It’s 2020: Do you know where your newspaper is? Better yet, do you know what your newspaper is?

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Posted: Thursday, August 30, 2012 1:58 pm

The next decade is still almost eight years away, but it’s becoming increasingly evident that the years leading up to 2020 will represent the most dramatic — some would say traumatic — transformation the industry has ever seen.

The prognostications of the last 10 years — among them that the industry would regain its footing once conditions stabilized or that online advertising would easily offset the loss of print revenues — have rung hollow. Indeed, the next eight years will define how, or perhaps more accurately in what form, the newspaper of the future will survive and the role the industry will play.

This much is clear: Newspapers will still be a force. Millions of Americans will continue to get printed newspapers delivered to their door, papers that have more color and are designed in formats that include compact broadsheets and Berliners. That said, not every U.S. city will have a printed newspaper every day of the week and newspaper subscriptions will span both print and digital access in a single package.

Digital consumption of news and information will continue to soar, fueled by the advent of less expensive and more sophisticated mobile devices lashed together by a ubiquitous wireless network. Smartphone penetration, now at 50 percent of U.S. households, will eclipse the 95 percent mark and versatile tablet computers and other e-readers will be everywhere. Device adoption will spark the rise of customized and tailored news and information; tomorrow’s mobile devices will literally understand what information is important and deliver it directly to their users.

Ownership of America’s newspapers will move into what might be described as a return to the industry’s roots: from family owned to corporate owned and back to private individuals. At the same time, banks like JPMorgan Chase and venture capitalists such as Alden Global Capital will put their own imprints on the newspaper industry: imprints that today, at least, remain too faint to accurately discern.

Smaller and community newspapers will continue to be less impacted than their larger counterparts by the trends of the next eight years as local readers and advertisers continue to remain loyal to their home-town papers. The national dailies like The New York Times, USA Today and The Wall Street Journal will survive, but metros that serve cities such as Kansas City, Mo., Denver, St. Louis and Baltimore will have to retool significantly to survive.

Journalism, and the mandate to create and distribute objective, fair and curated information, will become even more critical. But newspapers will likely become more subjective and more ideological in their editorial missions. And there is no assurance that the quality that many consumers expect from their newspapers will be as consistent or as evident in a digital-centric world.

Newspapers will increasingly be social media managers, helping their readers and advertisers establish relationships through multiple channels, from connecting with friends to designing targeted marketing campaigns that incorporate technology that envelopes how humans interact with website images and information.

Pace of change

“Think of where technology and the industry were just eight years ago,” said Michael A. Rogers, a futurist, consultant, author and former newspaper executive who two years ago served a stint as futurist-in-residence for The New York Times Co.

“There was no Facebook, no YouTube, no iPhone. The pace of change will just accelerate from now on.”

Certainly, the newspaper managers and executives of 2004 didn’t foresee the economic and social havoc that would be wreaked upon the industry in the subsequent years. Eight years ago, the industry was en route to what would be a record $47.9 billion in ad sales the following year. Publishers weren’t ignoring the Internet and its impact but were confident that their strategy — to ramp up digital ad sales to support their evolving online sites and to remain focused on local news, information and marketing — would be more than sufficient to keep those dollars rolling in. Newspaper values, meantime, soared. In 2006 McClatchy Co. plunked down more than $4.5 billion for Knight Ridder’s newspapers while one year later, Rupert Murdoch spent $5 billion to buy Dow Jones.

Few questioned the strategies many U.S. publishers were employing in the mid-2000s and fewer still foresaw what would happen in September 2008 and the global economic downturn.

Brutal impact

The following 12 months were certainly brutal, especially for newspapers. Major papers, in particular the (Denver) Rocky Mountain News and Seattle Post-Intelligencer, disappeared. Thousands of reporters and editors lost their jobs, as did thousands of production and support personnel as publishers scrambled to cut expenses to combat declining revenues.

While 2010 saw a bit of a recovery, the past 18 months erased any notion that the U.S. newspaper industry could survive just by making a few tweaks in their cost structures. No. What the industry required was dramatic change: change that would be painful, disruptive and difficult.

And absolutely necessary.

“Is the industry on the right track to make it? Generally yes,” Rogers said. “But will they kill the patient before they cure it? The companies that master the transition from print to digital, and get it right, will be the subject of Harvard business studies in 2030. That’s because the successful companies will be the ones that radically rethought what was a perfectly good business model for hundreds of years.”

And making that transition won’t be easy, Rogers asserts. “Imagine if everything was digital and someone brought you a big invention: paper. To compete against paper you would have to do business completely differently. It’s no different for publishers today.

“The Web is the greatest marketing tool ever invented,” Rogers said. “By 2020, wireless connectivity will be ubiquitous and offered as a normal course of business, so the convenience of using something offline will be diminished. As the audience increasingly moves to digital delivery, you can imagine a time where it will become simply too expensive to distribute (papers) physically.”

Strategic response

Publishers are responding, Rogers and other market-watchers say, by putting into action a broad array of strategies they believe will sustain their operations as they move into the next decade.

