Readers and Advertisers Flee and Newspapers Wonder What to Do

U.S. Newspaper Circulation Down 8.7% in Latest Survey (USA Today)

Newspapers Continue to StruggleTough times keep getting tougher for the U.S. newspaper business.  As described in this story, newspapers continue to experience a financial hemorrhage.  And if you think their current circumstances are bad, just wait another year or two when even more advertisers figure out their money is better spent in other media outlets.

While the doomsday alert for newspapers has been loud and clear for several years, most newspapers that are surviving are doing so by mostly cutting costs rather than increasing revenue.  Newspapers primarily generate revenue in two ways, reader payment and advertiser payment.  But clearly, the reader payment source drives advertisers, who will not continue to purchase ad space if readers stop buying.

While this story focuses primarily on the circulation numbers of the 25 largest newspapers, even small town newspapers are not immune as they face competition from information sources that were not thought to be direct competitors just a few years ago (e.g., search engines, bloggers).  Additionally, their distribution advantage (e.g., home delivery) is eroding thanks to methods of electronic delivery such as automated RSS feeds, email and cellphone apps.

The troubles facing newspapers is a classic example of what happens in the product life cycle.  In this case, the product has clearly reached the maturity stage and is teetering on the decline stage.  In an attempt to extend their life cycle, newspapers have tried to reinvent themselves mainly by adding an Internet outlet.  However, newspapers are learning what thousands of other businesses already know: there is a lot of competition on the Internet.

There are many reasons for the declines in newspaper circulation, including the rise of free news on the Web. Publishers also have sought to offset losses in advertising revenue by raising newsstand and subscription prices. And some newspapers have reduced delivery to unprofitable areas.

What will the newspaper industry look like in 10 years?

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