Media provides a great case study of creative destruction, to coin Joseph Schumpeter’s term for capitalism’s ability to destroy while creating anew. Yet even massive creative destruction will not reverse the basic economic principal that customers buy based on highest perceived value, where value is perceived benefits less the perceived costs to acquire those benefits.
Newspapers, for example, were highly profitable when they held the unique advantage of cost-effectively and frequently reaching customers with an advertiser’s message. Editors focused first and foremost on readers, with the publisher paying most attention to advertisers. The symbiotic relationship worked … until Cable TV and the Internet fragmented markets and provided alternative and less costly routes for commercial advertisers and classified ad purchasers to reach their target markets and paying readers to find news.
The monopoly position of the newspaper as a frequent advertising vehicle was lost. With declining ad revenues, newsrooms have been downsized to the point where every Sunday New York Times feels like an Easter Sunday version, historically the thinnest of the year.
With less content and free content available on the web, paid circulation further declined. In the interim, Google who creates absolutely zero content becomes, in the words of Atlantic Magazine writer James Fallows, “the world’s most important media organization.” Fallows is writing about how Google is working to help news publications in “How to Save the News.”
Why then has The Wall Street Journal flourished? And why, with Newsweek bankrupt and on the auction block, is The Economist thriving?
Both of the winning publications know their target markets and have designed their publications to uniquely meet their target market’s needs. The publications exist for the reader, not the advertiser. The advertiser comes along because these media examples have a growing customer base that is paying attention to the page.
The Wall Street Journal has been very savvy in both moving upscale – giving professional readers even more content with Wall Street Journal Pro – while giving the every-day reader interested in financial and business news enough sports, arts and style to reduce the emotional switching costs of canceling a New York Times or local daily subscription.
Both publications also remind me of the savvy direct mail companies like Lands End. It realized before its peers that the internet is the channel, the printed catalog a direct mail marketing tactic to attract new customers and prompt existing ones to buy more.
Where else, for example, but The Economist’s on-line homepage can I find top-notch, professionally produced global coverage of economics and politics? (Goggle News is an alternative, but I like supporting journalists!) The Economist print magazine on the other hand offers items like a10-page in depth coverage of an issue, coverage that I prefer reading off-line.
Fallows suggests that eventually newspapers will flourish once again, albeit on line. While Fallows offers some interesting innovations (most advanced by Google who will lose content and therefore ad revenue if all the other media go out of business), he’s missed a few.
Publishers of local papers should recognize that they still have advantages that benefit advertisers, but to capitalize on them they must expand their advertising scope beyond newspaper print and webpage. Imagine if Lee Enterprises (owner of many local newspapers in my region) acquired Hiebing, a successful regional marketing communications agency and secured attractive rates from local radio stations and printers. Lee could offer cost-effective integrated marketing solutions to local companies in need of getting their message out across multiple channels. There’s more value in that than on-line paid ads.
Second, local newspapers must stop treating their target market on the reader side as one market. Identify the key segments and create focused publications that meet their unique needs. Biz Times Milwaukee and In Business in Madison are creating communities of small business leaders through their events, on-line and print publications; with these audiences come advertising dollars the Milwaukee Journal-Sentinel and Wisconsin State Journal have respectively lost. Why Lee Enterprise let the (from what I understand profitable) Capital Region Business Journal languish into a poorly advertised on-line only offering is beyond my comprehension. (Disclosure: I write a column for the CRBJ.)
Without change here is where local newspapers may be headed in the very near term: There is now a software program that writes sports articles automatically from internet-feeds of local game scores. A local start-up could use this software to create an on-line local sports publication. ESPN is also eying local sports news as a business opportunity.
Without sports readers I do fear local papers are doomed, well before Google’s innovations for news sources save the day.
Technology changes transform industries. The winners are those companies that stop holding onto an obsolete business model. Winners innovate their business model to uniquely benefit a well-defined target market.
Kay Plantes is a Madison-based consultant and author. She was the keynote speaker at the BizTimes CEO Strategies Breakfast in April. She is an expert in business model innovation.
