Reinventing Print Media
With the decline in spending on print advertising likely to continue well after the recession, print media companies need aggressive and effective strategies for recapturing revenue.
The recession is catalyzing a permanent change in the media landscape, with increased pressure on newspapers and magazines. Overall advertising revenues fell in 2008, while newspapers, consumer magazines, and business-to-business trade publications saw print advertising declines of two to three times higher. With aggressive action to foster innovation and more aggressive cost management based on new success strategies, media companies can position themselves for a bright future according to a new study by Booz & Company.
Two major forces are washing away the profitability of print media. The first is the ongoing shift in marketers’ spending focus—away from paid advertising to priorities such as below the line marketing, which will account for the bulk of marketing spend as the economy recovers. The second long-term trend devastating print profitability is the rise of digital media. Print media must now compete with a much broader, and expanding, set of rivals including social networking sites, blogs and social media.
“The steps that print media companies have taken to expand their share of marketing budgets and to succeed in the new digital environment have been largely unsuccessful, such as charging for their content online or moving entirely online without charging,” explained Gabriel Chahine, a partner at Booz & Company. Making content available free on the Web while continuing to charge for it in print, may well be the best path currently available, but it does nothing to change the underlying trend toward lower revenues and profits.
Hope on the Horizon
There is a way forward for print media companies to adapt their business models to succeed in the new digital marketing environment, through at least four strategies:
Develop deeper relationships with readers around targeted interest areas.
Tap into revenue streams beyond advertising and circulation.
Reinvent the content delivery model (with a particular focus on lowering costs) and to emphasize a “profitable core” of unique and brand-defining material.
Innovate with new products and pricing models.
“We believe that companies that pursue these four strategies can have an attractive future if they make the most of these opportunities, while building on their traditional strengths,” said Chahine.
1. Build Deeper Relationships
Leading marketers recognize the power of digital media to start conversations with consumers. Companies with private-label media offerings such as Web sites and mobile applications, typically spend more money on them than on other digital advertising. These private-label media are often designed to attract registered users; growing marketers’ own databases and enabling them to better target marketing messages and offers.
Print media have a privileged relationship with their readers, who trust the publication’s content and value its credibility. Premium online environments can enable print players to develop a still more intimate relationship with their readers: Consumers become more engaged, and more willing to register and share personal data in exchange for offerings targeted specifically to them.
“Registration-based offerings provide opportunities to deepen engagement with paid subscribers. Such registered relationships and revenue per name should be the key metrics of a Web site’s performance,” stated Chahine. Media companies should funnel consumers from general content on a topic to more task-oriented content for evaluating purchase decisions, which create a win-win-win opportunity for media companies, their audiences, and marketers.
The challenge for media companies is how to scale up new, targeted content offerings for consumers, without having the added costs of content creation and executional complexity exceed the incremental revenues they can capture. Some media companies have tried to enhance the value of brand advertising online by aiming it at more targeted audiences. Targeted content that is tagged and contextually relevant can capture a 20 to 30 percent premium over run-of-site advertising for a media company’s Web site, based on Booz & Company experience with digital advertising sales effectiveness efforts. “But few media companies can deliver enough targeted impressions and therefore must resort to more expensive and complex-to-execute “value added” programs to better compete with other portals that deliver much larger audiences at a lower cost,” Chahine explained.
2. Tap New Revenue Streams
The bulk of digital revenues for media companies will continue to come from advertising and sponsorship during the next few years. But maximizing revenue per registered user name will play an increasingly vital role in building revenue streams and faster total income growth. Media companies can continue to pursue both sources of revenue in the digital arena, recognizing there are limits to the size of the audience they can generate if they charge consumers for content.
A study Booz & Company conducted in 2008 with American Business Media (ABM), the trade association for business-to-business (B2B) media and information companies, titled “A Roadmap for Profitable Revenue Growth,” discovered that ABM members are pursuing two equally viable transformation paths. The first is to reinvent the publishing model around a broader set of marketing solutions and services and the second focuses on delivering premium B2B content and applications that tap more deeply into professionals’ workflow needs, providing them highly specialized news and information.
