Analytical overview of the newspaper publishing industry in the uk.

Introduction

The print media has for a long time played an indispensable role of informing people about local and international news (OECD 2010). They have been a pillar of public life and democratic societies and at their best, the print media especially the newspapers have been an important source of reliable information (Elvestad & Blekesaune 2008). However, the unprecedented growth of information technology and the proliferation of new devices for delivering digital content among other market and business forces have led to a decline in circulation and newspaper readership (OECD 2010).

In line with the above, this paper provides an analytical overview of the newspaper publishing industry in the UK. It provides a comprehensive overview of the sector structure including an analysis of the value/supply chain, business models, some of the leading newspapers and an analysis of the market structure. The paper also examines key demographics, user preferences and the changing patterns of consumption. Finally, the paper conducts a critical analysis of the current issues and trends including examining the impact of technologies, market and business forces.

Overview of sector structure

The newspaper publishing industry in the UK has a unique structure in terms of geographical coverage of publications. With reference to the geographical coverage, there are two main categories: the national publications and regional publications (Anon 2013). The national newspapers comprise of 10 dailies and 12 Sundays (Anon 2013). Within these two categories are the tabloid newspapers; middle-market tabloid newspapers and broadsheet newspapers (Anon 2013). Most of the newspapers in the UK are however under the ‘tabloid’ subcategory.

Examples of tabloid newspapers are The Sun, Daily Mirror, Daily Star, The People and The Morning Star amongst others (Anon 2013). Whilst the broadsheet examples include The Daily Telegraph, Financial Times, The Guardian, The Independent, The Sunday Times and The Observer among others. The ‘Middle-market’ tabloid newspapers include Daily Mail, Sunday Express, Daily Express and The Mail on Sunday (Anon 2013).

Regional newspapers in the UK are more than 1500 but for the purpose of this analysis, we shall highlight the top 10 regional groups. The parent companies of the top 10 regional newspapers include:

• Archant which was formerly referred to as Eastern Counties Newspaper Group (Anon 2013).
• Associated Newspapers Ltd
• Guardian Media Group plc
• Mirror Group Regional Newspapers which is currently known as Trinity (Anon 2013).
• Newsquest
• Portsmouth and Sunderland Newspapers (Anon 2013).
• Northcliffe Newspapers Group
• Trinity Mirror plc
• Scotsman Publications Ltd and
• D C Thompson

Having defined the structure of newspapers, it is worthwhile examining the value/supply chains and the traditional business model.

Supply chains

In the UK, Newspaper supply chains are publisher-led. In other words, publishers have a strong degree of influence over the supply chains (OFT 2008). They exercise a stronger degree of influence over the volumes of products received by retailers through setting parameters used by wholesalers to allocate copies to the retailers (OFT 2008). The publisher also exerts influence on pricing at all stages of the supply chain by printing a price and setting margins for both the retailers and wholesalers (OFT 2008).

They also set performance standards that define the nature of service provided to the retailers. These standards influence the terms and conditions on which retailers are supplied by the wholesalers (OFT 2008). The publisher’s main role in the newspaper publishing industry is thus to intermediate between journalists, information users, advertisers and other attention-seekers (OECD 2010).

Journalists, on the other hand, have the task of creating content. This process of content creation and manufacturing requires in-depth research and investigation. Newspaper organizations also rely on news agencies such as Reuters and the Associated Press for news stories (OECD 2010). With the draft created, a diligent work flow follows that include a number of activities such as editing, copy-editing and graphical work (OECD 2010). Finally, a fully digital version is created ready for printing (OECD 2010).

Characteristics of the newspaper publishing industry

A key characteristic to note in the newspaper publishing industry is the two-sided markets: advertizing revenues and sale of editorial content (Berte & De Bens 2008). Newspapers provide for both advertising and editorial content and as such generate revenues from both the advertisers and readers (Berte & De Bens 2008).

Another key newspaper characteristic is perishability. Newspapers are perishable in that their value is only for a short period. Demand is thus concentrated in a short time window which is often in the morning (OFT 2008). As such, there is pressure in the supply chain to reduce the time taken to deliver newspapers to retail outlets (OFT 2008).

