“There are no case studies about the future.”
I don’t know how often I have said this in reply to the question: “Jim, can you present a few case studies on what my company should be doing?”
It is many years since I lost the inclination to deliver an answer to the wrong question. So when Australia’s Newspaper Works asked me to write “a piece on what some publishers are doing to increase revenue or create new revenue streams,” much as I love them to bits, I simply ignored them.
What I’ve learned over 20 years advising publishers on growth strategies, including creating and directing the World Association of Newspapers’ “Shaping the Future of the Newspaper” project, is that if peer emulation is your only raison-d’etre, you will die.
If you really want to not only survive in an industry with a half-life, in mature markets, of around five years — but also create value for the future — you have to innovate from the heart, not the blog.
To be fair, our industry began to pass its point of inflection — where digital growth exceeds print decline — around the turn of the year, with the rates of decline slowing as finally, after 20 years living with digital, it finally kicks in.
But a quick look at the most recent company reports of news publishers in the United States, U.K., and Australia, paints an interesting picture.
The reports are peppered with fad-du-jour language, from the good old “one-stop-shop,” implying visitors don’t come back, to the profoundly aware “the media landscape is changing” to the meta-physical “our digital future is here” — which, I guess it was when I wrote my first report on the Internet and newspapers in 1994.
Yes folks, 20 years on and we’re still treating digital as a novelty.
To an extent, the figures in the reports suggest that the future might be here-ish. But protestations of “turning corners” and/or “bottoming out” don’t amount to a destination, or even a navigable map.
Having read through the reports, I would say “on average” digital growth stands at between one-tenth and one-third of the print loss (and I know of worse figures). In the best case that I examined, it looks like one major group could be about two years from enjoying the inflection. In the worst, I reckon that point will be 11 years away, well past the company’s half-life.
Of course what one can’t determine is the impact these changes have on profitability. Many publishers report their digital activities are achieving EBITs of 50%, with creative allocation of fixed costs.
The big question, however, is what will happen to margins as the revenue shifts continue and these costs have to be re-allocated. In truth, many publishers can be more profitable by being smaller, because the old newspaper model had a uniquely high proportion of variable costs.
One typical example is a company where the point of inflection, on turnover, will be around 2018, by which time revenues will have declined by a further 18%. Turnover is unlikely to return to 2013 levels until 2022, give or take at least one likely economic downturn (they average 11 years, which takes us to 2019) and not to their all-time revenue peak in “real”terms until only God and short sellers know when.
To revisit one of my most basic strategic concepts, the starting point is to examine the “components” of media, namely content, markets, and technology (see chart.) The “derivatives” of these components are what defines the visitor’s experience, and drives engagement, and revenue potential.
- Discovery: The ingestion of content, in whatever form, through the creative use of technologies.
- Interaction: Through multi-dimensional communication, participation, interaction, and contribution.
- Stakeholder knowledge: In terms of visitor profiles and lifestyles, engagement behaviour, and value points such as revenue potential to advertisers and other streams.
Taking into account market performance, product and culture, there seem to me to be four types of news media companies.
1. True pioneers and value creators independently introduce something that didn’t exist before. They evolve and extrapolate the three components, and their derivatives to deliver something that wasn’t previously possible.
SMS, Google, and Facebook are concepts that were once inconceivable (though it is worth noting that SMS was defined in 1985, nearly 30 years ago; Google is now 26 years old; and fresh-faced Facebook is approaching pre-adolescence at 11, not much younger than it’s founder must have been at the time!).
There are two extrapolations from this:
1. Patience pays dividends, literally.
2. Given the collapsing age of pioneers, it won’t be long before the latest world changing gizmo is invented in the womb or even at the point of pre-conceptive genetics.
To date I cannot think of anyone that has truly pioneered the concept of news, by fully exploiting media’s components and derivatives.
2. Revolutionaries have engineered new forms of existing concepts, by exploiting developments in one or more media components to create alternative versions of previous concepts. Examples are the Huffington Post, Daily Beast, Mashable, iTunes, Amazon, eBay.
For these new entrants, the case studies merely served to confirm the weakness of existing models, as if we hadn’t suffered enough before the Web had been weaved.
For example, while The New York Times has 32 million visitors in the United States, the Huffington Post can boast 47 million. Globally, The New York Times reaches 54 million while the Huffington Post has 84 million.
3. Evolutionaries have successfully morphed into the digital world, by convulsing and transforming their traditional model. Scandinavian publisher Schibsted, The U.K.’s Guardian, Austrian regional publisher Vorarlberg and, of course, MailOnline, have all moved confidently into digital territory.
Many legacy companies have increased value by achieving operational efficiencies and new customer interactions. Airlines and banks are two good examples, but they too are floundering in the face of new, more modernist up-starts, engineered for the online era.
4. “Denihilists,” sadly, still form a massive proportion of our industry. These publishers are still endeavouring to maintain some sort of status quo, inclined to leaning on emulation, denying that the industry half life of five years is an average figure. A few will do well, and the others? Well, who knows? I’ve proffered many predictions over the years, but this is one I’ll keep to myself.
It’s not that I believe that the news industry will decline, but I certainly believe the revolving door of incumbents and new entrants is starting to spin.
Before you return to the day job, just stop for a minute.
No. I mean it. STOP.
For a couple of minutes, just ask yourself what could be the ultimate iteration of each of the three media components for your company? What would be the furthest point you could take them before amalgamating the resulting outcomes to create enthralling new discovery experiences, knowledge, and interaction.
- How could you re-engineer the concept of search, to maximise your visitor experience and engagement?
- Where can social media take you in terms of participation, granular content and rich, compelling discovery in a particular business, social or, say, sports segment?
- What about “robotic curation” of every piece of available information in your market, Big Data analytics to generate correlations, trends and clusters of commonality, or difference that would captivate readers, through compelling imagery?
- What don’t you know about your stakeholders? The knowledge that could increase the value of their relationship with you, and their world?
Such a process can be applied in a wide range of contexts and formats. You can spend the rest of the day, perhaps over a cold beer, pondering your ultimate destinations. Or you can create internal teams, partnerships, focus initiatives, or even involve your audience and advertisers, in practical future gazing.
Always remember that your advertisers are grappling with the same issues. Involving them in your strategy formulation, gives you great insight, but it also provides them with stimulus, and helps cement your relationship with them.
A wide range of tools can facilitate or drive this process, extracting big ideas, evaluating them, then focusing on strategies and, most importantly, successful outcomes. The simple model I present here consists of three components and three derivatives, but in my version each of these are broken down into sub-modules.
Combine these, with a detailed picture of your value chain — from visitor attraction through to maximise advertisers’ response levels. You then have a detailed compass to guide you within your defined future map.
Gates, Brin, and Zuckerberg were all looking to the future once. What did they see that we didn’t? And why?
SMS, Google, and Facebook may be concepts that were once inconceivable. Yet my two 20+-year-olds can’t envisage a world without them. “How did you ever manage to do anything without your phone,”one of them asked me a while back. Conceiving you for starters could have been one response.
In this strangely enabled world, I can’t imagine how I might ever become a grandfather. Not unless Sergey Brin invents some form of virtual procreation. (See how my brain is getting into this game. It’s easy … not!)