Media biz struggles: what’s behind the crisis?

By
Kelly Toughill

It is official; every kind of media is now in trouble. The scary times are no longer reserved for newspapers. Broadcasters, magazine publishers and even online media companies are shedding jobs, losing stock value and, in some cases, closing down.

But even though the bad news is universal, it is not uniform. The bad news for magazines is very different than the bad news for newspapers and broadcast companies. And the bad news in Canada is different than the bad news in Europe and the United States.

It is easy to blame the Internet and the recession for hammering traditional media, but  pointing to the familiar culprits masks what is really going on. Some media are likely to spring back after the recession, or at least stabilize. Others will have to reinvent themselves to find a place in a permanently fragmented world.

Here is a brief rundown of the key factors behind the journalism crisis in Canada and beyond.

Recession

In some cases, the recession is the root problem. In others, it is acting like a magnifying glass, exaggerating problems caused by other factors.  For magazines, the recession is the most serious problem. Advertising budgets are the first thing cut when a company faces lean times, and it is revenue from advertising, not readers, that keep all media alive.

Fragmentation

This is the biggest single problem for newspapers and network television. Fragmentation has helped the magazine industry overall, though it is hurting certain titles during the recession.

Newspapers and network television used to command huge advertising premiums because they reached everyone: women, men, children, sports enthusiasts, gourmands and grandparents. Ads were sold on the basis of how much it cost to reach 1,000 people. Over the last generation, marketing radically changed. Now very few products are targeted to the entire population. Even toothpaste has become a niche product, with versions aimed at young romantics who want a sparkly smile, older people with sensitive gums and so on.

Advertisers don’t want to pay the premium charged by mass media; they want vehicles that reach only their specific targeted niche.

The trend toward fragmentation has hurt newspapers far more than the trend of readers drifting to the Internet, particularly big-city dailies. Canadian newspapers took 18 per cent of all advertising dollars spent in the country in 1998. A decade later, newspapers took only 13 per cent of that market. There was a similar decline for network television. Both trends are chronicled in the annual digest of the Canadian Media Directors’ Council.

The winners in this shift were specialty television channels and magazines.

Niche networks such as W, Discovery and Spike attract specific types of viewers that can be commoditized and sold to advertisers trying to reach that niche market. They have enjoyed double-digit growth as the old networks declined.

Magazines were also the big winner, particularly titles that appeal to a specific group attractive to niche marketers. The last 20 years has seen an explosion of new titles devoted to narrow interests and demographics: heli-skiing, cottage renovations and every variety of cooking. Those magazines have done very well, even as mass media magazines like Time and Maclean’s have faltered. Canadian magazines have held their share of the ad market – five per cent – for a decade. Last year Canadian magazine ad revenues grew five per cent – the highest growth in three years. But the growth is uneven across the industry. For example, ad pages at Maclean’s shrank by more than six per cent.

For some magazines, the trend that brought them riches is now the cause of their trouble.  

Tightly targeted magazines that focus on luxury leisure activities are likely to founder in a recession that makes people think twice about spending every dime.

Online news sites that cater to a specific audience are helped by the fragmentation trend; general online news sites are not.

One of the most troubling notes in the cacophony of bad news was a recent report that advertising revenues at U.S. newspapers’ online sites is declining. Newspapers have been counting on their online operations for rescue as print revenues shrink. It is unclear whether online revenues declined simply because of the recession, or because newspaper online sites suffer from the same structural flaw as the print version: they are a mass media product out of favor with advertisers who want niche vehicles.

Online functionality

The Internet is simply a better medium for informational advertising; however print and television still rule in the art of unsolicited persuasion.

Newspapers lost the battle for classified advertising to Craigslist, Kijiji and Ebay years ago. The key advantage of many successful online advertising sites is their search function, but online advertising is less successful at wooing new consumers and introducing the notion of a need where none existed before. This is starting to change, as companies learn how to leverage Youtube and Facebook to introduce richer forms of advertising, such as videos and interactive advertising, and programs get more and more sophisticated at identifying which consumers are ripe for a particular unsolicited ad.

The impact of those experiments is still small though.  In other words, it will be a long time before the glossy ads in Vanity Fair disappear.

Canada, the United States and Europe

Until very recently, media organizations in Europe dismissed the crumbling business model of American newspapers and networks as irrelevant to their world. In the last year though, media companies across the continent have also started to shed workers—though not at the same pace as in the U.S.

Canada’s media sector is structured differently than that of the United States, and the Canadian recession appears much shallower than the one south of the border. But no one gets to be smug about the future right now, not Americans, not Canadians, not magazine workers, TV stars or even popular bloggers.