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'Culture of inertia' threatens US newspapers in digital world

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By Noel Young | Correspondent

March 5, 2012 | 4 min read

The search for a new revenue model to revive the newspaper industry in America is making only halting progress - but some individual newspapers are faring much better than others and may provide signs of a path forward, according to a new report.

The big problem

Replacing losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want, say the authors . "Most newspapers continue to contract with alarming speed," they say.

Bloomberg Business Week commented on the study by the Pew Research Center's Project for Excellence in Journalism ,"Those who obsess over the fate of newspapers have something new to validate their worst fears."

The Pew report says cultural inertia is a major factor, "Most papers are not putting significant effort into the new digital revenue categories that, while small now, are expected to provide most the growth in the future.

"To different degrees, executives predict newsrooms will continue to shrink, more papers will close and many surviving papers will deliver a print edition only a few days a week."

Yet a few papers are performing much better.

"These variances suggest that the future of newspapers, rather than being determined entirely by sweeping trends, can be significantly affected by company culture and management - at papers of quite different sizes."

The study involved 38 newspapers from six different companies There were site visits and interviews with multiple executives. All data was provided on the basis that it would be anonymous.

Of the papers that provided detailed data, 22 had circulations under 25,000, seven had circulations between 25,000 and 50,000, and nine had circulations of 50,000 or more (including three with circulations more than 100,000).

One of the most alarmoing figures: The newspapers studied were, on average, losing print advertising dollars at seven times the rate that they were growing digital ad revenue .

The most optimistic projections from executives saw digital gains overcoming print losses within a few years; the most pessimistic held that it would never occur.

But one paper studied saw digital ad revenue grow 63% and print grow 8% in the last full year for which it had data. Another paper had a gain of 50% in digital advertising.

Some of these "outliers" said the authors were having success growing new categories of digital revenue.. One was having significant success selling targeted digital advertising customized based on customer online behaviour.

"Another company had dramatic success building a new multi-million dollar a year consulting business helping advertisers and other businesses learn how to market themselves in the digital landscape."

Newspapers had made only marginal progress in developing new non-advertising revenue streams, such as hosting events, creating digital retail malls that provide transaction fees or, with the exception of a few papers, becoming digital marketing consultants for their advertisers.

A paradox is that digital, continues to provide only a small part of the revenue, while the part that is shrinking, print, provides most of the money.

"We have all these [new] products we are working on that we believe are going to deliver results that are part of our sustainability," said one executive. "But we need to eat today."

One executive told the authors bluntly, "There's no doubt we're going out of business right now."

The problem, he explained, was that If you changed your company and did not succeed, that could hasten the end of the enterprise.

"There might be a 90% chance you'll accelerate the decline if you gamble and a 10% chance you might find the new model," he said. "No one is willing to take that chance."

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