The Newspaper Outlook

Big Ideas and Big Trends In Newspaper Publishing Worldwide

Earl J. Wilkinson Executive Director International Newspaper Marketing Association (INMA) www.inma.org Creation of Value

ƒ Shareholders

ƒ Readers

ƒ Advertisers

ƒ Employees

ƒ Geographic communities

ƒ Demographic communities

ƒ Virtual communities Newspaper Market Caps Publicly Traded Newspaper Companies

25% 20% 15% 10% +25% 5% 0% -5% -10% -21% -15% -20% -25% U.S. Newspapers Non-U.S. Newspapers

Sources/Notes: U.S. newspapers, Yahoo, 2005-2006; Non-U.S. newspapers, Bloomberg (April 2007), 2006 Value Levers

Storylines of Publicly Traded Newspaper Companies Worldwide

Inside United States

ƒ High profit margins

ƒ Continued earnings growth

ƒ Moving toward multi-media Value Levers

Storylines of Publicly Traded Newspaper Companies Worldwide

Inside United States Outside United States

ƒ High profit margins ƒ Embraced digital revolution

ƒ Continued earnings growth ƒ Expanded beyond its geographic market ƒ Moving toward multi-media ƒ Medium, stable profit margins World’s Value Leaders

Schibsted Singapore Press Holdings ƒ Market cap: US$2.8 billion ƒ Market cap: US$6.9 billion ƒ Top newspaper company in ƒ Saturated newspaper market Norway with 14 dailies in 4 languages ƒ No. 1 Norwegian portal (Google ƒ Moving from “Singapore Inc.” second) strategy to “Regional Footprint” strategy: ƒ 40% of profits come from online 9 Organically protect core business 9 Inorganically actualize adjacencies ƒ 20 Minutes free commuter close to core as launch pad into newspaper launched in key Southeast Asia (magazines, European urban markets classifieds, outdoor, internet) ƒ Minority partnerships with global media players Wrong Storyline

Market Isn’t Buying What Newspapers Are Selling: Stock Performance, 2005-06

20% 15% 10% 5% 0% -5% -10% -15% -20% -25% U.S. Newspapers S&P 500 Strategic Choice

Freedom Communications CEO Scott Flanders at June 2007 Goldman Sachs Conference

ƒ Become larger businesses with smaller profit margins

ƒ Become smaller businesses with higher profit margins

If companies have to accept lower margins in the short-term to sufficiently invest in content and audience aggregation, so be it. How did we get to this fork in the road? Global Newspaper Industry 11,207 daily newspapers circulating 500,000,000 copies each day

Europe North America Newspapers: 2,398 Newspapers: 1,577

Middle East Newspapers: 272 Asia Newspapers: 5,071

Africa Newspapers: 400 Latin America South Pacific Newspapers: 1,400 Newspapers: 89 Value Disruptors

ƒ Technology: Creates alternative access points for information, creating a concierge class for news- feeding

ƒ Abundance: Creates a disconnect between news and success (relevance), especially among middle class Technology and Abundance

ƒ U.S. households have more television sets than people

ƒ Threshold crossed in the past 2 years

ƒ In this environment, is there really demand for another newspaper section? Newspapers Amid Abundance: Case Of Libération

ƒ Upscale, legendary Paris tabloid ƒ Single-copy in nature ƒ Editors wanted to add value for readers ƒ Added 36-page supplement to 72-page daily format ƒ Top-flight journalism, highest quality Newspapers Amid Abundance: Case Of Libération

ƒ Circulation dropped 30% ƒ Research conducted on what went wrong ƒ Answer: Nothing, traditionally speaking ƒ Readers maintained high opinion of Libération Newspapers Amid Abundance: Case Of Libération

ƒ Circulation dropped 30% ƒ Research conducted on what went wrong ƒ Answer: Nothing, traditionally speaking ƒ Readers maintained high opinion of Libération ƒ Readers felt guilty about not being able to read cover to cover (no time) Value Levers

