Ways to turn down the noise

Like a lot of people who keep track of new business and technology developments, I find myself getting overwhelmed with information. It's sometimes difficult to separate the signal from the noise. To keep from being completely buried under the noise, I've come up with some rules for determining what (and what not) to pay attention to:

• Press releases: They're advertisements, highly biased and often very inaccurate, but they're useful for identifying new products and services that might be of value to you, and competitors that you may not have known about. They can also alert you to management appointments and changes at your customers and competitors.
• Analyst reports: I almost completely ignore analyst forecasts, although reports of actual sales can be very useful. No forecast that covers more than 12 to 24 months is in any way accurate (and I say that as a former analyst who made my living doing five-year forecasts.) In addition, analysts often bias their forecasts upward to make their reports more appealing to vendors, or to placate an existing client or encourage a potential client to sign on. Analyst reports that make recommendations about which products or services to buy, or which vendors to consider, are subject to similar biases, and should always be looked at skeptically.
  
  Also, pay attention to the backgrounds and experience of the analysts themselves. How much working experience do they have in the industry they're covering? Did they work for a customer or for a vendor? Was the report written by the analysts whose names are on it, or was it actually written by junior, less-experienced researchers?
• White papers: Most white papers, whether they're directly written by a vendor or by a research firm for a vendor, are advertising. What's worse, in order to get them, you usually have to identify yourself, and you can expect a sales contact shortly thereafter.
• Webcasts: Again, these are mostly advertising for the companies participating in or sponsoring the webcasts. Unless you want to spend an hour listening to an ad, they're a poor use of your time. Even when customers are included as presenters, they may be there only for show, and the vendor representatives will dominate the conversation.
• Tech business blogs, such as TechCrunch and Silicon Alley Insider: These blogs generate traffic with controversy, often mix facts, opinion and conjecture together, and in general, are more entertaining than reliable.
• Hardware blogs, such as AnandTech and Tom's Hardware for computers, or Digital Photography Review for digital cameras: These blogs often do an excellent job of covering and reviewing new products, but be sure that the reviewer received no compensation from the vendor for the review.
• Newspapers and magazines (print or online): The quality of the information that newspapers and magazines report is directly related to the experience and quality of their reporters and editors. It takes time for a reporter to understand a subject area, especially technology, business, medicine and science. Budgetary pressures have forced many publications to fire their experienced specialty journalists and rely on freelancers, news services and press releases. Check reporters' bylines to find out where they came from and how much experience they have in the subject area. Also, anything labeled "Advertorial" is advertising, even if it looks like normal editorial content.

By being an informed consumer of news, you can get better information and draw more accurate conclusions in less time.

U.S. newspaper advertising declines for 15th straight quarter

The Newspaper Association of America reports that print newspaper advertising declined year-to-year in Q3 2010 for the 15th straight quarter, and in 18 of the last 19 quarters. The last year where there was more than one positive quarter was 2005. The story for national advertising (national advertisers running ads in local newspapers) is even worse: Q3 2010 was the 23rd straight quarter of declines, and the last "up" year for national advertising was 2004.

The declines in advertising revenue were to be expected, given that print circulation has been declining for years, but the newspapers are caught in a vicious circle: As circulation declines, circulation revenue falls, and the reduced circulation causes advertising revenue to decline. After two years of online advertising revenue declines, revenue increased for newspapers in all three quarters of this year so far, but total online revenues in Q3 were less than 14% of print revenues--far less than that needed to offset the print declines.

Most newspapers are going to have to jump to an online-only strategy sooner or later, but how far can they ride their print businesses before they have no choice but to make the transition? Further, can they afford to offer a meaningful newsgathering and editorial service on their online revenues alone?

Who don't you trust? Newspapers and TV news, that's who

U.S. newspapers, along with local and national television news shows, have all seen their audiences decline for more than a decade. The decline in newspapers has been blamed primarily on the growth of the Internet and the availability of news on the web for free that was once only available for purchase in print. The decline of television news has been blamed largely on its aging audience. There's another reason for the declines, however, and it has nothing to do with the Internet or audience age.

