Last week, the UK’s struggling Sport Media Group finally went into administration. The Daily Sport and Sunday Sport newspapers were never top on the sales figures from British the newsstands, but their slow death is a reminder that the challenges to the business models of media groups are far from over. Here’s why…
The problem is simple. The economics of newspapers are based on bringing buyers and sellers together; anchored in a pre-internet era when this was difficult. The content and packaging is designed to engage a lucrative target audience, and when the numbers cross a threshold, there’s advertising revenues to be unlocked. In the past, advertising demand has always been there, and the ad agency industry that grew up was engrained the newspapers’ business model into the culture of marketing.
Fast forward to today’s ‘any time, any place anywhere culture’. The internet made everything available and Google made it findable. Control of the sales process moved into the hands of the buyer, who could seek out what they wanted, all on their own terms. The ‘push’ approach of marketing was replaced by pull. Add to that the saturation of advertising messages through other channels, and consumers became both sensitive to when they are being marketed at, and ruthless at screening out marketing messages they didn’t want. The Sport newspapers are simply small casualties in a much wider landscape as publishers’ business models continue to be eroded.
Throughout the early 2000s, local newspapers across North America bled their reserves; the cash cows of media dried up. These were the first media properties to feel the real effects of the digital networked society. Pagination was cut, media groups consolidated, some survived as online-only, and many titles closed. At the time, Craig’s List and Google were usually blamed for the collapse of classified advertising – the foundation ‘pillars’ for most newspapers’ revenues – and classifieds were seen as the problem. But the revenue pressures are more fundamental. Newspaper and TV ad rates remain too high compared to digital alternatives for the attention they gain. The costs of creating content and entertainment demand global economies of scale. This means that publishers with just a few titles have little future unless they can get a strategic advantage in other ways,
The role of advertising in the marketing mix has tumbled, and the next two years will see dramatic changes in Europe’s media landscape. In the last few weeks AutoTrader’s sale has been questioned, Future magazines are warming up the City for bad results coming in May for their print titles, BBC Magazines are under pressure, and The Guardian is setting out to diverse into a mainstream US news service. Sport Media Group is an early indicator of much more to come.
