Consulting report on Strategic Planning at the Chronicle Gazette

Goal of the Report

This report aims at finding out the current status of the news publishing industry and the constant threat it is facing from the internet readership. This report offers an in-depth analysis of the current readership and the changes the industry is going through with the case of Chronicle Gazette, a news paper publishing company. This report contains analysis of the readership industry and the effect of changing situation caused to the industry in general. This report is concluded with the potential strategies in the face of competition from free online sources that could be utilized by Chronicle Gazette.

Chronicle Gazette

Chronicle Gazette is a leading newspaper in the major metropolitan area which has a paid circulation of 225,000 customers .It is a first rated newspaper and offers great quality in-depth articles to its customers. Writers of this newspaper are comprehensively informative and competitive and their contributions have provided them with lots of awards. Susan Feinman is the Publisher of this newspaper.

In the recent years Chronicle Gazette’s subscription has gone down as more and more readers are using online sources to view and read the news. In past eight years the subscription of this publication company has gone down by 38% causing an alarm to the overall business practices.

State of newspaper publishing Industry

Introduction

Newspaper publishing industry has been facing rigorous competition from online and internet technology, the hub of information sources. Newspapers readership is going down which is an startling sign for all the newspaper publishers, immediate access to news online is attracting readers to internet sources and causing huge losses to the conventional newspapers.

All over the world newspaper industry is suffering a great set back as reading habits of people are changing drastically, previously Newspapers were the only source of information with passing time mass communication strengthened and Media channels started providing news and this also was used to be prime time.  Major overhaul took place when specialized news channel began; they provide information 24X7. Cut throat competition is given by internet to these newspaper publishers which has increased their debts drastically and led them on the verge of bankruptcy. Publishing houses have been so badly broken that closed down their operation lay off the editors and reporters, reduced their pays or limited the physical circulation of the newspapers.

With increasing such issues, there is a rising concerns of how the declining newspaper circulation would impact the social life.

History of Publishing Industry

Publishing industry took off in the 1830’s, with major focus on selling the news by street hawkers on low-cost papers. With changing times this industry grew from strength to strength, earned significant importance, credibility and influence. In the late 1800’s sensationalism in news paper took its tool and the era witnessed marked movement in “Yellow Journalism”

Emerging radio technology and declining revenues during great depression badly affected newspapers, causing decline in newspaper advertisements of 45% from 1929 to 1933 and was low on 20% in 1941. Economy was so badly hurt that its spill over affect was experienced by publishing industry that led to suspended operations and job cuts while many of such publishing houses were shut as they couldn’t sustain themselves yet radio industry enjoyed realized gains in advertisements in the great depression era (Kirchhoff, 2009).

Advent of television created more problems for newspaper publication. In 1960’s television became the major and influential source of communicating news to the masses and these TV channels were capturing latest information and adopting unique style in delivering to the public. They became such a popular medium that all the national advertisers started pouring their business to such TV Channels. This led to the bankruptcy and family owned newspapers couldn’t survive on their own and were bought by growing chains. In the period of 1960 to 1980 57 newspaper were sold and majority of them were bought by Garnet Co.            Concentration in of newspaper ownership went up so high that by 1977, 170 newspaper owned two third of country’s 1,700 daily papers. 10 major newspaper companies including the Washington Post Co., New York Times Co., and Times Mirror Co went public as they were not able to run their finances by being privately owned.

Table 1. Daily Print Newspaper Readership

Percentage of Total Adults Who Read a Print Newspaper on a Weekday

Source: Scarborough Research Top 50 Market Report 1998-2007, prepared by Newspaper Association of America

Chain ownership started growing, ownership began to confine in few hands that led to decrease in competition and minimal intervention of watchdog role. In1910, nearly 60% of cities had competing daily papers. By 1930, that figure had fallen to 21%, and by 1971 this figure reached to 2%.

In 1980’s cable television banged the newspaper industry as consumers were exposed to 24 hours news information. Given the fact information was abundantly available, still newspaper continued to enjoy profitable and quasi monopoly status in their communities. Majority of the newspapers reported huge profits and great returns on their equity. Profit reached a maximum height of 22.75 in 2000 and declined to 10% due to the layoffs and budget cuts in 2008 by these newspaper companies. Big companies cash flows soared in 1990s at maximum limit of 29% due to favorable condition and great business as mentioned earlier but these cash flows went down in 2008 to 13% due to the emerging competition majorly pushed by internet to the newspaper industry(Kirchhoff, 2009).

