In this day and age, digitization is continuously reshaping the media, with a dramatic impact on newsprint publishing. The media industry’s business models are particularly vulnerable to digitization;after all, media outlets such as newsprint publishers rely heavily on the consumption of content that is now widely available for little or nothing elsewhere.In fact, in the MENA region –and despite healthy population growth – readership levels of newsprint have started to decline. And, although there are new readers entering the readership age profile, approximately 70 per cent of them are skipping the print versions and becoming digital-only consumers. These developments are, in turn, challenging MENA newsprint publishers’ business models, causing a structural depletion of economic value.
Management consulting firm Booz & Company has developed three major steps that newsprint playerstoday must take to ensure value retention. First, they should optimize operations by choosing where they want to be on the media value chain, and then consider where to make structured cost cuts. Second, they need to launch a digital transformation. Third, they should further strengthen the core capabilities that position them for the growth in adjacencies and build new revenue streams.
Today, close to 76 percent of current newsprint readers in the MENA region – who have excellent digital connectivity – are expected to either decrease or stop their newsprint readership within a couple of years. This is causing a rapid and sustained decline in readership.
In the MENA region, the decline in advertising revenue will proceed at an even gentler pace than in developed markets because of the resilience and dominance of local newsprint advertising spend. Indeed, the value of the newsprint advertising market in Saudi Arabia may actually grow a little in the coming two to three years in nominal terms. The market will, however, start to drop in value in 2016 with steeper declines in 2017 and future years because of digital disruption.
In reality, digitization levels are particularly elevated in the affluent Gulf Cooperation Council (GCC)markets, where the overwhelming majority of newsprint customers have access to broadband.
The response of many newsprint players has been to meet the challenge of digital disruption with investments in digital initiatives.However, although digital transformation is essential, it is not sufficient to recover the value lost within traditional operations. Simply put, the commercial model on these new platforms is weaker than in print. In contrast to the limited and valuable advertising real estate previously enjoyed by print, digital is far more competitive and fragmented.
In addition, the way-to-play in the digital space demands more than simply evolving internal capabilities and is significantly different to what newsprint players are used to.
The first agenda that regional newsprint players should adopt is to optimize their operations by making them more efficient and effective. This helps newsprint publishers to safeguard, and get the most out of, their traditional business; these existing lines of business matter because they are likely to account for the majority of revenues in the short to medium term.
The second agenda for newsprint publishers is to design a digital transformation that addresses the changing dynamics across two fronts: readers and advertisers. On the readers’ front, digital transformation is vital because user behavior toward media and news is changing rapidly thanks to new platforms, devices, and applications. The digital transformation is different from the reflexive digital initiatives taken by many newsprint players.
The third major step for newsprint players is to access new revenue streams by diversifying into adjacent value pools playing on extensions of core capabilities. Although the efficiency agenda and digital transformation are critical imperatives, they will not fully offset the depletion in economic value.
Diversification into new opportunities along the media value chain is the only way to ensure a retention of value and future growth. To be able to access new opportunities, however, requires more than cutting costs, investment in digital technology, and evolving current capabilities.