The Gallop Organization released a poll last Friday that shows that confidence in newspapers and television news is nearly at an all-time low for newspapers, and is equal to the all-time low for television news. In the most recent poll, only 25% of respondents said that they have "a great deal" or "quite a lot" of confidence in newspapers, and only 22% have the same level of confidence in television news. The numbers have been flat since 2007. By comparison, in 1993, the first year that the survey covered both newspapers and television news, 31% of respondents had "a great deal" or "quite a lot" of confidence in newspapers (that number was as high as 39% in 1990), and 46% had the same level of confidence in television news (the number has been generally going down ever since.)

You might think that 18-to-29-year-old respondents, who would likely be the most Internet savvy, would be the least interested in newspapers, but you'd be wrong. That age group trusts newspapers more than any other demographic category, with 49% saying that they have "a great deal" or "quite a lot" of confidence in newspapers, while their confidence in television news is only 22%. The political beliefs of the respondents also have an impact: People who consider themselves Republicans or Conservatives have the least confidence in both newspapers and television news. Democrats and Liberals have the most confidence in newspapers; when it comes to television news, Democrats also have the most confidence, but Liberals are slightly behind Moderates in their confidence. Independents are much closer to Republicans in their confidence in newspapers, while Moderates and Liberals are somewhat closer in their confidence in both newspapers and television news.

That's a lot of statistics, but here's the bottom line: If you don't trust a news source, you're very unlikely to pay for it. If three-quarters of the public has little or no confidence in newspapers, why would anyone expect them to pay for them when they can get the same content online for free? If almost 80% of the public has little or no confidence in television news, is it any wonder that they watch "The Daily Show", replay recordings from their DVRs or get on the web rather than watch the news on TV?

How are newspapers and television stations dealing with this problem? They're dumbing down their product even further. Rupert Murdoch has announced that News Corporation plans to launch a dumbed-down national newspaper specifically for tablets like the iPad. Tribune is experimenting with a dumbed-down television news format in Houston (as if television news hasn't already been dumbed down to insipid levels). If the big problem is lack of confidence, making the news even less credible isn't going to increase confidence, readership, or viewership.

In short, newspapers, television stations and networks can't blame their problems solely on extrinsic factors. The quality, accuracy and relevance of their reporting have at least as much to do with their present predicament as do the Internet and aging audiences.

Publishers: Sorry, but the iPad won't save you

Book, magazine and newspaper publishers are looking at the iPad as akin to the Second Coming, but it may actually accelerate rather than slow their declines. Here's why:

The Kindle has increased the number of eBooks purchased by heavy readers, but my belief is that it's due primarily to the low prices of Amazon's eBooks relative to their print versions. Heavy readers can buy a lot more eBooks than print books for the same amount of money. Those heavy readers, while important, are a small minority of the overall book-buying market. Prices for eBooks on the iPad are going to be a little bit higher than what Amazon has been charging, but because of the shift to the Agency model with Apple's 30% commission and pricing limits, the publishers will actually end up making less on each sale than they currently do with Amazon, even with higher price tags.

If the iPad becomes wildly successful, as it has a good chance of doing, it will put eBook readers into the hands of millions of people who would never consider buying a Kindle or nook. That's a good thing, but is it going to stimulate moderate and light book buyers to buy more eBooks? I don't think so. Instead, those buyers will substitute eBooks for print books at a 1:1 ratio, and the publishers will end up making less on each sale. As it decreases the sales of print books, print runs will get smaller, and physical manufacturing and distribution will become less efficient and more expensive. After an initial burst of sales activity, it's likely that book publishers will see their revenues go down, not up.

Magazines and newspaper publishers will end up with the same result, but for slightly different reasons. Existing print subscribers aren't going to subscribe to more magazines and newspapers because of the iPad; they'll switch from reading on paper to reading on screen, and eventually drop their print subscriptions. Readers who don't already subscribe are unlikely to pay to read magazines and newspapers on the iPad, especially if they can find free substitutes on the web. As print circulation numbers decline, the marginal cost of running printing presses and distributing magazines and newspapers will go up, making print publishing even more costly.

