(This is a recap in three parts of the presentation made at the European Users Advantage meeting in Lisbon on 26-27 September 2019. Read Part 1 here.)
Digital subscription acceleration has also brought up the issue of subscription fatigue. The proponents of the concept claim that, due to the proliferation of non-publishing subscription services (Netflix, Spotify etc...), people will reach their subscription saturation point, at publishers’ expense. Evidence of this is lacking, however. Perhaps it is the reason behind the low number of paying subscribers, and the limited number of publications subscribed per individual. But is this much different from the heyday of print? How many different press publications did most people subscribe to then?
Behind the concept of fatigue are the suppliers promoting other models. Some still advocate selling items on a one-off basis. But this practice continues to decline, as demonstrated by the discontinuation of this offer in 2019 by the title "The European" and more importantly, the end of this model for Dutch platform Blendle in 2019, the latter permanently pivoting towards a subscription model. It is these offers seeking to imitate Netflix or Spotify that triggered a lively debate in the publishing world last spring. The concept of multi-title platforms is not new. There are many international and local players, such as Inkl in Australia, Readly in Sweden, Pressreader (Canadian) or Le Kiosk. They never really broke through, but Apple's entry may have suggested that the scale was changing. However, the Apple News + offer instills distrust, particularly by its 50% commission, and several major dailies have refused to join it (the New York Times and the Washington Post). As for others, they publish a reduced version of their content offering on the platform (Wall Street Journal). For the time being, the results show limited success and it is not certain that the arrival in Europe of Apple News + in September will reverse the trend.
Other sources of revenue are alternatives---excluding advertising---that could add to or replace subscriptions, such as The Guardian’s donation-based model. The publication The Ken finds benefactors to finance subscriptions. In Canada, public funding supports publishers, through a federal grant of more than $500 million. And last but not least, other revenue may come from branded product sales, events and eCommerce.
Digital doesn't solve the problem
Long-term analysis clearly shows that the newspaper industry is experiencing a significant decline. Over the last 30 years, daily newspaper circulation in the US has decreased from 61 million daily copies to 31 million. In France, publishing industry income has almost been cut in half, from 11 to 6 billion euros in 20 years. Circulation attrition has accelerated from 2% in the 1990s to 5% in the 2000s to 8-12% more recently.
Print still remains the main source of revenue and profits, while digital growth and profitability are being negated by substantial attrition. The digital portion of the New York Times represented only 40% of its turnover in 2018, while this figure was 56% for the Guardian.
The majority of lost advertising revenue has moved from these news companies to the big platforms (Google, Facebook, Amazon and Apple) and stabilization is far from certain. Advertising remains a necessary source of revenue for balance. Google and Facebook's global market share in the advertising market has increased from 24% in 2018 to an estimated 28% in 2019. (It was only 10% in 2014.) In the digital advertising segment, the duo’s global market share rose from 56% to 61%in the same time period. Although such a major industry transformation requires ever-increasing investment in tools and skills training to keep up with it, the investment funds available to publishers continue to decline.
Restructuring, layoffs, acquisitions and bankruptcies are accelerating. Mashable opened the floodgates in 2017 with the dismissal of 50 people. The Huffington Post was in the red in France in 2018 (it had once been profitable) and its owner Vérizon has laid off 800 people worldwide. Buzz Feed laid off 200 people, or 15% of the workforce, in 2019.
In addition, more and more new media owners are from outside the publishing world and lack industry knowledge and experience. In France, for example, Lagardère, Roularta-L'Express, Le Monde and Mondadori have been acquired by CMI (Czech energy investor), SFR and Iliad (telephony) and Reworld Media respectively. This last company is mostly interested in how it can exploit the brand rather than sustaining the publications. In the United States, mergers continue, such as that of Gannett and New Media Investment Group in August 2019. There are only a few true publishing players left to consolidate. The example of Belgian Mediahuis, which acquired TMG in the Netherlands in December 2017 and The Irish Independent in 2019, is an exception. Marc Thomson, CEO of New York Times, notes with irony that the competitive landscape is likely to be much more favorable in 5 years for the few who have survived.
