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The economics of the digital world are changing the way the commerce of the traditional press as handheld devices signal the end of old business...



Powered by Guardian.co.ukThis article titled “iPads and Kindles force newspapers further away from print” was written by Dan Sabbagh, for The Guardian on Sunday 25th December 2011 17.00 UTC

A million iPads and Kindles may have been unwrapped on Sunday – according to tentative analyst estimates – an influx of portable technology that is expected to hasten a decline in the already faltering sales of printed newspapers, adding pressure on traditional business models that have traditionally supported so many titles around the country.

Publishers, preparing for the handheld arrivals, took the chance to break with a tradition that dates back to 1912, when publishers agreed not to produce Christmas Day papers to give paperboys, among others, a day off. For the first time in its 190-year history the Sunday Times published a digital-only edition on 25 December – with the normally paid for product given away in the hope of luring sought after digital subscribers.

Boxing Day publication, for dailies like the Guardian, has also become a necessity – to ensure digital editions for new Kindle and iPad owners to read. The result is that what was a traditionally quiet period for news has become a critical moment to showcase new work, at a time when an industry already riven by the phone-hacking scandal and under judicial examination, is facing what can be described as an existential crisis.

Fifty years ago two national dailies – the Daily Mirror and the Daily Express – sold more than 4m copies each; today the bestselling Sun sells 2.6m. In the last year alone, printed sales declined by 10% for daily broadsheets and by 5% for daily tabloids – and when the News of the World stopped printing last July 600,000 copy sales simply disappeared.

The knock-on impact of the decline has been a push for digital readers that have seen newspapers like the Daily Mail win 5m unique visitors a day – compared with its printed sale of 2m – but struggle to generate revenues to match. The Mail generated £16m from its website last year, out of £608m overall.

Some specialist titles, such as the Financial Times, are managing the transition well – it has 260,000 digital subscribers – up 40% this year – compared with 337,000 buyers of the printed product, where sales are down by 12%. Digital subscribers generate £180 a year and the paper, priced at £2.50 on the newsstand on a weekday, is profitable.

John Ridding, the managing director, says that 30% of the FT’s revenues come from digital sales and that “within two or three years” digital readers and revenues will account for more than those from the printed business. During a typical week the number of people signing on digitally is “five to 10 times” what it was a year earlier, as the newspaper looks to a future beyond print.

Others, though, are under pressure. Local newspapers have been hit particularly hard, with 31 titles closing in the last year. Most of those shutting are freesheets – with titles distibuted in Yeovil, Scarborough and Harlow lost. Historic paid for titles have seen their frequency cut: the Liverpool Daily Post is to go weekly in print in the new year, after sales dropped as low as 6,500. Its website, however, will update in real time. Daily titles in Birmingham and Bath have also gone the same way in recent years – while pre-tax profits at Johnston Press, the owner of the Scotsman and the Yorkshire Post, fell from £131.5m five years ago to £16m last year.

Roger Parry, chair of Johnston Press since 2009, believes the party has been over for several years, since Craigslist and Google began to take classified advertising away from local press.

“I think the future is for local multimedia companies which focus on signing up 50% plus of the households in their area on some form of subscription – that’s what happens in Scandinavia,” he says. For journalists there will have to be a shift from acting as “print writers to multimedia curators. There will be more content created by local people. The National Union of Journalists will hate this but it is fact of life.”

With the culture secretary, Jeremy Hunt, wanting to license local television stations in 20 cities, that gives local media a new way to reach audiences, although some – such as Witney TV in Oxfordshire – have already made a start with a daily offering of local video news. David Cameron, the local MP, regularly appears, but the site is staffed by volunteers, and its content limited – underlining how tough the digital economics are.

There are commercial pressures in national media too. Although the tabloid media have faced criticism at the Leveson inquiry, not least from the likes of Hugh Grant or Steve Coogan, popular titles remain in fair commercial health. Trinity Mirror’s stable of nationals – the Daily and Sunday Mirror, the People, and the Record titles in Scotland – will earn about £70m this year, although they made £86m the year before. The profit margin at the Daily Mail hovers at around 10%.

The challenge for the popular press is retaining printed sales – but the financial pressure is acute elsewhere. Three of the traditional broadsheets – the Independent, the Times and the Guardian – all lose money in a market where five titles compete for 1.3 million print buyers. Their readers are more likely to make the digital transition too, leaving newspapers no option but to embrace new forms of reporting – such as the live blog – and seed content at digital hubs, such as Facebook.

The Guardian may generate £40m in digital revenues from its largely free offerings, but some of that comes from its dating sites. The Times titles have gone for a low price subscription model, which has attracted 111,000 takers, but which generates £11m a year against an editorial budget estimated at £100m.

Some, like Paul Zwillenberg, from Boston Consulting Group, says serious newspapers “will have to cut their cloth because there will be a smaller pool of revenue and profit”. But he acknowledges that by pursuing different business models, they may increase their chances of success. The result, though, is that was once an industry of one business model: a printed product sold on the newstand is fracturing into very different types of mainly digital content companies.

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