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deterioration in the economics of newspaper publishing which could
possibly be caused by a combination of adverse circumstances:
• loss of classified advertising revenue;
• growth of online competition, including cannibalisation; and
• loss of display advertising to direct mail.
Together, these trends could force newspaper publishers to raise prices in
a shrinking market.
Industry structure and new business models
The most obvious and immediate pressure upon the newspaper and
magazine industry is the competition for time. There are a number of
studies in the US pointing to the fact that people using the Internet make
less use of traditional media. A study of PointCast users conducted by
IntelliQuest found that 46 per cent spent less time reading newspapers,
23 per cent spent less time reading magazines and 21 per cent spent less
time watching television (Editor & Publisher,
01-03-90. www.mediainfo.com). PointCast users are predominantly
business people and were heavy newspaper readers. A more general
tracking of Internet usage found that 16 per cent of Internet users
reported spending less time reading newspapers and magazines.
The major newspaper companies have recognised that the Internet
presents a challenge to their economic model and have started to build
their own online businesses. These have largely involved the re-purposing
of their print journalism for distribution online. Around the world, more
than 2 700 newspapers have online businesses.
The ready availability of online sources of news will accelerate a trend in
newspaper editorial coverage towards a more magazine type format, with
greater use of colour, and an emphasis upon feature articles. Magazine
markets are expected to continue to fragment.
In the US, newspapers have not succeeded in making themselves the first
port of call on the Internet, a privilege that has gone to the search
engines, which have subsequently developed as portals. 15 They have the
potential to emerge as competitors to the newspapers as suppliers of news
online. This is a type of re-intermediation in the market.
At present, newspapers are subsidising their online presence with the
enormous cash flows from print. When those cash flows come under
pressure, there is a risk that their online business will not have developed
the mass traffic of the search engines. This does not look like a near term
threat for news organisations in Australia. The Fairfax web and News Ltd
websites are in the top half dozen sites. Australia has always been a much
more concentrated media market than the US.
However, there remains a possibility that content online will fragment in
a manner similar to the magazine market. A newspaper is a package of
content, from sport, to weather, to business, the arts, crime politics and
general news. The package has been created to support the massive fixed
costs of printing plant and machinery. Online, it can become unbundled,
with specialised content suppliers, providing information and interaction
15 Research by the Pew Research Center in the US found that the number of people who get news online at
least weekly has grown from four per cent in 1995 to between 15 per cent and 26 per cent now . The
number of people getting news from newspaper sites, however, has fallen from 23 per cent to 16 per
cent over the past four years (15 January,1999, www.mediainfo.com).
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