Slow, Painful And Inexorable Decline

By April 25, 2013Issues, Mike Archer

By Mike Archer. Is door-to-door flyer delivery one of the only things keeping community newspapers afloat? And if so … for how long?

In his memo to staff this week warning of impending drastic layoffs due to “alarming declines in revenue” which, if they continue, will mean “the businesses [the Sun and the Province newspapers] are unsustainable”, Pacific Newspaper Group president and publisher Gordon Fisher, confirmed the truth most big daily newspapers are facing – their business model no longer makes any sense.

*See memo below

Making people wait while you put a bunch of information and images onto paper with the use of extremely expensive machines and then, collate it, fold it, bind it and deliver it by hand to people all over the city and the province is not as efficient as just posting the stuff to the web where everybody can see it as soon as it happens.

I don’t mean to trivialize what is happening to the industry but if you went to a banker today with their business plan you would be laughed out of the bank.

Fisher also, inadvertently, gave us an insight into the business models of many of Canada’s community newspapers especially in urban and suburban markets like the Fraser Valley.

“I would be less than honest if I failed to point out that, as an example, our productions costs are dramatically higher than those of our peers. As one small but enlightening example, we are not in the insert business because it is impossible to profitably compete due to our costs,” said Fisher.

By the ‘insert business’ Fisher means the huge flyer packs which come inside and wrapped around the outside of community newspapers nowadays. Though residents of the Fraser Valley have grown accustomed to receiving the heavy bundles which community newspapers have become, most small market newspapers in Canada are able to maintain their presence based on a combination of paid circulation and local advertising.

Staff stuffing newspaper with flyers

Staff stuffing newspaper with flyers

Flyer-Delivery Model

The suburban and urban flyer delivery newspapers have adopted a different model.

Back in the 1990s much of the industry took aim at Canada Post, where the bulk of the flyers were being delivered, and turned itself into a flyer distribution industry.

It started when Torstar’s Metroland division took aim at the suburbs of Toronto with a view to owning the newspapers in the suburbs.

Not enough of them were prepared to sell, at least on the terms Torstar probably wanted, and, rather than own a patchwork quilt of new and old newspapers across the Greater Toronto region, which would take years (if not generations) to establish as predominant players in the paid circulation newspaper markets of the suburbs, Metroland came up with a new distribution formula supported by flyers.

Rather than rely on editorial content to drive circulation up, the Metroland model, while not implicitly bumping editorial content down in importance, relied on door-to-door distribution to every address in town as a means of, overnight, claiming higher circulation than their established competitors which relied on paid circulation for their figures (and revenue).

Newspaper flyer stuffing machine

Newspaper flyer stuffing machine

Enormous Business Costs

The enormous print, insertion and delivery costs were covered by:

A: Owning their own printing press (so they paid themselves to print the product)
B: The new revenue source from flyers which they took away from Canada Post

National and regional chains like Canadian Tire, Shoppers DrugMart, and the grocery stores leapt at the opportunity for two reasons:

A: Flyer delivery through newspapers was much cheaper* than the post office
B: Flyer delivery inside a newspaper was a delivery method much more likely to lead to people reading the flyers than tossing them in the bin

*The pricing model used by the flyer chains is simple – once a newspaper has sold three – five flyers at full cost the rest of the revenue is gravy and allows newspapers to sell flyers at extremely low rates either for market share or in return for large volume or multi-market buys.

The model was copied in many places across Canada, most notably in the Lower Mainland where new newspapers sprung up delivering door-to-door and old, established paid-circulation newspapers were forced to abandon the revenue from circulation and switch to full distribution in order to compete in the new flyer delivery market.

Most smaller markets have either stayed with the paid-circulation model or added a free full-distribution flyer paper on weekends.

New York Times On Tablet

New York Times On Tablet

Reliance On National Advertising

Delivering the news to every address in town, whether they wanted a newspaper or not, became the accepted practice in some communities.

When you add the newspaper industry’s reliance on display (or ‘on the page’) national advertising from governments and many of the same big national and regional flyer companies, some newspapers are in fact more reliant on out-of-town business and government for their survival than they are on the local business community.

More and more over the last two decades, local newspapers have been in the business of selling local eyeballs to out-of-town retailers. The internet now allows those local eyeballs to interact directly with those companies without having to print or deliver anything.

Now that a bridge has been built which allows anyone to cross the river for free anywhere, anytime, why would you pay the ferryman.

With a faltering economy, shrinking retail sector and the shift of billions of dollars in national advertising to the internet, newspapers with business models like the Vancouver Sun and Province are in danger of simply no longer being viable, as their publisher pointed out this week.

The internet has done more to kill the newspaper industry than radio or TV ever could because it represents a completely new paradigm for the delivery of information. That’s what it is also killing TV and, if we ever get out of our cars, radio will likely die as well.

mouse plugged into newspaperI spent 20 years in the newspaper business and worked in just about every department at one time or another. I have wonderful memories about the business and many of the people in it so it is with a bit of sadness I watch the slow, painful and inexorable decline of the industry.

However …

… the notion that people should have to pay for news and information is dead.

And, despite some limited success at stemming the tide with paywalls (New York Times, Globe and Mail), the notion that I, as a consumer of news, have to pay you based on the costs of your outdated and costly business model is laughable to the new generation of information consumers.

A company’s ability to make money is not the concern of its customers, especially when what the company offers is of either little value to them or is available elsewhere for free.

It makes one wonder what will happen to the community newspapers which have turned themselves into flyer-delivery vehicles once the companies using the door-to-door delivery model pack it in. A transition back to paid circulation seems hard to imagine when they have been offering themselves for free for so long.



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Unlimited Indeed
unlimited imgThe Globe and Mail has come up with a name for its paywall – the limit between viewers and the information they are seeking which can only be breached with money – and have decided to call it, get this, Globe Unlimited.

In the image (to the right) in order to read any of the stories advertised in the list you have to click on the ‘Unlimited’ button for the privilege of paying to proceed.

And these are the people who want you to trust them to use words honestly and truthfully in order to effectively explain the world to you.

Not sure how building a wall and asking me to pay to get past it qualifies as ‘unlimited’ but the Globe, along with the New York Times, may prove to among the only newspapers with content which is unique enough that they can charge for access to it.

Whether or not it will be enough to stem the tide of a generation flocking to the internet for their information is doubtful but we wish them luck.

unlimited defBy and large though it seems like a last ditch effort on the part of the old media to do whatever they have to in order to keep their outdated business model going in a free information universe.

I can’t remember any examples of technological advances favouring the previous way of doing business.

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* Pacific Newspaper Group president and publisher Gordon Fisher’s memo to staff:

Sun memo 1
sun memo 2
sun memo 3
sun memo 4

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