Audience Brand Content Value Levers

90%

5% 5%

Audience Brand Content

Value Levers

90%

5% 5%

Audience Brand Content Value Levers

50%

25% 25%

Audience Brand Content Source: Mediaedge:CIA Backvertising, Assvertising, Nailvertising Lipvertising, Teethvertising, Headvertising, Fruitvertising Eggvertising? Source: Mediaedge:CIA The Big Picture

1. Consumers Changing: Technology and abundance disrupting consumer behavior (internet accelerating trends)

2. Advertisers Changing: Advertisers are changing their strategies to mirror this behavior, chasing consumers wherever they are

3. Newspapers Changing: The newspaper business model is changing as a result (mass eyeballs + mass advertising)

4. Fast Change Being Rewarded: Companies perceived to be changing faster are being rewarded, those perceived to be changing slower are being punished Goals For This Presentation

ƒ Link value creation to big trends at newspapers

ƒ Share global best practices

ƒ The transition from mono-media to integrated multi-media Circulations Down 8% In Past Decade In Western Countries Circulation Performance Paid daily circulation in key geographies worldwide since 1995

0%

-2%

-4%

-6%

-8%

-10%

-12% Japan North America G-7 Countries South Pacific English- Western Europe Speaking World Usage, Engagement

ƒ Engaged have become more 100% 5% engaged; unengaged have Junkies 8% 90% become more unengaged 15% Loyalists 12% 80%

ƒ “No time to read” 70% 25% 28% Specialists Engagement 60% ƒ Fast consumption: looking at, not reading 50% Upper Mass 30% 40% 26%

ƒ Simultaneous media use 30%

20% ƒ Place shifting (print 20% Lower Mass 21% newspaper at home, free 10% Disconnected 5% 5% daily on train, internet at 0% work, Blackberries in transit) 1995 2005

Source: Urban & Associates data on U.S. newspapers U.K.: Qualities, Populars, Regionals

12,000,000

10,000,000

8,000,000 Down-Market Regionals 6,000,000 Mid-Market Up-Market 4,000,000

2,000,000

0 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 U.S.: Mornings, Evenings

50,000 45,000 40,000 35,000 30,000 25,000 P.M. 20,000 A.M. 15,000 10,000 5,000 0 1940 1950 1960 1970 1980 1990 2000 2004 U.S. Population vs. Daily Newspaper Growth

350,000,000

300,000,000 Population up 118% 250,000,000 Readership Gaps 200,000,000 ƒ Working women and subsequent generations ƒ Single-parent households and subsequent generations 150,000,000 ƒ First-generation immigrants and subsequent generations 100,000,000 Daily newspaper circulation up 33%

50,000,000

0 1940 1950 1960 1970 1980 1990 2000 2005 U.S. Circulation Penetration of Dailies + Projections

35% 2010-2050 based on U.S. Census Bureau population projections and 1993-2003 annual rate of newspaper circulation declines (0.7% annually) 30%

25%

20%

15%

10%

5%

0% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Circulation Winners and Losers

Circulations decrease, 1995-2005 Circulations increase, 1995-2005 Unaudited, incomplete information So Goes the Middle Class …

ƒ Circulation and readership trends are consistent worldwide within ABC1 demographics

ƒ Print circulation growth coming with rise of middle class What Readers Value What Readers Value

ƒ Expectation of “always on,” customisation

ƒ Looking for connector of ongoing conversation

ƒ Sense of community: from geography to interests

ƒ Consuming more media, smaller bites

ƒ Faster consumption: looking at, not reading

ƒ Value “best at,” not “sort of good at” What’s Happening to Newspapers

ƒ Consumers reading more than ever before, but in smaller “bites” throughout the day as technology allows ƒ Print newspaper content package has been commoditised by internet, mobile, readily available free print products ƒ Trends been going on since 1950, internet is simply accelerating trends for all traditional media ƒ What’s new today: All-out race among media to reach the multi- media mobile consumer News Diet Changing Evening news buffet, 1945-1970

6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 News Diet Changing Morning news buffet, 1970-2000

6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 News Diet Changing Diabetic news consumer 2000-Present