Newspapers in the UK are printed at print centres which are spread throughout the country. Once printed, they are distributed to wholesale depots in the UK (Berte & De Bens 2008). These are then packed and delivered by the wholesalers to retailers (Berte & De Bens 2008). In addition, some newspapers are supplied directly to consumers through subscription. However, magazines account for most of the subscription sales. Some examples of newspapers that offer subscription service in the UK include the Financial Times and The Times (OFT 2008).

In the recent years, there has been a push towards supplying newspapers directly to the retailers. Publishers have become more involved in supplying newspapers outside the normal distribution process including supplying to high-street retailers (OFT 2008). As such a new supply chain, a direct-to-retail (DTR) distribution system is currently underway.

Consumer behaviour

The circulation and readership of newspapers cut across every age group, sector and social strata (Hamel & Prahalad 1994). However, some age groups are more prone to reading newspapers than others. Adults are particularly more loyal to their newspapers than the younger teenagers. According to keynote survey on the consumption patterns of newspapers in the UK, it was found that majority of newspaper readers comprised mainly of the elderly.

According to the survey, 48.9% of teenagers aged between 16 and 19 would buy a local or regional newspaper at least once a week (Keynote 2010). But beyond the age of 20, the buying falls and continues to decline up to the age of 44 before rising again, reaching a peak of 61.3% among those aged above 65 (Keynote 2010). Nonetheless, it is safe to assume that the UK industry offers a vibrant market for publishers as both the older consumers and younger teenagers have a quest for information.

But just like with other social trends, evolution is inevitable and the rise of the internet leads to changing user preferences and changing patterns of consumption (Currah 2009). More recently there has been a decline in consumption of newspapers even among the adults which is largely attributable to the proliferation of online alternatives. In a comparative survey carried out by Keynote between 2008 and 2009, it was found that 36.5% of adults bought national newspapers on a daily basis, down from 42.4% in 2008 (Keynote 2010).

The old newspaper business model which has for a long time been a success is coming under pressure due to the ongoing digitization. Reader markets and advertizing are in fact declining in many parts of the world owing to the growth of new digital media. The internet has grown to become nearly a standard publishing channel and is posing a major threat to the contemporary business model (Darmstadt 2006).

The changing consumer preference has been a key driving factor behind this contraction as advertizing and print media have lost out to online alternatives that offer information and advertizing services via the social media (Smith 2013). In fact, in between 2007 and 2012, there was a 25% drop in the circulation of the daily newspapers in the UK (Smith 2013).

Although the rise of the internet has to some extent benefited newspaper publishers through the revenues generated from advertizing on their online publications, the loss suffered by print advertizing has been far greater than the benefits derived from online publications such that it has resulted in an overall negative growth for most of the newspapers (Boczkowski 2005). Also, the value chain of news production, distribution and consumption has been fundamentally affected by the growth of the internet and the ongoing digitization (Leurdijk et al 2012).

Whilst most newspapers have launched their own websites and offered blogs and apps for mobile devices, they still have to bear the costs which are significantly high (Leurdijk et al 2012). Moreover, the huge quantity of information available online has made it increasingly difficult for people to pay for online services. Pay models which have proven to be successful are scarce. The pay-wall model was initially experimented by some of the newspaper publishers but failed as the subscription revenues could not offset the vast loss of advertising revenues that resulted from decline in readership (Leurdijk et al 2012).

However, there have been new attempts lately to re-introduce pay-walls for premium content by some of the publishers such as the New York Times, the Hamburger Abendblatt and The Berliner Morgenpost among others (Leurdijk et al 2012). But still, only a few companies have managed to succeed in developing viable online business models (Miyamoto & Whittaker 2005).

Perhaps we can say that the newspaper publishing industry is under turmoil due to the penetration of broadband and the rise of new devices for delivering digital content. Consumers are quickly embracing technology and switching to digital media. However, this transition from traditional print media to digital media varies with age (Fenez et al 2010). The younger generation is particularly the most affected. But as noted by Keynote, the impact has also been felt among the older consumers.

