More Pain Coming For Newspapers And Local TV

November 23, 2010


Editor’s note: This is John Reinan’s weekly marketing column for

Some stability has returned to the traditional media. Local TV stations just fattened up on their usual feast of election-year commercials. And after four years of ruthless cost cutting, newspaper companies have slowed — not stopped, but slowed — their bleeding.

But this brief spell of relative quiet may simply be the calm before another storm.

Newspapers are facing a huge boost in the cost of newsprint – their second-largest expense after employee salaries. Newsprint prices have risen more than 20 percent in the past year, and are expected to stay at that level for the foreseeable future.

Higher newsprint prices could force publishers into another round of cost-cutting. That could mean either fewer employees, or fewer pages in the paper. Either solution risks a degradation in the quality of the product that could drive more readers away.

Meanwhile, local TV hasn’t yet felt the full impact of the Internet. Hulu, a leading Internet TV service, is on track to more than double its revenue in 2010. Netflix has also aggressively entered the Internet TV market.

Here’s how that affects local TV. Cable TV companies nationwide lost nearly 750,000 subscribers in the third quarter of 2010 – the biggest drop in 30 years. Some of those cancellations no doubt were by people trying to save money in a recession. But others probably represent a switch to Internet TV.

Cable systems typically have franchise agreements requiring them to carry local TV stations. Internet-based TV services like Hulu and Netflix have no such requirements. People watching TV on the Internet will find it much easier to ignore local stations.

The rise of the smartphone also comes into play. By 2012, smartphone sales are expected to surpass, for the first time, combined sales of desktop and notebook computers. So, as more people watch Internet TV on mobile devices, local TV again risks being left out of the picture — unless the locals can come up with compelling Web offerings of their own.

A proposed sale in the traditional media world could provide clues about the future. Freedom Communications, which owns the Orange County Register along with 100 smaller newspapers and eight TV stations, recently put itself up for sale.

Some analysts have suggested that Freedom would use the money from the sale of its traditional media properties to remake itself as a digital company. That would be a sign that one management group, at least, no longer sees a future in newspapers and broadcast TV.

So, where is the future? On Facebook and sites like it. Facebook currently accounts for 10.3 percent of all visits to Internet sites by U.S. users. That’s more than Google, which comes in second at 7.2 percent.

What’s even more striking is that Facebook accounts for one in every four page views (actually, 24.4 percent). YouTube is second at 6.4 percent.  People use Facebook a lot, and they visit multiple pages while they’re using it.

The audience for Facebook is bigger than any TV show, and as time goes on it will become less about chatting with friends and more about delivering information and advertising of all kinds.

As Tim McGuire, longtime editor of the Star Tribune, said recently on his blog: “Mass media may not be dead — but call it fragmentation, targeting or hyperlocal, the day of a dominant local or national news force has definitely begun to fade. Mass media is on the clock.”