The media world continues to reorient, consolidate and find new ways to adapt to the digital landscape — and that trend isn’t changing any time soon. Technology has impacted the way consumers get their information, and it has upended media companies in the publishing, broadcast and digital worlds.
The business models of traditional publishers have perhaps been the most impacted as advertiser dollars are moving away from print to the web, video and social media. According to Moody’s, print advertising revenue is expected to decline between 10 and 15 percent through mid-2018. The firm said the U.S. newspaper and magazine industry’s organic earnings before interest, taxes, depreciation and amortization will decline between 7 and 10 percent through early to mid-2018.
“Digital advertising gains and cost management initiatives by the publishing industry will not fully offset the continued secular decline in print advertising revenues,” said Moody’s vice president and senior analyst Alina Khavulya, who noted that revenue from paywalls will help publishers expand their subscriber bases but circulation revenue “gains” from them “are likely to be muted.”
Traditional publishers, the majority of which are in the process of shoring up dollars by cutting or combining print staff in order to hire digital-savvy workers, are looking for news ways to drum up revenue in the face of declines.
Such efforts have included an expansion of their digital and video teams, the development of live events, e-commerce, branded content and acquisitions. For instance, late last year The New York Times scooped up recommendations sites the Wirecutter and the Sweethome for $30 million, and has begun staffing up those teams, while offering around 100 buyouts to newsroom employees.
While the development of new revenue streams is vital to evolving the business away from a reliance on print advertising, traditional publishers are still fighting an uphill battle.
Plagued with seemingly endless rounds of restructuring, in which jobs are combined or eliminated, some publishers are mulling putting themselves up for sale. This year has been a sort of watershed moment in the magazine industry, in which some well-known companies sold off their flagship titles or put themselves up for sale in order to keep afloat.
Earlier this year, Wenner Media sold US Weekly and Men’s Journal to David Pecker’s American Media Inc. The AMI sale left Jann Wenner, once the enfant terrible of the publishing world, with just a controlling stake in Rolling Stone, the magazine he co-founded 50 years ago. But Wenner sold a 49 percent stake in its marquee title Rolling Stone to BandLab Technologies last fall.
Time Inc., one of the largest magazine publishers, entertained bids for the sale of the company earlier this year. The publicly traded company said it was exploring options, after it was reported that it received expressions of interest from Meredith Corp., Najafi Cos. and a consortium led by former Warner Music Group chief executive officer Edgar Bronfman Jr. But Time Inc.’s board decided to pursue a strategic plan, which included massive cost cuts and the elimination of about 300 jobs. In order to continue trimming costs, Time Inc. has put Coastal Living, Sunset and Golf up for sale. It also is looking to unload a stake in Essence, its African-American media title. Although those titles are officially on the block, insiders say everything is up for grabs.
In the meantime, the print world continues to shrink, as it works to keep up with digital competitors such as Buzzfeed, Vice Media, Vox Media and Refinery 29, which have lower operating costs. Publishers can work to build scale digitally, but their business models are still retrofitted for print.
According to a report from Group M: “Publishers do not make enough from their owned and operated digital properties. The New York Times is now paid for by more people than ever before, but the aggregate of the subscriber contribution does not fully offset the evisceration of revenue from classified and retail advertising that were for generations the bedrock of commercial success.”
Khavulya agreed, noting that even though The Times’ revenue from subscriptions grew to $250 million in the second quarter, which accounts for a 61.4 percent of its total revenues, it isn’t enough to offset print ad declines.
“Digital isn’t offsetting print because advertisers are getting better targeting from the Facebooks and Googles of the world,” she said, explaining that advertisers are “putting their money there.”
According to eMarketer, U.S. digital ad spending will hit $83 billion in 2017, and Google will account for 40.7 percent of U.S. digital revenues. Facebook will claim about 20 percent of that total. The two tech companies together have formed a duopoly over the digital ad space, putting publishers at their mercy. Even though video has been billed by publishers as the next big money maker, there’s too much supply and not enough demand, Khavulya offered.
“I don’t see many bright spots [for publishers]. You can watch a video coming from anywhere…that’s why increasing digital revenue is challenging,” she said before turning to video. “Video is following the footsteps of publishing.”