Media Convergence

There has been much commotion of late [1] regarding the possible demise of the daily newspaper because of falling advertising revenue; declining circulation and audience share; rising production overhead (volatile newsprint costs due to the ongoing consolidation of North American newsprint mills which is reducing the number of suppliers, higher transportation expenses primarily because of fuel costs, plus stricter government regulations for pollution-abating presses, equipment, processes, etc.); changing government policies [2]; recessionary pressures [3]; fragmentation of the media landscape including competition with other daily newspapers as well as with broadcasters, cable systems and networks, satellite television and radio, magazines, etc.; and competition from faster news/entertainment delivery channels such as the Internet/World Wide Web and mobile and wireless technologies such as cell phones, etc. which can deliver content on an on-demand basis.

Since advertising revenue is the biggest source of revenue to the modern newspaper business model, declines in this metric can be especially telling. All of the factors discussed above are impacting the ability of newspaper publications to retain advertising clients and raise rates. Client retention and rate escalation are based on the newspaper’s ability to develop desirable subscriber/reader demographics, the newsstand and subscription price of the paper, customer service quality, advertiser results and circulation/audience share.

Key Newspaper Advertising Metrics

Advertising inches and total advertising revenue (retail, national and classified) are the primary measurements for each newspaper’s business performance. Tribune Company [4] is the largest owner/operator of newspapers in the United States. Their publishing portfolio includes such prominent mastheads as the Los Angeles Times, Chicago Tribune, South Florida Sun-Sentinel, Orlando Sentinel, The Sun, Hartford Courant, The Morning Call and Daily Press. For the year ended December 31, 2007, total advertising inches for these publications equaled 34,069,000, compared to 39,252,000 for the same period in 2006, a decline of over 5,000,000 total advertising inches or 13 percent. Total advertising revenue decreased to $2,861,019,000 for the year ended December 31, 2007, versus $3,194,968,000 for the year ended December 31, 2006. These trends and others for some of the nation’s largest dailies are leading many media analysts to speculate that the daily newspaper is quickly becoming a relict of the past.

Megatrends

Are daily newspapers disappearing because of “megatrends” such as media convergence? What is media convergence?

Imagine being able to receive all of your favorite TV shows on your cell phone or laptop, with the signal for those shows being encoded with text, graphics, audio, webpages, websites and hyperlinks so that, in effect, you have a super browser capable of surfing through hundreds of TV and radio stations as well as all the content available via the Internet. Think about how much more useful your big screen TV would be were it able to easily let you navigate the web, make and receive Internet phone calls, email, etc. from it, or check stock quotes on the Exchanges, help you find directions to a new restaurant, or dial into a webinar or Facebook. This seamless hybridization of television and the Internet is not here yet, as it requires that all mediums and transmission systems are able to receive and display the exact same content. Furthermore, it would also necessitate the complete merger of televisions and computers into a new device that combines all the functionality of each one. Fundamentally, televisions and computers would be one electronic machine, something you might call a “telecomp,” and there would no longer be separate televisions and separate computers.

Several events must occur to initiate the convergence—content mirroring and content appeal. Content mirroring means that our mythical “telecomp” must be able to both display and receive all television content (TV shows, movies and commercials in both standard and high definition) and all Internet/World Wide Web content (text; graphics, audio, video; games; websites). Additionally, our “telecomp” must present its combined functions in such a way (content variety, form factor, transmission speed, picture resolution, ease of use, ergonomics, etc.) that people will want to pay for it and use it.

There are some formidable technical and policy obstacles to overcome before the “telecomp” can even get off the drawing board. A single device that can receive encoded, compressed digital streams for Flash files, PDFs, Real Audio, radio waves, standard and high definition signals, etc. with current technology will be expensive, and if television and computers are to merge into one device then that device must be commercially feasible.

Also, television is both a medium and a transmission system with little or no available consumer interactivity. Comparatively, the Internet/World Wide Web provides for user interactivity. The question is will people be willing to adjust to receiving such distinct functionalities in the form of one appliance?

What’s more, do people really want to relinquish existing, relatively cheap devices that enable the reception of World Wide Web content, such as Blackberries, iPhones, Rio player, WebPad, etc? As long as these cheaper alternatives exist and continue to find market share, it is possible that they will blunt the demand for more sophisticated and expensive devices such as a “telecomp.”

What’s Old is New Again

We will have to wait and see how things work out. But consider daily newspapers again. Rather than disappear from the American information/entertainment scene entirely, they are likely to simply find other mediums into which to be reborn, such as being available entirely online.

Or consider Amazon’s amazing new wireless, battery-powered eReader device the Kindle, an effective convergence of print and high technology. The Kindle sold out in its first production run due to extremely high demand. The Kindle is an e-book reader, that is, an embedded system for reading electronic books (e-books) available for purchase at amazon.com. The Kindle’s superb “electronic-paper” display provides a crystal clear, high-resolution screen that looks and reads like real paper. In addition to downloadable books, users can download all the major daily newspapers, such as The New York Times, Wall Street Journal, Washington Post, The Boston Globe and magazines such as TIME, Atlantic Monthly, Fortune and Forbes. The Kindle is very portable, with a form factor of 5.3” × 7.5” × 0.8” and weighs about 10 ounces. According to Amazon’s website, downloads are purchased through the Kindle Store, which is itself accessed through Whispernet, over Sprint’s EVDO high-speed data network, which Amazon provides free of charge. New book releases and The New York Times bestsellers are offered for $9.99 unless priced otherwise, while in-print classics sell for $1.99. There are over 190,000 books currently available in the Kindle Store. Free chapter samples of a large selection of books are also available. Subscriptions to newspapers cost between $5.99 and $13.99 per month, magazines between $1.25 and $3.49 per month, and blogs (over 1,000 are available) are $0.99-$1.99 per month.

Perhaps the Kindle (and similar e-Reading devices like the Palm, the Rocket eBook, or Sony’s eInk reader) will spell both the end, and the salvation, of the daily newspaper as we know it today. Furthermore, maybe the Kindle points toward a new future for all legacy communication systems that rely on paper, have high physical delivery costs, are environmentally unfriendly, are non-interactive, etc. Once newspapers go this route, can television be far behind?

By Darrell Woody

Gazette Staff Writer

Notes:

[1]   See, for example, Perez-Pena, Richard. “Newspaper Circulation Continues to Decline Rapidly,” The New York Times/nytimes.com (October 28, 2008).

[2]  Newspapers are among the numerous industries that use telecommunications to contact potential and existing subscribers. The Do Not Call law, which regulates how telemarketers can use contact lists, registration, autodial and related telephone solicitation technologies and which has made it more difficult for telemarketers to promote their services using the telephone system, is becoming stricter. For example, the Federal Communications Commission has recently amended its rules to require telemarketers to honor registrations with the National Do-Not-Call Registry indefinitely. The previous rules provided that registrations would expire after five years. There are other new Do Not Call restrictions slated for implementation in 2009.

[3]  The National Bureau of Economic Research has recently stated that the U.S. economy has been in recession since December 2007.

[4]  Editor's Note: On Monday, December 9, 2008, the Tribune Co. filed for Chapter 11 bankruptcy protection, citing primarily an unsupportable debt load.