Dependence on advertising to blame for newspaper downturn, claims new study

Downturns in the UK and US newspaper industries are more closely connected to the level of dependence on advertising than the rise of the internet, a new book from the Reuters Institute suggests.

'The Changing Business of Journalism and its Implications for Democracy', which was commissioned by the Reuters Institute for the Study of Journalism (RISJ) at the University of Oxford, discusses the state of the newspaper industry across seven countries. In many cases, the internet is not the main challenge facing the business of journalism, they suggest.

Despite the similarly high levels of internet use across the countries, the book claims there are "massive differences" in how the industries have fared in recent years, with the downturns often tracing back to those newspapers which have inherited the "fragile" business model of relying more on advertising than sales.

"The latest downturns seem to be more closely connected with the relative degree of dependence on volatile revenue sources like advertising and on the differential impact of the global recession than with the spread of the internet," according to the book's executive summary.

In some countries where the private media sector has struggled and there is a "heavy dependence" on advertising over sales, such as in the national US and local UK press, the impact of this dependence on advertising is seen "most forcefully", the book adds.

In comparison, countries such as Germany and Finland, which are said to have strong, state-funded public service media, "have seen much more stable developments in the business of journalism".

"Countries like the US, Germany, and Finland all have about the same proportion of internet users. However, the American newspaper industry, which has generated more than 80 per cent of its income from advertisements, is today in a much more serious crisis than its counterparts in Germany and Finland, where advertising typically constitutes about 50 per cent of total revenues."

In the UK the distribution of sales and advertising income for regional and local daily newspapers was 35 and 65 per cent respectively in 2008, compared to 59 and 41 per cent for national daily newspapers, illustrating the heavier reliance on advertising by local press in the UK.

"Needless to say, this has hit regional and local newspapers very, very hard, in particular freesheets—and indeed, most of the titles that have closed have been freesheets, whereas titles with more diverse revenue streams are generally less hard hit—but still hit—by the cyclical decline in advertising revenue caused by the recession," one of the book's editors Dr Rasmus Kleis Nielsen told Journalism.co.uk.

But, he added, the presence or absence of strong public service media "cannot in itself account for the fortunes or lack thereof of the private media sector".

"The US has a very limited public service media sector, and a private press in a deep crisis, while countries like Germany and Finland have very generously funded public service media with a strong engagement online, and yet at the same time a private press that has largely been able to weather the storm and continue to make  money, even through the recession.

"The UK is somewhere in between, strong public service media (as strong as on the continent), more challenges facing newspapers (more so than in Germany and Finland, in particular for regional and local newspapers, but less so than for the US)."

The book, edited by RISJ director Dr David Levy and Research Fellow Dr Nielsen, is due to be published tomorrow. As a result of the research findings, Dr Levy said policy makers need to consider the variation across nations.

"The message seems to be that the changing business of journalism does not necessarily mean doom and gloom. However, it is clear that policy makers will in future need to think about the widely different variations in each country – even when confronted with comparable challenges," he says in a release.

"National policy makers also need to look beyond their traditional policy toolkits and critically assimilate lessons learnt abroad and see how they can be applied to their own set of circumstances rather than just slavishly copy others."

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