6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 Advertiser View

ƒ Chasing consumers anywhere they live and breathe

ƒ Battle for attention spans

ƒ Growing preference toward measurable media over mass media as technology allows

ƒ Will continue to associate with newspapers that produce quality, exhibit creativity Moving from product focus to “marketspace” focus Owning “Space”

ƒ Procter & Gamble Oral Care: Selling different things to the same customer (owning “toothspace”)

ƒ Amazon.com: Selling different things to different customers (owning “internet retailspace”)

ƒ IDG: Selling the same thing to different customers (owning “knowledgespace”)

ƒ Federal Express: Selling more of the same thing to the same customers (owning “shippingspace”) Newspaper “Marketspace”

Young

Old Poor Rich 1988 Newspaper “Marketspace”

Young

Print Daily Newspaper 75% household penetration 23% advertising share

Old Poor Rich 2008 Newspaper “Marketspace”

Young

Print Daily Newspaper 48% household penetration 15% advertising share

Old Poor Rich 2018 Newspaper “Marketspace”

Young

Print Daily Newspaper 35% household penetration 12% advertising share

Old Poor Rich 2018 Newspaper “Marketspace”

Young The Newspaper Dream ¾ Single print product ¾ Keep the old and rich ¾ Attract the “young and rich” ¾ Flirt with the “wannabe young and rich” ¾ Monetize for advertisers

Print Daily Newspaper 35% household penetration 12% advertising share

Old Poor Rich 2018 Newspaper “Marketspace”

Young

Entertainment Magazine Weekly

Free Daily “Lite” Daily

Print Daily Newspaper

35% household penetration Luxury Magazines 12% advertising share

Business Weekly Old Poor Rich The push for “marketspace” equates to multi-media Multi-Media Future

Television

Radio

Mobile

E-mail

Web

Publications Total Audience

Print Web

Mobile Aftonbladet, Sweden: Total Audience Unduplicated Audience

Print Web

Mobile VG, Norway: Unduplicated Reach

Print Newspaper: 1,356,000 daily readers

Total Unduplicated Mobile/SMS: Daily Web Site: 58,000 daily readers Coverage: 926,000 daily readers 1,847,000 (47% of population) Duplicated Audience

Print Web

Mobile Asahi Shimbun, Japan: Duplicated Reach Value Chain

Yesterday Today

1. Create the biggest product 1. Target a niche audience

2. Which draws the largest 2. Create a product to serve audience tightly-defined audience

3. Which attracts the most 3. Sell advertising around advertisers target audience Audience Value Proposition Yesterday Today

1. Size 1. Size 2. Scope 3. Shape 4. Quality 5. Frequency 6. Engagement Emerging models to manage audiences FT Value Tiers

Light Medium Heavy

ƒ Allow 30 free ƒ Annual online ƒ Subscriber to FT.com articles subscription print newspaper per month to be 9 £100/year 9 Maintain consumed free average daily ƒ Single-copy rate of £1.00 – lower than buyer of print single-copy price newspaper 9 Increased from £0.30 to £1.30 “What our business will be about going forward is the skillful management of the slow decline of the printed product and the accelerated growth of the internet.” -- John C. Mellott, Publisher, Atlanta Journal-Constitution AJC Target Market Segmentation

Print = Older Readers Online = Younger Readers Future of Print Future of Print

Philadelphia Model (Quality)

ƒ Audience migrates from print to online

ƒ Raise print circulation prices and sell “quality audience” to “quality advertisers”

ƒ $3 cover prices OK daily Future of Print

Norway Model (Quantity)

ƒ Audience migrates from print to online

ƒ Lower print circulation prices to maintain mass audience until inflection point …

ƒ Convert paid dailies to free dailies to maintain quantity audience Future of Print

Philadelphia Model (Quality) Norway Model (Quantity)

ƒ Audience migrates from print to ƒ Audience migrates from print to online online

ƒ Raise print circulation prices and ƒ Lower print circulation prices to sell “quality audience” to “quality maintain mass audience until advertisers” inflection point …

ƒ $3 cover prices OK daily ƒ Convert paid dailies to free dailies to maintain quantity audience “Newspapers cannot be defined by the second word: ‘paper’. They’ve got to be defined by the first word: ‘news’.”

