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Business Models of Newspaper Publishing Companies report no. 05.2006 1 Business Models of Newspaper Publishing Companies www.ifra.com/wherenews Business Models of Newspaper Publishing Companies © 2006 Ifra, Darmstadt Foreword 2 On 28 March 2006 Ifra started the new and maybe even how to influence the more multi-faceted research project “Where likely futures they will face. NEWS?”, the media futures research initia- The results of the project will provide tive, which will run for at least three years. the basis for workshops around the world “There is a void of understanding about to train newspaper managers to understand how people will use media and where they the options they face and how to adapt to will get their news 10 to 15 years from now, them in terms of organisation, technology where and how people will be receiving it, and market development in their specific re- where it will come from, where the com- gions. panies that provide it and that provide the Ifra has decided to start publishing first technologies behind it will be,” said Ifra CEO research reports that provide an insight in Reiner Mittelbach. “In order to fill this gap the process of publishers’ orientation de- authentic and credible research into trends velopment in a changing world of multiple and scenarios together with the involve- media. The first reports will present new ment of many participants is required. Ifra is knowledge in following areas: one of only a few such organisations in the > Existing and Potential Business Models world with the membership and resources to of Newspaper Publishing Companies undertake such a task.” > The Development and Application of The kick-off meeting at the end of March Business Strategies in Newspaper Pub- 2006 gathered industry experts from all over lishing Companies the world representing publishers as well as With this new report we are pleased to suppliers to the industry. During this first publish the first document of a series to meeting the working group agreed on the come within the framework of the “Where scope of the project, the research methods NEWS?” project. The actual report has been and the first steps to be taken to accomplish prepared and written for Ifra by Prof. Dr. the project. Robert G. Picard and Dr. Cinzia Dal Zotto Since the future of media usage is from the International Business School in strongly dependent on the development of Jönköping, Sweden. Prof. Picard is Director society, technology and markets, the proj- of the Media Management and Transforma- ect will analyse those conditional and en- tion Centre (MMTC) at the Jönköping Inter- vironmental questions before researching national Business School, while Cinzia Dal the changing media consumption behav- Zotto is the Research Manager at MMTC. Ifra iour. The identification of long-term social, commissioned this research project to Prof. technical and market trends will be based on Picard and his team. The project ran from solid research of facts and developments in spring 2005 until March 2006. the saturated newspaper markets of Europe For further information on Ifra’s “Where and America. NEWS?” project, contact: Scenario planning will complete the Manfred Werfel methodology of Ifra’s “Where NEWS?” proj- Ifra Research Director and Deputy CEO ect. With a better understanding of the range E-Mail: [email protected] of possible futures, publishers can make bet- ter decisions on how to position themselves, Darmstadt, May 2006 Imprint Reports from the media future research initiative “Where NEWS?”. Published by: Ifra, Washingtonplatz, 64287 Darmstadt, Germany; www.ifra.com; Tel. +49.6151. 733-6; Fax +49.6151.733-800. Chief Executive Officer: Reiner Mittelbach. Research Director and Deputy CEO: Manfred Werfel. Research Manager: Harald Löffler. Republishing – also of excerpts – only with express permission of Ifra and acknow ledge– ment of origin. Price: This report is sold at the price of 280 EUR* per copy. For Ifra members, the price is covered by the membership fee that entitles them to an allotted number of copies. Ifra members may order additional copies at 13 EUR* per copy. * plus 7 % in Germany and for companies and persons in the European Union that do not have a VAT number. www.ifra.com/wherenews Business Models of Newspaper Publishing Companies Table of contents 3 Table of Contents Executive Summary . 4 Introduction . 5 The Nature of Business Models . 7 Business Models and Innovations . 9 The Characteristics of the Newspaper Business . 10 The Characteristics of Electronic Business . 11 The Project . 12 Results . 13 Existing and Future Business Models . 18 Investments in Future Technologies and Products . 22 Discussion and Conclusions . 25 Business Models of Newspaper Publishing Companies © 2006 Ifra, Darmstadt Executive Summary 4 Executive Summary The long successful newspaper business they see a clear trend towards more coopera- model is under pressure. Advertising and read- tion. The majority of respondents believe con- er markets are mature or are declining in large tent generation, distribution, and advertising parts of the world. The ongoing digitisation of activities will be the areas in which most co- media channels will lead to an even wider range operation develops. Targeted advertising is ex- of consumer and advertiser choice. Because their pected to become the main area of cooperation, budgets for time and money are finite, one can although advertising is ranked as second most expect tough competition between the different strategically important organisational unit. The media channels as well as within individual me- editorial department is ranked number one as dia. a strategic organisational unit, but cooperation Newspaper publishers have started to react to involving content generation is ranked second. these changes. The Internet has already become This reveals an unclear operational topic of the nearly standard publishing channel, despite companies’ strategies and way of thinking. the fact that no large-scale commercial break- Publishers indicate that home and mobile through has yet happened. Many new product broadband, editorial management, and customer launches, product makeovers, and provisions of relationship management systems are the most value-added services for readers have been in- important technologies for developing their stituted and predictions indicate that the chang- businesses. Publishers thus seem to recognise es have just begun. The developments provide the importance of innovation and customer fo- reasons to examine how newspaper publishers cus for value generation. Contradictions exist, foresee their revenue streams changing in the however, because these publishers rank mobile future, how they want to develop their business devices and services low as revenue source even models, and how this will be reflected in their though they are considered among the most organisation structures and activities. important technologies for the development of In order to introduce the reader to the sub- publishing companies. Furthermore, innovation ject of investigation, this report first explores in could be enhanced although collaboration in depth the nature of business models, the mean- product development. However, publishers are ing and the importance of innovation, and the not targeting product development as a coop- characteristics of newspaper and electronic eration activity. businesses. Then, the results of a study of Ifra The results of this study reveal that, in gen- member publishers and top newspaper company eral, newspaper publishing companies are still executives from the most important newspapers focused on the traditional printing business. in countries around the world are presented. Cost saving is in their focus. In order to create Publishers perceive their market as highly value, it will be useful for them to develop par- competitive compared to 15 years ago and iden- allel business models based on business oppor- tify predictability of market developments, de- tunities offered by new technologies and to find creasing return on investments, and increasing ways to exploit network relations and speed up cost of technology as the most important chal- their capability to react to and anticipate chang- lenges for their companies. The main revenue es. Newspaper publishing companies, however, stream today still comes from the traditional are often too anchored to their traditional busi- printed newspaper business. However, the re- ness and late in recognising and exploiting new spondents expect contributions to the revenue opportunities. This is seen in the fact that ex- stream from Internet activities to increase. perimentation is considered to be the least im- Most of the respondents agree that the edi- portant force playing a role in investment deci- torial and advertising portions of their organisa- sion making at a time when the dynamism of tions are the most strategically important units the media industry requires an entrepreneurial for their business. When looking at the future, spirit. www.ifra.com/wherenews Business Models of Newspaper Publishing Companies Introduction 5 Introduction Business models are the bases upon which to some elements disappears. A situation may firms conduct commerce. They are created and then arise in which such models may be rein- understood by stepping back from the business troduced successfully for the same or a different activity itself to look at its bases and the under- product or service. lying characteristics that make conducting com- The contemporary newspaper business mod- merce with the product
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