 Industry Conditions

Currently there are 1400 daily newspapers in United States and thousands of other community papers publishing weekly or biweekly. In the clutter of these newspapers only handful of papers have national print readership including Wall Street Journal, USA TODAY and The New York Times. One third of newspaper circulation in big cities is provided by top 50 newspapers. Newspaper industry that consists of reporters, sales man, printers, advertising sales people and other constituted $50 Billion business in 2002 alone and employed around 40,000 people according to the 2002 census.

 Cost cutting: A way for Newspapers Survival

Given the level of completion newspaper industry started to face, survival became a matter of concern, squeezing profits required some structural changes in all the newspaper companies. Analysis of Suzzane M.Kirchhoff (2009) reveals that 50% of the cost of newspaper companies consists of labor wages, while production & distribution accounts constitute 30% of cost. In the face of stiff competition when their product is not being sold well, these companies have cut their cost drastically by reducing the size of paper, staff lay off or reducing the number of publishing days(Kirchhoff, 2009).

Some key Statistics Regarding Cost Cutting

• Newspaper trimming by 115 in 2008, highest one year drop since 1978.
• 17 %  staff lay off  form the recent 2001, actual employed laid off were 56,400
• In 2009 10,000 journalists lay off or took buyouts.
• Reporters covering state legislatures went down by more than 30%, comparing 2003 figures.
• Washington reporters were 35 in 1985 and figure went down to 23 in 2008.

Dwindling Advertising Revenue

Newspapers receive 80% of the revenues from retail, national ads and classifieds while subscription and stand sales make up the rest. Major cost of the paper alone is driven by extra pages of Sunday newspapers as lot of other inserts are there on that page. Newspapers have raised heavy profits through traditional advertising, amount received sued to be so huge that it was enough to subsidize local, foreign and investigative reporting and also made subscription available at lower prices to the consumers(Kirchhoff, 2009).

This perfect mechanism of running the newspaper smoothly is no more available and working as advertising reduced due to recession in the economy and shift of consumer readership on the internet. Newspaper have had sharpest decline in advertisement as shown in the table below This TNS model is showing that newspaper revenue has decreased by 25.5 % in the first quarter of 2009.

Conventional print news has received a beating due to the rising debt cost and emergence of new media sources  such as internet which has low entry cost. Advent of new devices and excess availability of internet on PDAs and new hand sets have given further opportunity to consumers to access the news online.

 External Forces

There are number of forces shaping some drastic changes in the newspaper industry.

 Economic Forces

From the above mentioned statistics we can very easily relate the effect of publishing industry in general. Ups and downs in the overall economy greatly affect the business of the publishing industry and effect is measured into ways;

1.  Number of advertisements received.
2.  Subscription

We have seen the effects of great depression earlier in the Industry analysis section that advertisement which is a major revenue stream for newspaper has gone down, it also declined due to the financial crunch of 2008 and its spill over effect faced by all the sectors of some of the great economies which affected newspapers.

On the other hand low cost of reading news and watching latest videos online has also reduced the subscription which consisted of roughly 30% of the income stream for the newspaper business(Gentzkow & Shaprio,2008).

 Social, Cultural, Demographic & Environmental Forces;

Social, cultural, demographic and legal factors have promoted the readership online, causing some major hindrances to the newspaper publishing industry businesses. There has been a major cultural shift that is promoting internet and information technology, social activities of people have been confined to the interacting websites such as Facebook, Orkut, Twitter and Myspace. Extensive usage of these websites and long hours spent on internet is rigorously promoting online news readership.

On the demographic bases people of age 55 and above who are less adaptable to technology have newspaper subscription while the new generation is more into the technology and internet serving activities, even job work requires task to be done on the computer and enhances the accessibility to view the news on the internet while doing office work.

Using internet as a medium to promote latest and exciting news is also preserving the environment as usage of paper is almost zero, which is taken as a favorable signs by many people who believe in preserving the world.

 Political, Governmental and Legal Forces

Politics is significantly affecting the newspaper industry, in fact politics has given rise to the media channels which is strongly communicates the latest happening and developments in the political parties of a country and forms the sentiments of voters, hence in short we can say politics is favoring news channels more than newspapers as development in statements is so quick and so frequent that a daily newspaper fails to catch the excitement which is shown by channels better.

There are no legal bindings, no licensing is required and it is easy to enter into the internet world and start publishing latest news with virtually no cost.

Technological Forces

Technological factor is also unreasonably pushing the conventional newspaper business down as the cost effective mode of providing the content is available, “the internet”. Hence any major break through in the technology would further suppress the newspaper business.

 Internal Assessment

Alongside the external factors, internal core capabilities of company affects the business activities and shapes new directions and strategic objectives. In this section we would look into the internal factors of company and how can they be utilized to revamp the business activities.

