Business is about change; but no CEO would like to confront change in the magnitude experienced by the newspaper industry over the past 15 years.
I am chairman of a Swiss “quality” newspaper Le Temps. It was founded in March 1998, six months before Google and six years before Facebook (2004). At the time, newspapers represented 32.7% of overall advertising spending. Today, it has dropped to 9.4%. Over the past 19 years, digital advertising has surged from 2.1% to 38.6%. Google and Facebook, which did not even exist when the Le Temps was launched, account nowadays for more than 60% of digital advertising expenditure!
Moreover, 68% of this advertising is done on mobile platforms. The first smartphone was launched in 1999, the iPad one year later and the iPhone celebrates its 10th anniversary this year. All of them have changed the world, all of them are younger than Le Temps. Today, US adults spend 10 hours and 34 minutes a day in front of a screen. Advertising and business go to where the market is: digital.
First lesson: when a revolution occurs today, it happens fast, very fast. Historically, the media have been incremental to each other. Television has not destroyed radio; Internet has not killed television. In media, as in most industries, actors proliferate and consumer choice increases. The “old timers” still manage to survive, but the new players reach a dominant position in just a few years. Overall advertising revenues remain about the same but new entrants quickly take the lion’s share.
Why didn’t publishers react faster? Because, and this is the second lesson, in business, a revolution often emerges from another industry sector. The leader in “cloud” business today is Amazon, not an IT company. Google triggered the revolution in self-driving cars, not Ford or GM. Perhaps the next winner in the financial industry will be a telecom company using phones for payments or perhaps Facebook – who knows? Business leaders should always look beyond their familiar horizons: this is where the barbarians usually come from…
Third lesson: the pendulum eventually swings back to the middle. Will paper die? Probably not. Sales of electronic books have stagnated for the last two years. Reading on paper remains a different experience from reading on a screen. However, the reading experience itself may take place at a different time — perhaps during the weekend — while digital browsing will prevail during the working week. This is the consequence of the distinction between the urgent – on digital and the important – on paper. Every business model is hybrid and innovation always cannibalizes former success stories. It does not mean it that it eradicates them entirely. People still go to the movies and look at billboards…
The fourth lesson is that a newspaper is more than a product; it is a brand. Legally and financially a brand belongs to the company; emotionally, it belongs to the consumer. And this is how it is supposed to be. When Coca Cola launched New Coke in 1985, consumers reacted angrily: “what have you done to our brand?”; “the greatest marketing blunder of the century”, according to then CEO Roberto Goizueta. They quickly back-paddled to launch Classic Coke. Customers’ emotional relationship with the brand is to be treasured. If it is broken, it is worse than if the product itself is broken.
Brand means brand extension, and this is the fifth lesson. A newspaper is at the center of an ecosystem: digital, paper, conferences and videos. Readers have the choice to how and when to get their information. The French fashion house Yves Saint Laurent does not make its money with “Haute Couture” for which it is so famous. The revenues stem essentially from the extension of the brand, from ready-to-wear to jewelry to perfumes and cosmetics. Extension of the brand means that different parts of the portfolio bring different levels of profitability. But all contribute to the success of the brand in terms of image and income.
Consequently, and it is the sixth lesson, brand management implies the respect of the identity of each part of the portfolio. No moral judgement should favor readers who prefer international affairs to sport, or business to entertainment. All readers should be respected and addressed specifically. However, if back office consolidation is appropriate (accounting, finance, procurements), a firewall should be maintained between brands and their individual images. One does not sell a luxury watch with a plastic strap.
The seventh lesson is that readers (consumers) should be at the center of any business model. Obvious? Not always… Too often in the past, the temptation was great in the media industry to focus more on advertising and less on readership. But advertising always goes towards readers and never readers towards advertising. A reader does not buy a newspaper just to look at publicity. The digital world creates the same temptation. Advertisers are attracted by sites with the greatest number of clicks, even if they post fake news or extremist comments. However, today, it starts to backfire…
Finally, public opinion expects media companies to be more than money-making businesses. They are part of the intellectual infrastructure of a country. They contribute to its attractiveness in the same way as political institutions, physical infrastructure and culture. A newspaper, for example, allows a local community to have an identity, to interact and to build an image for the rest of the world.
The economic success of a media depends on its ability to permeate the social and emotional aspirations of a society. It is increasingly the same for any other business today – companies are increasingly under pressure, especially from the younger generation, to show how they contribute to society in general. Henry Ford sensed this truth many years ago: “A business that makes only money is a bad business”.
This article is authored by Prof. Stephane Garelli- Professor at IMD business school – Professor at University Lausanne – Chairman Le Temps newspaper
The views expressed in this article are of the author and not necessarily the views of the publisher.