Publishers More Willing to Innovate : Newspapers Fear Being Bypassed by Advertisers
Like a flu that won’t go away, a deep foreboding is again settling over the nation’s publishers about the future of the daily American newspaper.
The advertising structure is changing. Readership is declining.
And now, as publishers concluded their annual convention here Wednesday, concern is rising that a significant number of advertisers increasingly are using new technology to sell their products directly to consumers--bypassing traditional advertising media altogether.
The term “bypass” is even becoming a buzz word for lost advertisers.
In reaction, publishers themselves seem more willing to explore innovation. They recognize that their ability to reap ever higher profits from building circulation and raising advertising rates is no longer working.
As consultant Christine Urban told the American Newspaper Publishers Assn. meeting, newspapers are “severely threatened for share of mind, share of market, share of future.”
“There is a strong underlying concern in the industry today,” said Tom Johnson, publisher of The Times, “about declining readership and the threat of bypass.”
It is a change of mood for publishers who seemed buoyant at their convention only two years ago, when videotext--the idea of an electronic newspaper sent each morning to readers equipped with special computer terminals--failed to materialize.
With the boom during much of the 1980s, said Cox Newspapers President David Easterly, many publishers got “fat, dumb and happy.”
But it was made clear this week that now there are other problems. And they don’t come only from readers wanting new ways of getting information.
It is coming from bypass, the loss of advertising to direct marketing.
Consider the case of Kimberly-Clark, maker of Huggies disposable diapers. The company recently spent $3.5 million to develop a database that identifies 75% of the new mothers in America. The system contains not only their identities but their demographic characteristics and a history of what kinds of products they buy.
With that knowledge in hand, Kimberly-Clark can start building the personal loyalty of those consumers--through educational pamphlets, discounts, and other telephone and direct-mail customer services. The company hopes to create the kind of personal relationship that Americans once had with local merchants in the days before national chains and suburban malls.
In turn, as the children of those mothers grow older, the database will allow the company to sell products through campaigns that will be more tightly targeted and cost-efficient than through traditional advertising.
“We can no longer dismiss direct marketing as junk mail,” said Hearst President Frank Bennack.
Direct Mail Booming
Rather, it is coupons and catalogue sales, point-of-sale promotion and telemarketing.
Indeed, these techniques have grown so fast, according to Bennack’s figures, that direct mail now represents 14% of all advertising, and catalogue sales 10% of all retail sales.
In 1986, the average American received three direct marketing solicitations each day, and half of all adults ordered something via mail.
The growth will slow in the next five years. Still, telemarketing is expected to grow by 20% and direct mail by 11%, while traditional media, such as newspapers, television and magazine advertising, will grow by only 7%, Bennack said.
And now, with deregulation, the regional “Baby Bell” telephone companies are seeking to move into electronic publishing and direct marketing, a specter that particularly worries publishers because the phone companies control the lines of communications.
Tuesday, for example, New York Telephone announced a system that will connect anyone with a personal computer and a telephone to services offering everything from excerpts of USA Today and Newsday to stock quotes and home shopping.
These factors are combining with more familiar pressures on newspapers. The industry has suffered a recession for more than a year now, in part because mergers resulted in a significant consolidation in the retail department stores.
Not only has fewer retailers meant less advertising, but the survivors now carry so much debt that they have scaled back their ad budgets. Also, national advertising has never fully recovered from the recession of the early 1980s.
And readership is still falling, particularly among young adults. In 1967, according to industry figures, 60% of people aged 18 to 29 read newspapers. By 1986, that number had fallen to 33%.
In response, some newspapers are now trying to use the same technology that is threatening their base. Some are experimenting with making their movie reviews available by telephone. Readers call in and get the review and show times for any movie they want, using the technology made possible by touch-tone phones and computer circuitry.
The Providence (R.I.) Journal has several such phone services, including Soap Opera Updates, which offers a plot summary of the soaps in case a viewer missed an episode. And these are designed to work with the newspaper: Consumers must check the paper to get the daily access code for Soap Opera Update.
The Ft. Worth Star-Telegram sells its wire service to readers via computer for less than $10 a month, and some papers are considering making their classified ad listings available by computer in a way that they are instantly up to date. Consumers don’t have to wait for the next day’s paper.
The Boulder (Colo.) Daily Camera’s Infocall service lets readers get sports and other information over the phone. Although the paper itself has only 30,000 subscribers, it gets more than 77,000 calls on the service each month.
Marginal Improvements
And some papers, such as the Hartford Courant in Connecticut, are experimenting with making their next day’s paper available by fax machine the afternoon before.
But all of these are marginal improvements. More must be done, publishers believe, to change the basic product of the newspaper.
Today, with rising immigrant populations, ethnic diversity and greater market segmentation in general, there are “fundamentally new markets that need fundamentally new newspapers,” said consultant Urban.
Even these, however, may not address the problem of bypass. For the economics, at least for now, favor the new direct marketing techniques.
The cost of newspaper advertising, for instance, is rising at a much higher rate than the cost of direct marketing. Newspaper and TV advertising rates have risen 54% since 1982, well above inflation, Bennack said. Telephone marketing, meanwhile, has actually gotten cheaper.
Direct marketing also aids consumers who “want help sorting through the clutter” of ever more confusing information and an increasing proliferation of products to buy, he noted.
One of the audio-visual presentations that publishers saw this week said it simply. “Once life was simple,” it began. “Those good old days are long gone.”
