Surveys show that a growing amount of Americans regard advertising as an annoyance at best. Consumers may have forgotten that it’s advertising that has subsidized news and entertainment for decades providing radio and television content for free. Newspapers and magazines charge for content but the circulation income doesn’t come close to paying for the production costs.
The marketing world is transitioning from mass-marketing to micro-marketing which will shrink advertising’s subsidy of content. “Where advertisers are going is that they’d rather have a smaller audience with more committed readership,” says David Verklin, of media buying giant Carat North America. One important issue is the fate of news in the micro-marketing era. Can the mass media make money from Web-based publications that reach a targeted audience as desired by advertisers? If ad revenue is inadequate, will people willingly pay for quality journalism?
The audience for news is fragmenting even though Americans remain heavily reliant on the mass media for their national news. Americans receive 83% of their news from television, 42% from newspapers, 19% from radio and 15% from the Internet (Source: 2003 Pew Research Center).
Television executives seem overly enamored with the income potential from product placement in programming. News shows have been off limits for now. As product placement becomes more popular they run the risk of turning mature viewers away from the television without adding enough new income to protect network news divisions from an eventual ad revenue implosion.
The growth opportunity for news is the Web. Every broadcast station and publication of note has created an online version. The Internet is already a vital source of news and offers long term potential for news businesses that can figure out how to use the Internet’s advantages (interactivity, low cost distribution, quick turnaround time and digital ad formats).
The mass medic’s investments in the Web are just starting to produce profits for many news Web sites. Online news is even more advertising dependent than print. Few publishers have dared challenge the free content business model of the Web by charging for access to their content. In fact, after Rupert Murdoch purchased the Wall Street Journal he converted the most successful paid subscriber business on the Web to a free content site.
Online advertising sales are growing at a fast pace but are a long way from sustaining newspapers and magazines at their current size. Consider the New York Times whose print advertising sales were more than twenty times greater than their web advertising sales in 2004. They will need to downsize their operations quite a bit if they are to ever pay to run the industry leading newspaper on web advertising sales.
Can online news generate sufficient profits to finance a media company of the quality we have been accustomed to over the years? Perhaps someday, but micro-marketing to a targeted audience is likely to prove the most effective way for the media to adapt to the segmenting of America.