2016 Media Research Update: Newspaper executives worldwide have one big headache – and are taking three very different approaches to tackling it.

This summary report is free to download.

Yes, our 7th annual World Newsmedia Innovation Study surveyed decision-makers in 10 languages in 50 countries. And it's true that even our new summary report is packed with fascinating insights into the current performance and future priorities of firms  on all continents.

So, you might have thought it would be difficult for me to pinpoint one issue that is on the top of the agenda of most innovating news organisations. It wasn’t. 

With 8 of 10 respondents reporting that print advertising was down or flat over the previous 12 months, the pressing issue amongst the majority of publishers is this: What to do about advertising? Or, more specifically, what can be done to get a substantial share of the growing digital adspend that PwC forecasts will account for 38.7 percent of total global advertising revenue in 2019, up from just 16.6 percent in 2010? 

Before I talk about how senior executives are answering that question, it might be worth recalling the  four key challenges news firms face in this area: the intense competition from digital pure play advertising-supported firms such as Facebook, Google and Twitter; the possibility that digital advertising exchanges will drive down the market price of their inventory and take a larger slice of the revenue; the proliferation of ad-blocking software; and the preference that key advertising agencies have for buying digital audiences at scale wherever they may roam online, rather than buying advertising space in the context of specific content, which is key to media’s traditional value proposition. 

PERFORMANCE: Where did the money come from over the last finacial year?

I recently shared the stage at a Westminster Media Forum with Maxus UK chief executive Nick Baughan, who pulled no punches: “I’m an ad buyer, I like numbers; I like easy ways to access numbers and I like homogenous category with which I can deal with.”

Baughan said he estimates his company, part of WPP’s media investment arm Group M, represents about 30 to 40 percent of the total advertising market across all media in the United Kingdom and “roughly similar” numbers globally. “We go to where scale is; so for media agencies like ours it’s all about Facebook because that’s where the scale is, not because Facebook is a great community area or whatever it is, it’s because that’s where the numbers are. Now the problem with that is, is you are clearly then sacrificing some of your editorial context for the numbers that go with Facebook and that’s just a decision that we’re all going to kind of have to make in life.” 

Of course, news publishers won’t give up on the digital or print advertising opportunities easily. What to do about it? Whatever else this year’s study results show, this much is clear: There is no one-size-fits-all approach to future news media business models. I’ve identified three broad strategic mindsets emerging amongst publishers. I like to think of them as the Guards, the Rangers and the Pioneers.

The Guards are those who doggedly defend their traditional business model and are expecting at least 90 percent of their future profits to come from advertising and content sales. About one in 10 of the respondents fall into that category. Meanwhile, more than a third of the respondents (33.8 percent) say 10 percent or less of their income comes from alternative sources; only a tenth of the respondents expect that to be the case in the next five years.
 

PROSPECTS: What are executives prioritising for investment?

The Rangers are those who are doing all they can to protect their current businesses, but are also working towards to earning up to half their income from alternative sources. The majority of this year’s study participants might be described that way. Almost 70 percent say they expect that their company will need to earn more than 10 and up to 50 percent of their incomes from different sources in the next five years.

Then there are the Pioneers. They are not only seeking out a variety of new revenue streams, but they’re expecting that their companies will have to earn more than half their income from sources other than traditional advertising and content sales to meet their revenue targets. Two out of every 10 of this year’s respondents can be defined as Pioneers, a third of whom (7.1 percent) say that they anticipate their companies will need to draw more than 70 percent of their revenues from sources other than traditional advertising and content sales.
 
These findings invite a variety of further questions. Those media executives who might be described as Guards and are banking on advertising for the bulk of their incomes in the longer term, might want to ask themselves why nine out of 10 of their peers have made a different assessment about what would be required for longer term success? The Rangers are likely to be asking themselves how do executive teams straddle the twin challenges of identifying new ancillary opportunities and exploiting current activities without losing focus? The Pioneers, who are stepping over the line into new business territory and expect to settle there, are likely to be questioning whether to keep hold of their news media assets at all.

The need for business focus was the primary reason Pearson’s chief executive John Fallon gave when the publishing and education company first sold its 50 percent stake in the Financial Times in July 2015 and then a month later dispersed of its 50 percent share in The Economist.

“Pearson is proud to have been a part of the Economist's success over the past 58 years, and our shareholders have benefited greatly from its growth,” Fallon said in a company statement at the time. “Pearson is now 100 percent focused on our global education strategy.”

The issue of business focus is increasingly important, particularly as rapidly emerging technologies continue to challenge existing operations and open up an array of new opportunities. More than 38 percent of respondents in this year’s study say their companies are prioritising developing new digital products that extend their current brands over the coming year, while 24 percent say their companies are looking to invest in non-media businesses.

Perhaps the key question for newsmedia boardrooms is this: Do we diversify, or do we specialise? On the one hand, there are risks associated with having all one’s eggs in a single basket. On the other hand, there is also the risk of becoming a jack of all trades and master of none. To answer that question, senior leaders need to be absolutely frank about what the company’s core competence is at present and what partnerships they need to forge to grow.

The World Newsmedia Innovation Study 2015 was conducted by Dr François Nel of the University of Central Lancashire in collaboration with the World Newsmedia Network.  The project is made possible through collaboration with a variety of academic and industry partners, including: Dr Coral Millburn-Curtis of Green Templeton College, University of Oxford; Emma Urjasova; Dr Katja Lehtisaari of the University of Helsinki; Dr Datis Khajeheian of Aalborg University; Ali Alrowaili of the University of Central Lancashire; Dr Oscar Westlund of the University of Gothenburg; Global Editors Network; Digital Editors Network, UK. We welcome queries from other potential industry and academic collaborators, who can contact the study leader at FPNel @ uclan.ac.uk 

The summary report has been published in the Global Digital Media Trendbook 2015 edited by Martha Stone. Copies are free to download HERE.