Monthly Archives: February 2016

Another case of “Where The Independent goes…. Others follow”?

It’s been a long time coming, regularly inaccurately predicted, but now the end of the mass-market printed newspaper is in sight.

The Lebedev’s brave decision to close the printed Independent, and use the proceeds from the sale of the ‘i’ to enhance their digital offering is, if not the first, likely the harbinger of what will follow.

I started forecasting the longevity of the average printed newspaper back in 2012, when it became increasingly obvious econometrically that many newspaper companies were not going to survive the transition from print to digital. Since then the forecasts have become ever more reliable, but the dates of forecast have hardly changed.

Newspapers’ demise won’t be because circulation disappears, but because they will not have sufficient coverage to achieve an advertising response. Within most newspapers’ current business model, they will no longer be able to sustain their costs, and in particular the cost of printing. The only hope therefore is that digital revenues, will be sufficient to stoke the engine room. In some cases this will be true, sadly for many a successful transition seems very unlikely.

The econometric argument

The first issue is whether there is any linkage between newspaper circulation in a country and newspapers advertising revenue. Since the scale variances of both may be coincidental (as they were in the 1980’s), the proof has to be demonstrable across different markets. Since advertising revenue is subject to range of other factors (such as GDP), the method chosen is to compare circulation volumes, and newspapers’ share of advertising by country, over time. This is demonstrated in chart 1 below.

FoP national analysis

The R2 co-efficient suggests that there is sufficient linkage between the two factors to say that across markets, there is some correlation between falling sales, and falling shares of advertising. If Spain, which has exhibited a number of peculiarities is removed the R2 co-efficient rises to around 55%, suggesting that the linkage is robust enough.

If this method is then transferred to national markets then we find that the correlations are significantly stronger. The R2 correlations are over 0.98. The charts below correlate the declines in circulation and advertising, with the known and forecast points illustrated by year.

FOP Europe pictureThe years of zero share forecast are shown in the table below

Table1 Year of zero viability
Austria          n.a.       Italy                     2020
Belgium        n.a.       Netherlands         2020
Denmark       n.a.       Norway                2018
Finland        2026      Spain                      n.a.
France         2018      Sweden                2023
Germany     2022      Switzerland          2019
Ireland        2020      UK                       2019

How the scenario will roll-out


As I’ve suggested since producing these forecasts, we are not going to reach a point where advertising lights are suddenly switched off. Rather we will experience an increasing rate of attrition. For some years now, individual advertisers have been concluding that newspapers are no longer an effective form of communication, so the numbers of advertisers are declining.

Secondly they are slowly choosing to limit their spending to fewer and fewer titles.

The third outcome then is that newspapers will begin to find that their print business is unviable. The question then is whether their digital products either are currently viable, or with the closure of the print service, some revenue can be transferred to the digital service.

Some newspaper companies – The Guardian, Mail-Online, Mirror regionals can see a point of inflection in the near future, and can be confident that their digital services will be self-sufficient. Other groups will struggle, but succeed their migration before print becomes unviable. But a significant number of titles, or groups of titles, will simply fail.

National v Regional

Finally I, been asked what is the difference between the prognosis for nationals and regionals. My analysis suggests that the “average” national title will hit the zero share point toward the end of 2018, and the “average” regional title’s zero share point late 2019. Of course each title will be subject to different versions of the scenarios outlined about.

And then 

It is suggested that the driver of the Lebedev’s decision to close the printed Independent, was the approach, from Johnston to buy The ‘i‘. This is a good opportunity for The Independent, but the logical from Johnston’s perspective is  eludes me completely. The idea that:  “We wanted to go after more national advertising revenue and have a bigger train set across which to offer our digital services” is at best naive. 

Yet at the same time Trinity Mirror have announced the launch of their own “mid-market, low price newspaper. This project has been long in the making, by a management team who are among the best in the business. Their in-house sales operation has always struggled to integrate their national and local newspaper offer. The notion that JP will be able to pull this off is fanciful, with an outsourced sales-house, who excellent as they are, also have to deal with a raft of other regional groups.


The Lebedev’s decision is not the first, but it is the first of a major title, and is particularly significant given The Independent’s history of innovation, and influencing the world of newspapers.

The newspaper industry is very conservative and significantly prone to emulation rather than innovation. Perhaps the most significant example of this was tabloiditis, where during a short period hundreds of titles made the move to a smaller format, with little realistic strategic thinking. The newspaper that started all this was The Independent. There are many publishers, across Europe and North America who have been waiting for some-one else to go first.

I’ve predicted that as we move the zero share point will see an increasing number of titles either following the Independent into digital, succumbing to the failure to migrate viably, or perhaps reducing the frequency of publishing (for which there are strong arguments).

But having followed the behaviour of publishers for decades, I suspect that there is an approaching Tsunami of transformation. A final factor is the timing and shape of the inevitable economic downturn.

By 2020, the fate of the European Newspaper Industry will be clear.

© Jim Chisholm. February 2016.

I am happy to provide further clarification of any of the points above, and have forecasts for most countries.

Phone:     +447775817797
Skype:     jpchisholm