Providing marketing solutions enables media companies to tap into the broader marketing budget, while gaining a larger share of the paid media budget. Lead generation is a critical building block of the new model. Paid search and ad networks also provide a cost effective way for marketers to drive traffic to their own private-label media. Building a broader set of solutions for marketers provides an opportunity for media companies to compete more on their own terms with search and ad networks. They can leverage a more engaged and premium relationship with their audiences, obtain deeper insights into consumer behavior, and enhance their strength in developing content that reaches consumers and serves their interests. “Publishers also have an opportunity to capture marketer spending both from paid media advertising to help marketers build their brands and from marketing solutions that help marketers build their own private-label media,” said Chahine.
Consumer media companies can also follow transformation paths that tap into new revenue streams that come from readers rather than marketers. But this is a greater challenge; readers will typically pay for content that is hard to find elsewhere and difficult to replicate or copy. Some consumer publications have overcome this consumer reluctance by establishing their credibility through unique research that can’t be found elsewhere on the Web. Media companies will also find new ways to brand themselves as community- or data-driven hubs and can charge for ancillary benefits that save people time or build their status or connection.
3. Reinvent the Content Model
Print media companies need to dramatically lower their costs through targeted action that changes the way they approach content development. They must focus resources on their “profitable core” and rebuild from there. This is the set of print and digital content that most drives audience engagement around well defined interest areas. It is only on those distinctive content assets that a media company can build a “right to win,” competing for attention against marketers, user-generated content, and other media companies.
Identifying the profitable core requires thinking freshly about the zones or editions of a publication and eliminating sections that do not drive significant readership or advertising revenue. Rationalization efforts also include focusing on a more targeted set of Web pages, and continually tracking and evaluating areas of focus to profitably serve selected interest areas. Print players should also explore new ways to align the cost of content with the revenues they generate from that content.
Some untouchable areas of a print media company’s operations need to be confronted, to allow better sharing of content across “sister” publications, integrating newsrooms and editorial staffs across publications, and developing more centralized, outsourced, or offshored editorial capabilities. “Some companies may also need to consider moving out of high-cost metropolitan locations and cutting out top-heavy costly management structures,” Chahine stated. “New metrics for determining how to compensate journalists are also critical; especially as some print media companies struggle to survive.” Finally, editors should embrace, rather than shun, user-generated content.
4. Innovate with New Products and Pricing
It is clear that when a significant number of consumers carry smart phones or other Web-enabled devices, they will expect new and more convenient delivery and formatting of content. Print players have long recognized this. Today, they continue to experiment with new digital editions as well as premium offerings such as e-newsletters, alert services, and downloadable content. Innovation will be reinforced by unbundling the content offering and super-serving targeted interest areas. “Building out these interest areas means not just providing the same content in new formats, but also using applications that work with online, mobile, and other new devices to increase consumers’ willingness to pay for content or to register for it,” explained Chahine. The marriage of content and applications is at the heart of digital innovation.
Among these areas of innovation, digital video is increasingly important—in large part because of advertiser preference for video as part of brand-building investments. It is clear that digital video is highly effective at increasing audience engagement. Marketers are also looking to video as a key part of their private-label media efforts.
These kinds of innovations will open the door to innovative pricing models and experimenting with unbundling and packaging content is crucial to driving incremental revenues beyond online advertising and new marketing solutions. New content and applications, built around interest areas, can coexist with free offerings if the new features bring additional convenience and value.
At the same time, print players need to balance the risk of cannibalization (in which the audience migrates down to lower price points) with the upside of signing up new customers or up-selling existing customers. “Deeper insights into audience interests and willingness to pay, combined with other rigorous cost-benefit analysis, are required to guide future innovation efforts and optimize these pricing trade-offs,” Chahine said.
Taking the Necessary Steps
The goal in all four success strategies is to build stronger relationships with audiences around their most passionate interest areas. Through bolder innovation, media companies can build communities around these interests, serving up the right combination of content and applications to provide real utility to consumers.
In many ways, media executives face the same challenges as ad agencies: The evolving marketing and media ecosystem is placing pressure on them to innovate and evolve, or risk becoming extinct. The strategies that make media companies successful will require new capabilities and to acquire and scale up these capabilities, many media companies will need to partner with others.
The opportunities for newspapers and magazines have rarely been so great. Innovation and effective cost management now will mean the future for media companies will be a bright one.