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Friday, 1 November 2013

About Sanoma, vanishing business models and the value of information that you receive for free.

Today, there was very bad news from one of the biggest publishers of weekly and monthly magazines in The Netherlands, the Finnish company Sanoma.

More than 500 personnel members of this company have been sacked today and many more freelance writers, editors and photographers will lose a valuable source of income too.

And to make things even worse, a staggering 32 magazine titles have been nominated to be either sold to another party or to be completely abolished in 2014/2015. Perhaps counter-intuitively, these 32 magazines were not obscure titles and small editions, like ‘Dutch Ikebana Magazine’, ‘Young Scientist’ or ‘Cars for Doctors’.

To the contrary, among the titles to be abolished were the Dutch Playboy, ‘Kijk’ magazine (i.e. ‘Look’; an old and very interesting popular-scientific magazine, which I almost spelled as a child) and other renowned men’s magazines, like Nieuwe Revu and Panorama: magazines that offered a once unbeatable combination of barely dressed ladies and interesting stories upon crime and popular culture.

Het Financieele Dagblad wrote the following snippets about the events at Sanoma:

The Finnish media corporation scraps 500 of the 1600 jobs at its publisher’s branch in The Netherlands. The sheer existance of 32 magazines is uncertain.

The company will focus on 17 magazine titles. Most of these titles are women’s and housing magazines. Of the men’s magazines only Autoweek will remain.

The magazine branch entered into the problem zone, as a consequence of dropping advert yields and smaller editions. The yields from the subscription sales dropped by 6% in the first nine months of 2013. Store sales dropped by 10%, and the advert revenues in the printing branch even dropped by 25%, year on year.

Sanoma announced the reorganization during the publication of its quarterly data. The corporation suffered a net loss of €265.5mln, as a consequence of €268 mln in depreciations on the Dutch activities. The total revenues dropped by 5% to €568 mln, while the Dutch revenues dropped with 5.1% to €164,7mln.

This is just another nail in the coffin of both online and ‘dead tree’ publishers, as they are lovingly called: formerly very succesful publishers of online and paper magazines and newspapers, who suddenly saw their business models vanish into thin air and now cling onto life by the skin of their teeth.

Their business models have suffered enormously, due to the fact that: 
  • Soft-erotic magazines like Playboy, Penthouse and Hustler have become almost totally obsolete, as every man can enter into a mega-ton of free x-rated stuff in just a few mouseclicks, while being in the privacy of his home;
  • The celebrity skin in those magazines – formerly a huge motivation for youngsters and older men to buy them – can also be found nude online within just a few mouseclicks; sometimes even starring in their own leaked x-rated videos;
  • Most interviews-with-the-stars in paper magazines have been published online, even before they could be printed;
  • The ‘notorious crime’ stories, which formerly attracted many readers of paper magazines, can also be found on the net, at specialized websites;
  • A zillion bloggers – including ‘yours truly’ – supply worldwide readers with tons and tons of free information and interesting stuff, about almost any subject there is in the world and at an often surprisingly high quality;
  • Almost all newspapers and magazines print 90% of their news online, but yet failed blatantly in finding a way for making money with it, outside online adverts and a (mostly unsuccessful) paywall;
  • Consequently, less and less people buy a subscription to a daily newspaper or a weekly/monthly magazine on paper;
  • The market for printed and online adverts seems to suffer from an incurable anaemia, due to both the credit crisis, with its strongly diminished private consumption as a consequence, and the fact that people have been beaten to a jelly by all pop up and online adverts and ever since categorically refuse to click on anything at all.
The results are devastating, as many weekly and monthly entertainment magazines – especially for men – can’t keep their head above water anymore and simply disappear. Other magazines – especially women’s magazines and specialty magazines – survive, but most of them lead an anaemic existence, waiting for better times that will probably never arrive.

And also for the daily newspapers, the consequences are dire and almost impossible to turn around: due to the reduced subscription and single sales revenues and also the dropping advert yields, these newspapers have to shrink their editorial staff to the bare minimum in order to save expenses and be more or less profitable.

The consequence is that the quality of their editorial work and research – especially the specialized and labour-intensive, hands-on research that once distinguished newspapers, like the New York Times and the Washington Post – is dropping like a rock in water.

There are only fully-employed reporters and editors left for the most important subjects (domestic and foreign affairs, sports, politics and economy) and locations (The Hague, Brussels, Frankfurt, Washington/New York, London and Paris).

All other news is gathered from freelancers, who are yet willing to work for a ‘token’ fee and especially from the press agencies that cover the local and global daily news (AP, Reuters, Bloomberg and ANP, to name a few).

Therefore these newspapers become more and more dependent upon the local and international press agencies for their daily news-supply, which makes them less distinguishable in comparison with other newspapers that are suffering from the same problems.

Consequently, almost the only items left for chief editors to distinguish their newspaper from all other newspapers, are the columnists and pundits, who are filling the opinion pages. Further, the weekend specials and magazines are about the only chance left to make some extra money, as these specials still attract specialized, high-brow advertisers, who seldomly make use of online advertisements until now.

While all the aforementioned problems didn’t come unexpected at all, how to solve them remains the €1 billion dollar question, which hardly any newspaper has solved yet.

Today, I had an interesting discussion with one of my Twitter-buddies, ‘Edwin’, concerning the question which model for content payments could eventually be the winning one.

We both feel that the current world of ‘unlimited gratuitous information’ is a world that will eventually kill all online newspapers and magazines, as their shrinking editorial staffs run slowly, but surely dry from money to do their work.

The problem is, however, that most people have become very reluctant to pay for news and information, especially as almost all information can be obtained for free through the internet. Edwin and I both agree that only the best, most valuable and distinguishable news and information will be paid for, unless… it is simple, quick and cheap to make those payments online.

When either the news in a paid-for online newspaper is just ordinary, off-the-shelf news, which can be obtained everywhere for free, or the payment method is too complicated or slow: just forget it to make money from a paywall. People will simply skip your newspaper from their shortlists and get their news from the numerous other online newspapers.

However, if you can offer unique, ‘home-made’ and very valuable news, you still have a chance: especially when you combine paper and online news in a package deal for people and companies.

Still, every potentially successful online payment method for such a newspaper or online magazine should be quick, easy and cheap: payments through a cellphone subscription or through continuous or one-off online direct debits from one’s  current account might have a good chance.

However, complicated and/or expensive payment systems, like realtime payments with credit cards, Paypal or interactive bank payments are doomed, in my humble opinion. Too complicated, too expensive and too slow.

Still, I feel (and probably does Edwin too) that the real payment method to “crack the paywall anxiety”, has not been invented yet. 

Such a system won’t be one second too soon, as Sanoma proved today!

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