The primacy of digital distribution is a given, with every major newspaper publisher pledging allegiance to bits over print. Publishers are also moving aggressively to institute digital subscription plans, in the process walling off the online content they offered for free for so many years. From a standing start only a few years ago, more than 300 U.S. newspapers now restrict the content they post to paying customers, and hundreds more will join that list in the years to come.

“Digital circulation revenue is real,” said Outsell Inc. analyst Ken Doctor. “It is getting substantial support and will generate substantial revenues.”

Gannett Co. Inc., for example, expects its metered paywalls to kick in more than $100 million in additional revenues by 2014. Other major groups, including Lee Enterprises, McClatchy, GateHouse Media and Tribune Co., expect comparable results as they restrict online content to paying subscribers.

“What this tells us is that if publishers manage this transition correctly, the industry might be able to port enough of their revenues to digital,” Doctor said. “We didn’t know this two years ago.”

Digital circulation provides another benefit: Just as advertisers use the Web to better understand their customers, newspaper publishers will be able to reap valuable demographic data from mining the information they receive as a result of how consumers interact with their products.

More change

Still, Doctor said, “Much more will be known about the fate of this industry and its future direction over the next eight years. Much of the cost-reduction and change in ownership has occurred already, but as far as the product is concerned, more change will occur.

“Look at what Advance is doing (by cutting print days) and the steps others are taking to consolidate. We get it: Print is ending, and you have to act on that.”

That said, print still has years of viability. Today, the reason is simple: print ads still generate the lion’s share of the industry’s revenues. By 2020, print will still be offered, but perhaps not to every consumer in every American city every day of the week.

“Newspapers will now be considered news companies and not just newspapers” as the market evolves, Doctor said. “For most consumers, these organizations — whether it’s The New York Times or The Wall Street Journal or NPR — will be news brands. Print will be available for those with a strong print relationships, but it might be more of a weekly product.”

The industry’s challenges notwithstanding, Doctor said he’s sanguine about the industry’s prospects: earlier this summer he posted a top-10 list of good news that includes his assessment about such positive trends as tablet adoption, a growing sophistication in how digital ads are sold and the maturation of community-generated blogs.

Resources stretched

Still, these nuggets of good news, important as they may be, don’t diminish Doctor’s concerns

about resource-stretched newsrooms being able to produce quality work.

“As Aaron Sorkin put it, a world that depends on high-quality factual news is getting less and less of it at a time where it needs more and more of it. Look at annarbor.com. You would have to say it doesn’t go as deep or is as important as it was” when it was printed every day as The Ann Arbor News.

Yet trimming print days in favor of digital distribution will likely no longer be the exception eight years down the road.

“The New Orleans move is not a shocking one,” Doctor wrote in his “good news” post. “By 2020, we’ll be used to a few days a week of print, or maybe just ‘the Sunday paper,’ and wonder why we chopped down whole forests; didn’t we always have these tablets?”

Economics — the need for publishers to cut legacy costs — is one factor spurring the shift. The other: the advent of more sophisticated, but far less expensive mobile devices through which consumers will get their daily (or hourly) newspaper fix.

“Tablets in their future form, lighter, cheaper, will be the preferred medium in which to read newspapers,” said Roger Fidler, a tablet-computer visionary who today serves as the program director for digital publishing at the Reynolds Journalism Institute at the University of Missouri.

Tablets, presses converge

The institute’s 2012 Media News Consumption Survey, released earlier this year, indicates that for many news organizations, the iPad and other tablets is comparable to a printing press.

“The penetration of the iPad is impressive,” he said. “I’m now seeing couples traveling with multiple iPads, and I also expect that costs will come down.”

In the two years since Apple introduced the iPad, the company has sold more than 85 million of the gadgets worldwide, MacRumors.com said, the majority of the tablet market (see page 17).

By 2015, the number of iPads is expected to more than double, to 175 million, according to a recent analysis by Piper Jaffray. Other vendors will sell an additional 125 million, the consulting firm said.

The rapid penetration of tablet computers represents a golden opportunity for publishers, Fidler said.

“The point has to be made. A newspaper displayed on a tablet remains a newspaper. The important role that newspapers have filled will continue, but journalism itself will be transformed,” becoming more subjective and opinionated.

“I can see in some ways papers becoming more like they were 100 years ago, with defined political leanings that consumers will recognize,” he said.

The iPad’s technological wizardry notwithstanding, the most important component of the device’s increasing penetration is this: Tablet-computer owners are used to paying for the information and services they want to have, a development publishers can exploit as they wean consumers from the notion that information is free.

“There is the expectation that you will pay for content” on an iPad, Fidler said, “so a pay model is established” with the device. “There is no way for a newspaper to survive unless there is a (pay) model.”

In addition to digital circulation publishers will receive from tablet users, newspapers can also expect sales from digital ads. But it’s the next generation of services, such as location-based and transactional services, that will help newspapers reap the revenues they need, Fidler said.

An important caveat: “Lifecycle is now so quick, and the economy will continue to be a big factor,” Fidler said. “Historically, periods of rapid growth of technology, like we are now seeing, have been followed by a plateau or even a decline in new technology,” he said.

“So the expectation that we will continue to see a rapid pace of development is false. I wouldn’t be surprised if in the next eight years we see some sort of plateau. That is something publishers will have to consider.”

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