Wednesday, April 13, 2011

Publishers emulate politicians in their obsession with cost cuts, modest revenue plans, while ad $$ go elsewhere

With the President speaking this afternoon about his plans to cut the deficit, one can't help but see the parallels between the current fashion among politicians to talk expenses (but no tax hikes) with the standing philosophy of the publishing industry to talk expenses (but rarely ad sales). The results have bene pretty much the same: the declining health of the enterprise.
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The decade long period of slash and burn media management is probably reaching its end, there is simply few editors and salespeople left to cut. But the problem that has been created is that the discussion now centers more on the idea that modest gains in revenue (read: charging readers for online access) will somehow solve the fact that their ad dollars have gone to Google, and other companies that weren't even considered competitors a decade ago. It is like the politicians who don't mind raising the gas tax a few pennies, but won't consider raising taxes on the wealthy or ending tax breaks for the nation's most profitable corporations.

If online, mobile and tablet publishing platforms are to become profitable mediums for publishers their products are going to have to be competitive with other digital advertising vehicles – more ad-centric. To do this, publishers need to get their ad executives into the game, at the center of their strategies.

Here is something you might want to think about: how many digital ad executives have been made digital publishing consultants at a newspaper or magazine company? Instead, the focus is almost entirely on content.

One year ago, Google's Hal Varian spoke to the newspaper industry and reminded them where they are getting their dollars. While 80 percent of revenue was derived from ad sources, only 20 percent came from circulation – worse, only three percent came from subscriptions. Yet, this is where the focus is at so many publishing firms.

Final point: up until 2000, newspaper ad revenue pretty much kept up with GDP growth, sliding somewhat with the rise of the Internet, but it did not crash, it merely dipped due to the addition of a new competitor. So why the crash? What changed? I would argue that while one segment became more and more ad driven – Google, online pure plays – traditional media firms went the other way.

1 Comment:

D.Berry said...

Politicians are said to create "death panels" but don't.

Publishers create panels at their industry events, but they are often "death panels".