– Arthur Sulzberger Jr., The New York Times, 2002 A time of transition At Which Altar To Worship?

Cathedral Stock Market Managing the Transition

Point A Point B

Single print product Multi-media product Complex print package Focused print package Bigger is better Smaller is better Internal focus External focus Monologue/customers Dialogue/customers Monetize monologue Monetize dialogue Journalism role: news/no limits Journalism role: navigation/local Marketing: non-existent Marketing: constant High profit margins (20%+) Medium profit margins (12%+) The Transition’s Painful End Game

ƒ Drastically lower editorial department headcounts and printing costs as a percentage of revenue ƒ Lower publishing frequency and page counts consistent with consumer demand (don’t unnecessarily over- feed the market) ƒ Shift operational costs: 9 Marketing from 1.5% to 7%+ 9 Research from 0.2% to 3%+ 9 Advertising sales 9 Digital experimentation ƒ Lower profit expectations from 20%+ to 10%+ ƒ Shift capital expenses from printing presses to fiber optics Wrong: Across-the-Board Cuts

ƒ Our challenges are not “across-the-board” ƒ Too many resources invested in functions that don’t add value (revenue, brand, customer knowledge) ƒ Not enough resources invested in functions that grow the business ƒ Outsource, contract, and eliminate functions … smartly. There will be winners and losers. U.S. Circulation vs. Journalists at Newspapers

70,000 Circulation at Daily Newspapers (000)

65,000

60,000

55,000

50,000 Journalists Employed at Daily Newspapers 45,000

40,000

35,000

30,000 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 U.S. Circulation vs. Journalists at Newspapers

70,000 Circulation at Daily Newspapers (000)

65,000

60,000

55,000

50,000 Journalists Employed at Daily Newspapers

45,000 What Could Have Been

40,000 ƒ Freeze in “journalist-friendly” headcount ratios (1990)

35,000 ƒ 10,500 fewer journalists ƒ 18% lower headcount than today 30,000 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 Editorial staffing levels do not equal more or less circulation, readership, or revenue Managing the Transition

Point A Point B

Single print product Multi-media product Complex print package Focused print package Bigger is better Smaller is better Internal focus External focus Monologue/customers Dialogue/customers Monetize monologue Monetize dialogue Journalism role: news/no limits Journalism role: navigation/local Marketing: non-existent Marketing: constant High profit margins (20%+) Medium profit margins (12%+) Opportunities To Grow

Marketing

Perceived as creative

Digital slivers

Willing to experiment Marketing Matters Power of Brands

ƒ Consumers drive brand perceptions, companies merely try to steer the conversation

ƒ Newspapers have dramatically under-funded marketing for 75 years (1.5% of revenues!) and invested in the wrong type of marketing (product)

ƒ In multi-media world where brand is everything, newspapers must increase funding for brand development – or die

ƒ Everyone loses: The best product that nobody reads “Mozaic” “Het Nieuwsblad, Everyone Relates”: Print brand campaign using reader photos “Mozaic” “Het Nieuwsblad, Everyone Relates”: Print brand campaign using reader photos Words Matter Signature slogan that celebrates written word, importance of reading the newspaper Meine Kleine Kleine Zeitung, Austria: Showcasing the power of a multi-media brand When Pigs Fly

ƒ Like most urban ƒ Cynics said dailies, circulation circulation would declined for years grow again in Philadelphia ƒ Contributes to “when pigs fly” overall bad image of newspapers ƒ Increases marketing budget ƒ Knight Ridder sells from $300,000 in to owner who 2005-06 to believes in $14,000,000 in marketing 2006-07 When Pigs Fly Advertising Experiments

Irregular Ads Irregular Ads Irregular Ads Irregular Ads Irregular Ads Irregular Ads Folha Origami Giant Folha Vertical Giant Folha Giant Folha