In short, if the iPad and similar devices are wildly successful, they could end up turning print publications into the equivalent of vinyl records--high-cost specialty items purchased only by collectors.

The Christian Science Monitor to cease daily publication

In what's likely to be the first of a wave of fundamental restructurings in the newspaper industry, The Christian Science Monitor announced today that it will cease publication of its daily newspaper by April of next year. According to Online Media Daily, the newspaper will shift to a weekly print edition, along with a continuously updated version of its website, CSMonitor.com, and a daily electronic subscription product. There's been an ongoing debate within the Christian Science church over whether or not to keep the newspaper alive, and this strategy appears to be a compromise that will keep the Christian Science Monitor in business by shifting daily coverage to the web and dramatically decreasing costs.

Weekly newspapers are about the only bright spot in the newspaper industry, and moving from a daily to a weekly will help the Christian Science Monitor capitalize on this trend. I think that this is likely the model that many newspapers will follow--daily coverage on the web and a weekly print version. Whether that will save enough money to keep hundreds of newspapers from failing is anyone's guess, however, especially with advertisers pulling back across the board, including online.

It seems likely to me that in many markets, the job of providing daily local coverage will fall to the websites of television stations, not newspapers. The local newspapers in those markets will either have to survive as weekly lifestyle-oriented publications, or not survive at all. The strategy pursued by The Christian Science Monitor will work best for the national or quasi-national newspapers, such as The Wall Street Journal, New York Times or Washington Post.

In any case, we're witnessing the start of the final transition of print newspapers to electronic distribution, or to history.

Update: According to Advertising Age, only two of the top 25 U.S. newspapers gained circulation in statistics from the Audit Bureau of Circulation for a year-to-year six month period ending September 30th. Those two are USA Today and The Wall Street Journal, and the gains were 0.01% in both cases. Some of the other changes were The New York Times down 3.6%, the Los Angeles Times down 5.2%, The New York Post down 6.3%, the New York Daily News down 7.2%, the Chicago Tribune down 7.8% and the Houston Chronicle down 11.7%. Overall, daily circulation declined 4.64%, and Sunday circulation dropped 4.85%. In both cases, the overall rate of decline increased from the year-ago rate, which was 2.6% for dailies and 3.5% for Sunday. Not an encouraging trend.

Going, going...

If you're a newspaper publisher, the Newspaper Association of America issued some pretty horrifying news today. Total newspaper advertising revenues dropped $3 billion year-to-year in the first six months of 2008, to $18.8 billion dollars, and online newspaper ad revenues dropped for the first time. Alan Mutter, who writes the Reflections of a Newsosaur blog, plotted the decline for his readers:

 

In non-adjusted dollars. these are the worst results in 16 years, but Tim Windsor restated the results in constant 2008 dollars, and determined that these were the worst results since 1982. Here's Tim chart:

Using inflation-adjusted numbers, ad revenues are actually lower than they were in 1982. In addition, according to the NAA, national daily circulation has been falling steadily since 1988, and Sunday circulation has been falling since 1990.

We're in a recession, so that's magnifying the revenue fall-off, but it's very clear that a lot of newspapers are either reaching or have passed the tipping point at which they don't have the resources to attract and keep readers. With less advertising, the news hole either gets bigger or the newspaper gets smaller. If you can't afford to pay enough writers and editors to fill the news hole, the only option is to make the newspaper smaller. At some point, the newspaper goes away.

Broadcasters should take no solace from these numbers. The audience for news shows has been dropping for years, and the average age of the audience watching the national nightly news is over 60. CNN, Fox and MSNBC aren't enlarging the news audience, they're simply trading it among themselves.

Years ago, Ted Levitt, a marketing professor at the Harvard School of Business, asked the rhetorical question "What business are you in?" Newspaper publishers aren't in the newspaper business, they're in the information business. They've got to figure out profitable ways to get their information to customers. For a lot of publishers, that's not going to involve a printing press for much longer.