Perhaps the biggest threat to print is not digital, but rather distribution. The newsstand business continued to decline in 2019 and single-copy sales are threatened. In France, the main player in distribution is close to bankruptcy and is again requiring public support. In the UK, Aldi has decided not to sell newspapers in its supermarkets. In Germany, the number of outlets has fallen by 30% in just a few years.
Subscription distribution is also in turmoil, as post offices are threatened in all countries. In France, mail volumes dropped from 16 to 11 billion items between 2010 and 2017 (newspapers account for 10% of mail volume). The volume has since fallen below 10 billion and the slide continues. This drop is already having an impact on the frequency of distribution. In Belgium, mail delivery will only be twice a week in 2020, as in Italy, the Netherlands and Denmark. The Netherlands is testing doing away with physical mail delivery, by scanning physical mail and forwarding it to the recipient's e-mailbox. Finally, competition---where it exists---is under threat. The Dutch Post Office may merge with its competitor Sandd, while in France, postal competitor Hopps is threatened with bankruptcy and may be purchased by Alibaba.
One consequence of this crisis is that publication frequency is decreasing. The "daily" has ceased being daily. In the United States, for example, the Pittsburg Post Gazette went from 7 issues a week in 2017 to 5 in 2018 and 3 in 2019. Magazines are making similar moves, sometimes successfully. "Popular Science" in the United States has been able to increase its sales when it went from monthly to quarterly, perhaps by offering more and varied content.
Is the GAFA relationship reaching its tipping point?
The balance of power between publishers and platforms seems to be entering a new phase. First, there is the rapidly evolving legislative framework. After GDPR, which came into force in 2019, the Copy Right Regulation was voted on in the European Parliament. Another regulation is underway about e-privacy. Unfortunately, these laws sometimes have the opposite effect as the one sought. So far, the GDPR has only assessed one (significant) limited fine (against Google in France). On the other hand, it handicaps small players who have the most difficulty obtaining consent from internet users. These same users, however, consider GAFAs so essential that they are willing to provide the personal information requested in order to access their platforms. As for the copyright regulation whose objective is to recover a share of the advertising pie sucked up by GAFA by making them pay for content, Google has already found a way around it. The elimination of third-party cookies means that users who are browsing anonymously cannot be tracked. However, the GAFA tax that France has introduced and European projects such as Tips, which aims to counter the development of platform payment interfaces, remain in place.
But in addition to regulation, publishers also seek to establish their independence, or at least their autonomy. In several countries, projects have been initiated for unique identifiers among publishers, such as the Nunio project in Portugal, Net ID and Verimi in Germany or Geste in France. With an identifier, the goal is to rebuild the architecture essential to the commercialization of advertising.
However, GAFAs remain strong. They have two aces in the hole; the first being the voice assistants that insert them into the daily life of users’ homes. Echo, Home and Home Pod are already well-established and Facebook will launch its own version. The second is the custom payment modes that they have developed (Apple Pay, Amazon Pay, Google Pay and Facebook Libra, although the last one is meeting with some resistance). Payments are an essential link in transactions.
If we take GAFAs one by one, their relationships with publishers vary and much has changed in less than a year. Facebook, which was highly criticized in 2018, forges new, more friendly links with publishers through the payment of press aid, partnerships (with, for example, Le Monde), the creation of a publishing tab and contributions to conversion (using the paywall system Piano). Google has switched to a more defensive attitude, not least because of the copyright issue requiring it to pay for content. However, it funds the press (the "Google Fund") and has a partnership with Wordpress to support local journalism. Apple has been the most aggressive this year, with its Apple News + offering, its staggering commissions requested from the "partners" that would join it, and the initiative to ban third-party cookies on its browser. Lastly, Amazon advances its own strategy behind the scenes. It has quietly overtaken Microsoft in digital advertising and competes with Google on SEO. On the other hand, it favors the spread of its Amazon Pay payment method as a strategic direction. Finally, its owner Jeff Bezos owns the Washington Post and pushes the Washington Post to become an industry provider with its Arc Soft software, much like Amazon Web Services.