Horizontal Giant Folha Folha Top Cover Folha Belt Digital Slivers User-Provided Content Norway’s VG: For 6 years, readers provide photos, video, news tips, letters via mobile/online Hyper-Local Content United States’ Bluffton Today: Free Home-Delivered Daily, 19,000 Distribution, Local-Only Hyper-Local Content Austria’s Vorarlberger Nachrichten: Web/Mobile-to-Print, Blogs Covering 96 Communities Hyper-Local Content Gannett’s Local Information Centers Transform Concept of “Editorial Content” Global vs. Local The different web faces of The Washington Post Global vs. Local The different web faces of The Washington Post Global vs. Local vs. Hyper-Local Washington Post’s LoudounCounty.com merges database and journalism Weight Club Sweden’s Aftonbladet creates millions from 200,000 paid club subscribers Podcasts, Bluecasts London’s City AM: Taking technology further Social Networking Bakersfield Californian: MySpace meets Yellow Pages Dagbladet on Playstation Expressen TV Online video: YouTube style with Expressen quality news, sports, entertainment Digital Slivers Individually, they are nothing. Together, they are 3%-7% of revenue (and growing).

9 RSS 9 Videocasting 9 Podcasting 9 Blogs 9 Social networking 9 SMS/MMS 9 Mobile web Extraordinary Creativity Drive-Through Classifieds Mexico City’s El Universal creates way to escape urban chaos and generate revenues Place Classifieds At Newsstands Gazeta do Povo, Curitiba, Brazil: Generating more revenue by democratizing access points Private Treaties Times of India: Trades advertising space for equity stake in companies

ƒ Times of India growing faster than advertising market

ƒ To attract revenue from up- and-coming companies, trade Times of India advertising for equity stake in companies

ƒ Since 2005, invested US$300 million cash equivalent with 80 companies Breast Cancer Awareness Sydney Morning Herald: Printed in pink to draw awareness Toward Magazines?

The power of Canada’s Globe and Mail front pages Valentine’s Day Editions Poland’s Gazeta Pomorska: Male and female version of newspaper on Valentine’s Day Opportunities To Grow

Marketing

Perceived as creative

Digital slivers

Willing to experiment Conclusions Hidden Assets

ƒ Highest success rates from legacy companies that have discovered “hidden assets” previously not central to past strategy

ƒ De Beers: From mines and diamond stockpiles to unique customer relationship

ƒ Marvel Entertainment: From comic books to character licensing for movies Since founding in 1939, Marvel’s value proposition was comic books Shifted from comic books to licensing Marvel characters for film distribution Hidden Assets for Newspapers?

ƒ Audience: Brand-loyal readers who have never considered themselves a community ƒ Journalists: Valued journalists trained only for broadcast communications ƒ Money: Immense cash flows and capital budgets ƒ Distribution: Infrastructure second only to the postal service, yet only distributing a print newspaper ƒ Advertising Sales Force: “Feet on the street” that even scares Google (we know this is under-utilized) ƒ Service: Making “smart” the “help desk” concept Newspaper Value Propositions

ƒ Newspapers re-imagining their value proposition 9 Audience development 9 Value for advertisers ƒ Provided technological alternatives, consumers choosing to consume news on many platforms ƒ Advertisers chasing consumers across platforms ƒ “Newspapers” creating new platforms, reinventing themselves as “multi-media companies” ƒ (Im)patiently waiting for business models to emerge INMA: Harvester of Ideas Constantly in search of global best practices

Europe North America Newspapers: 2,398 Newspapers: 1,577

Middle East Newspapers: 272 Asia Newspapers: 5,071

Africa Newspapers: 400 Latin America South Pacific Newspapers: 1,400 Newspapers: 89 INMA: Harvester of Ideas Constantly in search of global best practices

ƒ Know your value proposition and sell it; don’t equivocate

ƒ Other industries going through the same value search

ƒ About positioning your brand amid technology, abundance

ƒ Change is a constant moving forward

ƒ Look around the world for best practices to apply at home

ƒ Draw inspiration from knowing successes are everywhere Earl J. Wilkinson Executive Director International Newspaper Marketing Association (INMA) www.inma.org [email protected]