Organizational Process & Structures

Organizational process of Chronicle Gazette is rather simple, with reporters at one end running and searching for great news and writing articles that depicts quality and information and content is so well covered that they have been awarded for their work many times. On the other hand there is a team of experienced professional who have an art of selling advertisement space, they are the key people identifying big business and bringing in major revenue for the paper. All in all the processes and structure of the company is very competitive and promising.

HR Capabilities

In face of competition Chronicle Gazette has to be very particular about the work force, given the fact that many of the writers have won awards for their work, this fact alone says it all that work force is good and competitive and no alteration is required, HR capabilities are well matching the level of competition. Yet the reporters and writers should come up with exciting topics to keep the readers engaged.

Financial Position

Financial Position of Chronicle Gazette is giving silent alarm, with subscription falling by 38% in past 8 years and advertising revenue dropping by 28%. Considering the stated figures, we can say that financial position of this company is ever dwindling. Chronicle Gazette needs to work out on the cost and should look for either increasing the subscription or identify alternate sources of increasing the revenue stream only then this company can stay in the picture.

Marketing / Sales Capabilities

Given the above figure of declining advertising revenue and subscription, we can say that marketing and sales capabilities are not up to the mark and the team handling marketing and sales activities should cone up with sales promotion tactics to maintain the subscription level and show the incentives to the advertisers and initiate sales pitch in unique ways and create win/win situation for the company

Strengths and Weaknesses of Publishers

Strengths and weakness of publishers in general are given below;

Strengths

• They have been into the business of selling the news from quite some time.
• They have team of efficient writers and reporters who understand the need of customers.
• Writers have the flow and flair of putting the word to give the feel, which customers look forward too.
• These newspapers not only sell news they also sell living standards to the customers by publishing articles related to home, living, technology etc.

Weakness

• Newspapers have the fixed cost which is hindering a shift on internet sources.
• Competition from low cost entrants.
• Not understanding the cultural shift of extensive internet usage.
• Closing of the conventional business and moving online within a blink of an eye.

Steps that Chronicle Gazette Might Take

Chronicle Gazette has been in the newspaper publishing industry from quite some time, like many others this company has been facing severe competition form internet sources, which has become a favorable mode of news readership. Taking into consideration the latest situation Chronicle Gazette has to take some steps to secure the business activities and put it back to the fast growing path. Chronicle Gazette has host of option available that could be used.

In this report I am putting forward two strategies both of which have different impact on the basis but one is workable on short term and other might work for the business in long term basis, yet both aim at increasing the revenue stream as well as subscription.

Steps companies in the publishing Industry took to combat the threat

Many companies reacted to the constant competition pushed by internet. Different companies have reacted differently under these circumstances, their stories have been explained below;

1. Two major newspapers “Detroit News and Detroit Free Press combined the operations, their cost became very high due to less advertisements and to combat the cost effect  they reduced the subscription to three days a week.
2. Catching up on the opportunity of alternative sources of news and information potentially available on number of wireless devices, emerging business caught on to such audience and published investigative reporting, example could be Pro Publica (Pro Publica. Org), Kaiser Health News and Voice of San Diego
3. Some of the newspapers offer print as well as online readership. One of the political newspapers Politico raises 50% of the revenue from ads in its free print newspaper and maintains 3 million online readers.

Strategies for Chronicle Gazette

Strategy # 1

Chronicle Gazette by partnering with restaurants, clubs, shoe shops and apparels shop give fee coupons as a complimentary item along with subscription.

The above mentioned suggestion has short term implication it may work for the company for a while and it will give the company some time to think and take steps for long term business activities and revenue stream.

Once discount coupons would be offered people would buy the Chronicle Gazette and these companies would also buy advertising space and receive guarantee sales. It is going to be a strategic partnership with many business and Chronicle Gazette

Strategy # 2

Chronicle Gazette should react proactively to the changing needs and start an online website.

Chronicle website can only survive if it do what every one is doing, Chronicle Gazette has an edge in delivering the news to the readers, they should take it to the next level and offer round the clock exciting news and publish articles that people would want to read and showing the number of clicks to the advertisers can sell the advertising space at the website similar to what they are offering in their newspapers.

Above mentioned strategy should be implemented after scrupulous understanding of readers’ need so that they can generate maximum stream of clicks. This way income stream would only be advertisement and not the subscription yet they can make fortune out of advertisers alone like many other websites are making.

References

1. Gentzkow, M & Shaprio, J.M. (2008). The Effect of Newspaper Entry and Exit on Electoral Politics, retrieved May 22, 2010, form http://faculty.chicagobooth.edu
2.  Kirchhoff, S.M. (2009). The U.S. Newspaper Industry in Transition, retrieved may 21, 2010
   from http://www.fas.org/sgp/crs/misc/R40700.pdf//