Strategies for Media Companies
Media companies including giant conglomerates CBS, NBC Universal and Gannett have been hit hard by the recession. And the Internet, which siphons many viewers, listeners and readers from traditional broadcast and print media has not helped the situation. To survive, media companies must find inventive and compelling ways to beef up their Internet presence, without giving all their Web content away for free.
Can Newspapers Dig Themselves Out of the Hole?
Newspaper revenues have been shrinking for years as circulations drop and advertisers pull back--or out. Barclay Capital predicts newspaper advertising revenue will drop another 22 percent this year. Classified advertising--which for some papers, such as the Boston Globe, accounted for about half of all advertising revenues as recently as the 1990s--was hit especially hard, with classified advertisers moving to websites such as Monster.com and Craigslist.
Not only did newspapers fail to aggressively seek out and perhaps partner with these sites, they also viewed the Web as an extension of their existing print businesses and began giving away their content for free, hoping to translate page views into dollars. What they did instead was devalue their content, as a generation of readers became accustomed to getting news for free. Moreover, newspapers discovered that on the Web, there's a whole new world of competition, including niche Web sites that attract targeted advertising.
"It's a very difficult economy for newspapers," veteran Boston advertising executive Jack Connors told the Boston Globe. "Advertisers still have to advertise, but the Internet has allowed them to be much more targeted and cherry-pick customers. If they're selling Volvos, they're able to reach just the people who own Volvos."
What can be done? The troubled economy has certainly made matters even worse, with traditional newspaper display advertisers like big department store chains--among them Mervyn's, Circuit City and Tweeter--along with numerous auto dealers going out of business or downsizing. The salvation for newspapers appears to be in developing niche websites of their own, as well as custom publishing projects, newsletters and email blasts. Newspapers also are encouraged to use social networking sites such as Facebook and Twitter to drive traffic to their sites, in the hope that ultimately they will build up enough eyeball traffic that advertisers simply can no longer afford to ignore them.
"We are very much at the beginning of the game," Susan Hunt-Stevens, a Globe senior vice president who oversees the company's digital operations, said in a Globe story on the plight of newspapers. "Boston.com has got to grow. We clearly need to develop ways to grow revenue. How we do that is something we're looking into closely."
Broadcast Giants Also Must Figure Out a Way to Harness The Web
Broadcast media has also been hit hard by the rise in Internet content. Traditional television viewership has been under attack since the introduction of home video in 1978, but in recent years things have gone from bad to worse. Websites such as YouTube and Hulu siphon off viewers, while time-shifting devices like TiVo let viewers watch their favorite TV shows whenever they want and even let them skip through commercials. "This is a bit of a free lunch," notes blogger Brad Templeton, a longtime observer of media and the Internet.
Like newspapers, broadcasters mistakenly have been trying to migrate to the Web by copying their traditional business models. Notes Business Insider's Henry Blodget: "Specifically, the TV industry's attitude is the same as the newspaper industry's attitude was circa 2002 to 2003: Stop calling us dinosaurs. We get digital; we're growing our digital businesses; we're investing in digital platforms... [But] as with print-based media, Internet-based distribution generates only a tiny fraction of the revenue and profit that today's incumbent cable, broadcast, and satellite distribution models do. As Internet-based distribution gains steam, therefore, most TV industry incumbents will no longer be able to support their existing cost structures."
Strategies for success in this taxing environment are still being worked out. Broadcasters need to tool up their existing outlets to stand out more from the competition, perhaps by emphasizing comprehensive and authoritative local news, which viewers can't get from viral video websites. As Diane Mermigas writes in OMMA Magazine, "Digital connectivity has turned the world of local news and communications on its head. Television is the last thing broadcasters should have on their minds. They have one last chance to play their strong suite--their local connections--in a digital marketplace exploding far beyond the small screen before losing consumers and advertisers to a spectrum of unlikely competitors from Google and Craigslist to Zillow and Twitter."
Media companies also need to develop a viable business model for the Internet. Initially, paid content was seen as a ticket to success, but with all the free programming available over the Internet, that is no longer considered a smart option. So, now, media companies are experimenting with selling sponsorships or commercial time to their Internet programming, just as they do with traditional broadcast television. They also are developing ways to monetize location-based searches, increased product placements, multi-platform selling and mobile platforms, including applications for the Apple iPhone.
The key for media companies to survive is to develop strong integrated digital business models and realize that doing business on the Internet should by no means mirror what they have done for years on the traditional print and broadcast side.
Thomas K. Arnold is publisher and editorial director of "Home Media Magazine" and a regular contributor to "Variety." He is a former editorial writer for U-T San Diego. He also has written for "San Diego Magazine," "USA Today" and the Copley News Service. Arnold attended San Diego State University.