Latin American newspaper publishers are caught in the early stages of the vice peers worldwide have struggled with the past decade: how to diversify revenue streams even as print continues to contribute 98% of revenue.
In a 10-day period last month, I visited 15 media companies in six Latin American countries: Panama, Costa Rica, Honduras, Guatemala, El Salvador, and Colombia. I talked with advertising agency executives and media buyers.
It was an intense baptism into the opportunities and threats facing executives who have long questioned why peers worldwide have tilted so far digital so quickly.
First, the optimistic news:
Print remains dynamic and young: Print newspapers, especially in the quality market aimed at upper-end demographics, are dynamic and young. Circulations of newspapers that are more compact and youthful in design are outperforming legacy broadsheets that look like their U.S. counterparts. Many are world-class in design.
Popular newspapers a growth story: Popular newspapers aimed at working class readers are a better growth story than the quality newspapers, with advertisers warming to aspirational demographics otherwise lacking in higher education and wealth.
Advertising strong yet stalling: Print advertising revenues are strong, but showing signs of stalling.
New digital revenue targets: Despite this success, there is a healthy tension to grow digital revenues to a commonly stated goal of 10% of revenues.
Mobile bypass medium: Mobile is the rapidly rising source of digital traffic, especially among sports newspapers where at least one title is seeing 75% of its digital traffic. Mobile is the bypass medium in markets where computer-based Internet remains the domain for high-end demographics and office workers.
Now, the more challenging news:
Struggling with culture change: Most Latin American publishers have figured out that internal corporate culture change is mandatory for exponential growth in digital audience and advertising. But a recalcitrant print culture, led by change-averse newsrooms, is thwarting digital advancement.
Classifieds showing weakness: Classifieds in Central American countries are declining, with 10%-15% annually typical feedback. Some own digital classified verticals, and some don’t. That does not appear to be true in Colombia, where print + digital combinations are still pointing to classified advertising growth.
Global agencies pushing digital in print markets: Print may still be revenue and strategic realities today, but advertisers are beginning to demand digital – and publishers are taking notice.
For major international agencies based in New York and London, they are dictating digital expenditures to print-centric Latin American counterparts, creating an awkward gulf between local realities (print) and global dreams (digital).
Transparency: There is a lack of transparency within many newspapers and among the newspapers. Publishers with whom I visited understand this internal cultural challenge, but were less aware of the lack of knowledge among publishers with a shared language and business experiences. They are eager to break barriers.
Infrastructure isn’t helping mobile takeoff: For all the talk of mobile, the infrastructure isn’t yet available for breakthroughs. Most Central American countries are still mostly 3G, and I don’t mean the “good” 3G. To some degree, that’s still true of Colombia, but the country is tilting quickly toward 4G.
It does no good to be mobile-first if your apps don’t pop and load times on HTML5 pages languish.
Digital talent: There is a deficit of young digital talent in many Latin American countries. Less so in Colombia, with Medellín recently touted as the “Silicon Valley of Latin America.” More so in several Central American countries with less of a university feeder system.
The nuances of popular newspapers
Popular newspapers continue to outsell quality newspapers in most markets mainly because the working class vastly outnumbers the middle and upper classes.
More than a decade ago, my research into Latin American markets showed that print circulation as a percentage of ABC1 demographics was more than 100% – meaning a typical publisher that owned a quality daily, a popular daily, and perhaps a sports or business daily had run out of room to grow audience.
Changing the business model from reliance on circulation to stronger advertiser acceptance of populars opens up that growth path. Digital further changes that dynamic.
Yet the popular newspaper’s success is not universally true in Colombia, where the nature of working classes is vastly different in Bogota vs. Medellin vs. Cartagena vs. Barranquilla. In Bogota, free dailies such as El Tiempo’s ADN and El Colombiano’s Publimetro seem better “popular” fits, even as they don’t fit “popular” definitions.
One interesting workaround to this reality in Colombia is a popular newspaper called Q’hubo, which is jointly owned by regional publishers in Medellín, Cartagena, Cali, and Bucaramanga. Thus, each publisher “owns” Q’hubo in its home market.
To this end, most Latin American publishers with whom I visited seem to have a Trome-like aspiration: Grupo El Comercio’s successful family-friendly popular brand that is differentiated from the sex, blood, and voodoo popular newspaper models more commonly known worldwide. None seem to quite match Trome’s extraordinary success in Peru.
What does seem to work is the more “base” version – which is why some populars will soon close and others are being launched in more down-market incarnations.
As for popular newspapers in digital platforms, most publishers have chosen to push these single-copy products on the streets without Web sites – or with very slimmed down e-paper versions. The reasons for this are two-fold:
Working class people don’t have computers and only now barely have smartphones.
Popular newspaper publishers don’t want to make the same mistake as quality newspaper counterparts 20 years ago and depreciate print in lieu of digital.
This will be interesting to watch as working class people flood onto the Internet via smartphones between today and 2020.
Structured innovation and culture change
There is an obsession with how to structure innovation – a good thing given the tardiness to tackle this at most media companies around the world. Yet most Latin American publishers are only now marshaling energies to get over the first big cultural hurdles.
Medellín’s El Colombiano has pioneered a “design thinking” way of attacking big projects like redesigns and new products by pulling key employees out of their jobs for 3-12 months to attack the special project in a systematic way.
They call this their ECOlab, and while it is focused today mostly on newsroom and product innovation, the possibilities are endless about extending it elsewhere in the company. ECOlab is a cultural outlier in Latin America and a potential model for publishers worldwide.
At El Universal in Cartagena, print-to-digital culture change comes in the form of a weekly “Web Council” that forcibly questions how things can get better in digital formats.
Grupo Nación in Costa Rica deserves special merit for an 8-month-old radical re-think of its physical space, going for open work spaces, lockers with laptops, and no assigned desks except generally where publications or sections are gathered.
Meanwhile, the media company has found clever ways of embedding brand managers with newsroom clusters to be advocates and conduits – a polite integration of the editorial/commercial walls. What Grupo Nación has learned is that physical change spurs a re-thinking of everything.
At least two publishers have been pushing digital before others. Grupo OPSA in Honduras and La Prensa Grafica in El Salvador proudly say they tilted early toward pushing digital solutions for advertisers.
In the case of Grupo OPSA, they started the digital push in 2006 and are only recently beginning to see results – albeit in ways they didn’t anticipate.
The market is now perceiving the company as a digital solution provider, with digital marketing services as likely an outcome as digital advertising. That’s not what they set out to achieve, but they will take it.
What I found in my Latin American tour were publishers smarter than they think they are, nagged by the belief that the digital tsumani is upon them.
They are correct to be worried. Yet in the market-rewritten landscapes of North America, Europe, and the South Pacific, I confess to wishing my Latin American friends could better enjoy their comparative success more than they appeared to be doing.
I found outliers in structured innovation (El Colombiano), radical re-thinks of physical space (Grupo Nación), and early investments in digital (Grupo OPSA). I found smart operators in popular newspapers, with more nuances than previous-generation populars.
Latin American publishers smartly realise the clock is ticking for culture change and digital. And they realise the two points are linked.
While mobile-obsessed readers might slowly be switching preferences, the advertisers will shift more suddenly. And they have 10 years of case history worldwide to warn them that they had better be ready.