Of course these changes will tend to benefit the consumers. Such newer forms of decentralized news will liberate readers from partisan news monopolies which have dominated the industry (Currah 2009). Consumers will also benefit from increase in the availability of ‘free’ news and news consumption that can be tailored to fit own preference (Currah 2009).

But at the same time there is a concern regarding the quality of output, in particular, whether the desired output can be sustained by market. It should be noted that, unlike the traditional news organizations, many actors involved in the online content lack the large fixed cost base needed to provide in-depth and varied reporting of news (OECD 2010). In this regard, will vulnerable news genres such as reporting on local government, investigative journalism and reporting on areas not of immediate economic or political interest, survive (Leurdijk et al 2010)This is an issue that requires further documentation.

Current issues and what the future holds

Following the recent recession that led to declining business profit, the advertiser’s budget has today shrunk (Smith 2013). The impact of the recession has been a decline in readership due to high prices of newspapers. Also, the recent phone hacking scandal that implicated tabloid newspapers has undermined trust in journalists and led to a declining demand in major papers (Smith 2013).

More recently, the introduction a new generation of eReaders such the iPad, tablet computers and kindles has provided an alternative for accessing information online (Sabagh 2011). With influx of such portable technology, the decline print newspaper is likely to accelerate, adding pressure to the traditional models that have supported many titles (Sabbagh 2011). The impact of these changes has already been felt by a number of local newspapers with 31 titles closing in 2010 (Sabbagh 2011).

However, there are those that seem to handle the transition well such as the Financial Times which has seen a growth in digital subscription (Sabbagh 2011). For instance, in 2011, the average print circulation of Financial Times (FT) was 297,227 whereas that of the digital circulation was around 301,471, indicating a 31% increase in digital subscribers (Greenslade 2012). During the same year, the average global audience grew to 2.1m whereas that of the print stayed flat (Greenslade 2012). But while FT has made a successful digital transition, majority of the newspapers have not succeed in developing viable online business models.

Given the declining demand, pressure has mounted on newspapers to adopt defence mechanism in order to protect their bottom line (Smith 2011). Publishers have been forced to optimize online advertizing platforms and some others have had to adopt paywalls (Smith 2011). Also, there are those that are opting to expand internationally in efforts to capture a new market in an information-centric society (Smith 2011).

The structural challenges facing the newspaper publishing industry have no doubt resulted in a decline in circulation volume and a shift of advertizing to online channels. The growth in information technology is already having an impact on consumption behaviours as reading is losing against listening and watching of news via the Televisions, radios and the internet (ATKearney 2005). The trend is also forecast to continue in the coming future.

As pointed out by ATKearney (2005), circulation of newspapers is likely to decline by over 25% in the forthcoming 20 years due to a decline in readership and the growth of digital generation. With newspaper revenue declining, there is a higher possibility of heavy consolidation to occur through company ‘attrition’ and Merger and acquisition activities (ATKearney 2005).

The impact of the recent phone hacking scandal is likely to be minimal as popular titles still remain in fair commercial health. Tabloid newspapers such as ‘The People’, ‘The Daily’ and ‘Sunday Mirror’, and ‘Record titles’ in Scotland are still in fair commercial health. However, whilst the Leveson inquiry is expected to have minimal effects on the industry performance, a concern has been raised that the resulting regulation will be unbalanced between print news and that published online (Smith 2011).

Conclusion

Indeed we have seen that a number of factors have contributed to a decline in newspaper circulation such as recession, new technology (e-readers and smartphones), new internet intermediaries, new business models, and social factors such as increased participation in creation of digital content.

These changes have had mixed effects in the industry. On the one extreme, consumers have benefited from availability of free information and consumption of news content which can be tailored to suit their own preferences. Also such newer forms of decentralized news have liberated readers from partisan news monopolies which have dominated the industry.

On the other extreme, the traditional print media has been declining and this demise puts at risk an important foundation of democratic societies. Also, there is a concern that the desired quality output may not be sustainable as many actors involved in the online content lack the large fixed cost base needed to provide in-depth and varied reporting of news.

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