years ahead. We managed through it and we prosper today. But, in the process, we realised how much the media landscape had shifted. I decided I needed to get away and recalibrate my point of view. 
 
So I took off for nine days. I didn’t talk to anyone during that time except resort personnel or guests. I did, however, read my e-mails. I cleared the room and, with the large wall chart sheets and some markers, I began trying to figure all of this out.
 
Reflect on all that happened between 2007 and 2011 in our industry. We witnessed an explosion of Facebook and social media. We observed advertisers move away from paid advertising to owned and earned (the social space). We saw Apple launch iPad, Amazon introduce Kindle, and Barnes & Noble present Nook — and underestimated their market penetration. Video consumption climbed with the arrival and growth of YouTube and Hulu, the online video service, as well as Internet-enabled TVs and computer-driven entertainment shows. 
 
The convergence of these trends, frankly, disconcerted me. I needed to get away and seek solid clarity on what all this meant, especially for the future. 
 
A method to the madness
 
First, I wanted to understand what truly was happening in our society. I examined social-economic trend lines and technological trend lines and plotted where their intersections might be. I considered the likely advances in technology; I imagined what might be adopted and what might not be. 
 
I spent a lot of time looking at how we organise ourselves socially, how we connect to others, and how we are going to have our content tier-rated for us (by our circles of friends, not newspaper editors). I’m a huge believer in collecting data points; I consistently coach colleagues that success in life is nothing but a collection of data points. 
 
Nearly half my time was spent assessing the different consumer electronic devices that we use or that are emerging. I studied how we’re going to use them, as well as how we will pay for them and the data flowing into them. I explored connectivity and how we get the data to those devices. 
 
From all of this examination, I concluded that by 2017, we would enjoy high-definition Wi-Fi and WiMax service 24/7 anywhere and on any device. That will prove critical to ensure no disruption occurs in that constant availability of information. 
 
I also assessed what a normal individual’s day will look like, how he or she would access information, and on what types of devices. Then I made predictions on how all of this will affect the revenue streams of specific media, whether it’s local TV or cable, radios, newspapers, or magazines. 
 
I didn’t have a particular point of view when I began, but surprising conclusions certainly emerged. For instance, I didn’t think Twitter would be as huge as I do now. 
 
But, Twitter and Facebook will furnish 40% of unique visitor traffic to content sites by 2017. Google will deliver about 20%, another 2% will be direct to URL traffic, and 15% will constitute miscellaneous referral traffic. 
 
And what does this mean to newspapers?
 
Obviously, if you’re a newspaper owner today, your future will look very different than it does today and certainly a decade ago. Much of your classified ad revenue already has dried up from free online rivals such as Craigslist. Craigslist alone led to a decrease of 21% in classified-ad rates, a 4.4% drop in circulation and a decline of 3.1% in display-ad rates, according to a 2011 academic study.
 
Declining revenue from preprints will flip the profitability of most metro print properties below the profitability line. With preprints, the future simply is up for grabs as readers move away from them and make more of their purchases online. I look at my personal experience. I moved into a new condo a year ago and, instead of shopping for furniture at a store, I bought 65% of it online. 
 
According to my calculations, preprints — whose percentage of newspaper revenue rose to more than 30% from 15% after classified ad revenues sagged — will drop off a cliff in 2014, sliding 30% in revenues to newspapers. This decline will continue unabated for the next several years. 
 
Daily printed newspapers will suffer, but smaller weeklies will be relatively strong. It’s primarily a matter of lifestyle; their readers care about the local content, to keep up with what’s going on in the community and with people they know. Consider these newspapers the last bastion of printed newspaper pleasure. 
 
For newspapers and magazines, it all adds up to two factors:
  1. Their ability to create enough interest and value in their content to prompt people to buy their publications on a micropayment process online.
     
  2. Their ability to sell advertising next to that content, no matter where that content travels.
Newspaper brands will remain, but their ability to stay vibrant will depend on the smart decisions they make on such matters as controlling their inventory, making more from their content and distribution partners, and better leveraging their rich audience data and the relationships they have with their audiences. 
 
As an aside, what happens to local TV markets, historically, but not recently, considered the newspaper’s primary competition? Gone.
 
It’s fairly simple. When 85% of the content of local stations isn’t local and comes from a network or syndicated partner, why would a network, say ABC, want to maintain a long-term relationship with the affiliate, especially when many viewers today can go to abc.com and view any of the network shows? Or they can use Hulu or Netflix and buy each show for US$0.25 or whatever the cost will be to access the shows online. Content producers will be cutting out the middlemen, which is what local TV stations face. 
 
As for local news, watch for the emergence of more local 24/7 cable channels that are high-quality and accessible from any device or screen. People will tune in to these local news sources to view a rich array of coverage. And these news outlets will attract a lot of local advertising revenue that will allow small businesses, from car dealers to bakeries, to gain more community prominence from their targeted commercials. We will have a more vibrant local video world in which to choose from versus the 10 minutes of high school football jammed into an hour-long local TV show.
 
Where will advertising net out by 2017? 
 
We won’t be discussing offline and online as categories as almost everything will be consumed digitally. Any discussion of mobile advertising will vanish because most everything by then will be mobile. There also won’t be a large distinction between “national” and “local” because targeting has become audience-based and, when you look at the data, everything becomes local.
 
As a result, the advertising community will be spending its time discussing the weighting of units, whether they’re text, image, audio, video, or social ads. They’ll consider the size of screen, and the environment in which viewers consume the ads will determine its value. The larger the screen, the higher the cost per mille, or CPM.
 
Now, turning to … WAKE UP, Van Winkle. You’ve been dreaming again. Stop looking into the future and return to 2012! It’s going to be a wild ride.





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