Advertising revenues are taking a massive blow. Some local publishers say they are down by 50%, some national titles by 30%. Online advertising revenues are further challenged by advertisers blacklisting coronavirus-related stories and by some platforms at least temporarily demonetizing coronavirus-related content
“A lot of news media won’t make it but this is an opportunity for some,” writes our Director Rasmus Nielsen
The coronavirus pandemic will impact every part of our lives and societies, including our news media. Even in the best case scenario, there will be major disruptions in many countries for months, with economic and social consequences felt long after. From a public health point of view, the pandemic may not end for another 18 months or more.
Both online news sites and television news programmes have seen a surge in audience attention as people seek to understand the pandemic, what is being done about it, and what they can do themselves. However, many of the independent news media people rely on will themselves nonetheless be at risk during this crisis.
Existing forces of creative destruction already rippling through the industry are now compounded by the unwelcome arrival of a pandemic that those of religious disposition may see as little less than one of the four horsemen of the apocalypse.
Some have already described the likely impact on news media as an “extinction event” for our media environments, a moment for news media akin to the biotic crises that lead to widespread and rapid decrease in biodiversity.
Given all the many creative, informative, and powerful ways in which I see journalists and news media respond to the pandemic, and all the ways in which individuals, groups, and organizations are using digital media to stay connected, informed, and empowered, I’m not convinced reduced diversity is what we face —but the impact will be real and negative on the business of news as we know it, further hollowing out many newsrooms, and I think it will change our media landscapes in enduring ways by weakening many for-profit news media, killing off some, and (perhaps) strengthening a few.
We already know that ever-more intense competition for attention, advertising, and consumer media spending especially from platform companies has disrupted the traditional business of news and driven a polarization between a few winners and a lot of losers in the legacy media industry and digital-born news media face much the same pressures as legacy ones, with some succeeding but many struggling. On top of those situations, we now face the short-term and long-term impact of a global pandemic.
What does this mean for the business of news in the short run?
The short answer is: bad things will happen.
The slightly longer answer is that this will play out differently from country to country, and company to company. With some rough estimates based on UK newspaper industry data, we can get a better sense of the immediate impact on revenues and employment. I will focus on newspapers not out of sentimental affection for words on dead trees, but because the newspaper industry still accounts for the majority of investment in original reporting.
I want to underline this is not a rigorous analysis or formal modelling, but illustrative, indicative numbers to help people in the profession and in the industry think about what may happen next. Precise figures are not always available. But based on public data produced for Ofcom and the Cairncross Review, newspapers account for about two-thirds of investment in news provision in the UK. Print is something like 80% of UK newspaper revenues and digital something like 20%. The split between advertising and circulation is about fifty-fifty. By comparison, WAN-IFRA data suggests that the global newspaper industry is more like 90% print and 10% digital, with a somewhat higher reliance on circulation revenues than advertising revenues.
In the short run:
Advertising revenues are taking a massive blow. Some local publishers say they are down by 50%, some national titles by 30%. Online advertising revenues are further challenged by advertisers blacklisting coronavirus-related stories and by some platforms at least temporarily demonetizing coronavirus-related content. If UK newspapers lose 30% of their advertising revenues, that will be in the region of half a billion pounds in the course of a year, and more than 15% of their total income. This will hurt every publisher, but it’s especially dangerous for small local titles (both legacy and new) with little access to credit and limited cash reserves, freesheets and others almost entirely reliant on ads, and for those larger companies who have high debt or significant pension obligations.
Reader revenues are harder to predict. With a huge spike in traffic, and everyone reminded of the importance of independent credible information, at least trusted brands should have an opportunity to engage new subscribers, and some in the US have said they are seeing a surge in new subscriptions. But at the same time digital news subscriptions tend to be a winner-takes-most market, so not everyone will benefit from this, and some brands, like the Financial Times, have made some of their coronavirus stories free to access to help inform the wider community. (If the pandemic lasts 18 months or more, will news about it remain free for the duration of the crisis?) Offline, print still drives a large part of reader revenues, and the distribution system and single copy sales will be under immense pressure during lockdown and social distancing.
Other revenues vary a lot in both volume and importance for different publishers, and there is little consistent data available. But take the events business, which many publishers have been expanding, and some are based on. Consider the plight of the Seattle-based digital news site The Stranger, which tweeted that 90% of their revenue is directly tied to people getting together in groups and that the coronavirus situation has virtually eliminated this income.
So in the short run, we are likely to see huge declines in advertising revenues, probably declines in reader revenues for many titles (though some may, over time, see an uptick), and declines in many other streams of revenue. If that happens, we will see, as a minimum, a net reduction of hundreds of front-line journalistic jobs in the UK (more than the BBC’s Local Democracy Reporters scheme and Facebook’s Community News scheme combined), and we may well see net losses in the thousands. Even leaving aside the impact on broadcasters and independent community news, the impact on newspapers alone could mean a loss of something like ten percent of all front-line journalistic jobs in the UK.
What does this mean for the business of news in the long run?
What happens next? Of course, a lot depends on the length and severity of the pandemic. However, even now, the OECD secretary general Angel Gurría has said the economic shock is going to be bigger than the financial crisis and called it “wishful thinking” to believe that countries will bounce back quickly.
The UK economy, for example, is already in recession, and the only question really is how bad it will be and whether it will be a severe recession or turn into a full-scale depression with years of economic decline. Needless to say, at this stage, no one knows exactly what will happen. But right now projections from various banks for UK economic growth in 2020 range from -1.1% to a pessimistic -7.9%. (For comparison, the UK economy shrunk by 4.2% in 2009, the low point of the financial crisis. If the pandemic effectively lasts until a mass-market vaccine is available the numbers are likely to be much worse.)
