The economy hurts, but it’s not the real problem

In a published interview this week, MediaNews Group CEO Dean Singleton said media analysts are “mis-covering” what’s happening to newspapers.

They don’t understand the difference between a severe economic downturn, the most severe we’ve seen in my lifetime, and structural change. There are both going on. There’s structural change going on, and it has been for several years, and that will change our business model. But the majority of the revenue declines we’re seeing in 2009 are plain, old economic downturn.

Singleton’s belief implies that things will be brighter when the recession ends, but that’s not what Jack Myers thinks. Myers has published a chilling warning for media companies that believe as Singleton does.

Those media companies that believe a renewed economy will send their rate cards shooting up are in for a shock.”

Jack MyersHe went on to say that a lot has changed since the economy went south and that advertisers will not go back to the days of increasing costs. Advertisers, he noted, have made it very clear that they consider media costs too high, and he concludes that: “Media cannot expect to fund enhanced capabilities and services through increased costs.” Advertisers, he wrote, require enhanced services at reduced costs, and this means an operational mandate for media of reducing costs as well.

Funding of a business, like our nation, can no longer depend solely on increased revenues. Operating costs must be reduced. Salaries must be brought into line. Underperforming employees can no longer be supported. Advertisers, for their own survival, will inevitably cease their funding of those media vehicles that are no longer measurably productive for them. Marketers will not longer support those media that are not effective and efficient. The fragmentation of advertising budgets which escalated throughout the 1980s and 1990s, is reversing itself. While fiber optics, digital compression, interactivity, addressability, satellite distribution and other technologies suggest continued fragmentation of television media, advertisers are no longer willing to fund these advances.

We’d be hard-pressed to find an honest media analyst who would disagree with what Myers is saying here, and it’s why we’ve been preaching that the real disruption is in advertising, not in content. Media companies cannot assume that any multi-platform distribution model will return them to their glory days, because the advertising just won’t be there to support it. Add to what Myers is saying the reality that advertisers are becoming media companies themselves, and you get the picture.

Myers noted that unless media value is increased, advertisers will continue to withdraw support. This is why the old game must be discarded for a new one, one that begins with value propositions that connect in today’s disintermediated, commodified world. Local media especially must awaken to the reality that their most valuable asset is their sales force, not their news department, for sales account execs have their feet on the street and roots planted deeply in the local advertising ecosystem. The only question is how to take advantage of that.

We think that identifying and developing the Local Web is the key to survival downstream. We cannot sit back and wait for the Googles of the world to do it; we must do the grunt work necessary to identify and understand everything about the Web in each of our markets.

We’ve got to get into database advertising, for local businesses will demand it. Enabling commerce is the new mantra of local media, and we simply have to move beyond the ad infrastructure made available through a news-based portal to get there.

Every citizen of the media community — every television and radio program, every magazine, every newspaper section, every billboard, and every website — must operate at a profit. Losses at any level, except in an investment mode, cannot be tolerated.

This is one of the themes of our book, Live. Local. BROKEN News. The book is about television, but the same thing could be said about newspapers or any other form of local media. We cannot — cannot — keep doing the same things we’ve been doing and expect different results.

The relationship between media and advertising has always been symbiotic, and what happens to the host happens to the symbiote, like it or not.The economy has definitely hurt media companies, but it has masked much deeper issues, and those who don’t respond properly won’t be around to celebrate the new economy. Advertising is the new content. That’s where we need to be.

(Originally published in this week’s AR&D Media 2.0 Intel newsletter)

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