What does this grim outlook mean for the future prospects of the business of news?
In the long run:
A prolonged recession or depression will mean lean years ahead for news media, especially in print. While there is no universal pattern and the relevant research is dated, it is worth pointing to this article, which found that, with some country-to-country variation, advertising expenditures declined an average of 5% when a 1% decline occurred in the overall economy, and that the effect of economic downturns on print advertising expenditures were on average 4 times that of the effect on television advertising expenditures. (Just think about what a 7.9% decline in GDP would mean in light of that.)
Similarly, while stickier than advertising revenues, a severe recession, let alone a long-lasting depression, would lead people to consider discretionary spending, including media. As more and more different subscriptions compete for people’s money, this is likely to hit many news media hard on reader revenues. When we asked respondents in our 2019 Digital News Report which subscription they would choose if they could have only one, just 12% said they would pick news, compared to 28% that would choose a video streaming service like Netflix.
And if/when the economy recovers? It is tempting to think that the business of news will return to what we considered “normal” before the pandemic, but if we have had months and potentially years of profound disruption, that too is wishful thinking. The ongoing structural transformation towards a more digital, more mobile, and more platform-dominated media environment continues apace, with all its concomitant creative destruction, and coronavirus is more likely to accelerate and exacerbate much of this development as it is to slow it, let alone reverse it.
People are going to spend a lot of time online for the foreseeable future. And so far, we have few examples of people returning to offline media once they have embraced online ones.
And yes, people are flocking to news sites and television news right now, and we are all powerfully reminded of the importance of credible information. But it is unfortunately not at all clear that the public feel that news media are always the best, or even more credible, providers of such information.
The situation may evolve, but the pandemic arrives in a context characterized in many countries by a profound crisis of confidence in the news media. A survey from early March found that while most respondents named major news organizations as where they got most of their information about the virus, news media and journalists were among the least trusted sources of information. (Though some countries, like Denmark, have seen a different pattern.)
Fundamentally, people will use media that help them be who they want to be, do what they want to do, and showcase a version of who they are and of what they do that they like. Many news media have struggled to offer a compelling value proposition in this space, much of which is increasingly dominated by platforms. The US has seen a surge in the number of news apps downloaded in recent weeks—but downloads of aggregators like News Break and SmartNews far outstrip downloads of leading publishers like CNN, Fox News, and the Washington Post. There has been growth in online news consumption, but surely part of that is because global internet traffic has increased more than 50 percent.
And yes, advertising will recover as the economy recovers, but resurgent advertising spend will not necessarily return to the same advertising channels. Companies trying to rebuild their business will very aggressively reevaluate their advertising spending and seek to maximize the return on investment, and any medium that cannot deliver evidence of that will see a permanent drop in advertising, even when overall spend recovers. This is what happened after the financial crisis. Advertising rebounded, but newspaper advertising never did.
In the long run, I think that the combination of creative destruction and a global pandemic is even more creative destruction, even after an economic recovery. News media who want to thrive in this situation need to focus on developing the businesses and editorial offers they want in the future, not try to restore the business and editorial offers they had in the past. The past is the past. It ain’t coming back. And if we don’t figure this out, the short-term cuts will be just the first of many subsequent rounds of layoffs.
So what do we do next?
As we embrace social distancing, wash our hands, and follow public health experts’ advice while managing anxiety and all the combined pressures of balancing personal and professional responsibilities in a new situation, it is natural to wish for someone to come to the rescue —perhaps governments, perhaps deep-pocketed platform companies who like to stress how important news is for both them and society, perhaps philanthropists. The UK government has announced a £330 billion emergency bill, but, despite Culture Secretary Oliver Dowden recognizing that news “has never been more important than it is right now”, no earmarked support for independent journalism.
I think it is clear that there are a number of things policymakers could do to create a more enabling environment for independent news media. But they weren’t doing it before the pandemic, and frankly I don’t think it is high up their list during the pandemic either.
So I’ll believe help is coming when I see it. Till then, we are on our own.
To be brutally honest, I think a lot of news media won’t make it, including both legacy and new entrants, precarious as their situation already was, whether old titles managing decline, or new titles struggling for sustainability. Some start-ups will disappear entirely. Many legacy titles might be reduced to the kinds of lingering slightly zombie-like brands-without-newsrooms already seen across the US (Rocky Mountain News, The Youngstown Vindicator), or acquired as trophy assets by more or less benign wealthy individuals (the risk of media capture is real). Some of these losses will be tragic for entire communities who have few other sources to turn to.
But even if some titles will close, and many be further diminished, I also think there is an opportunity for some here. In the UK, those who have expressed a desire to “whack” the BBC have been very quiet as the public turns to public service media. Non-profit and member-based news organizations with a clearly articulated mission and a commitment to serving everybody, not just those who pay are trying to mobilize support from both current and new members. And those based on subscription models are demonstrating that their journalism is worth paying for.
Not everyone will succeed. But some will. Coronavirus has made many things more difficult, including the business of news. Old forms of local media will suffer. As will precarious outlets serving disadvantaged communities and start-ups at a delicate stage. What will be a big blow in developed markets like the UK could be catastrophic in other countries. The destruction will create more room for new forms of crap to supplement old forms of crap. But that does not mean editorial idealists and hard-nosed commercial realists cannot work together to build a sustainable future for distinct, valuable, and more diverse journalism, both locally, nationally, in niches, and with global ambitions.
The global pandemic has super-charged the destructive part of the creative destruction rippling through the news industry and the profession of journalism. That only makes it so much more important we work together to deliver on the creative part. People need us, so let’s do it.
Courtesy: The Reuters Institute for the Study of Journalism