UPDATE 2009-10-13 - Bloomberg wins the bidding war – purchases Business Week for $1 – $5m (will the comment section on Business Week articles now be closed, who will be fired and will the $16m expensive Business Week Exchange online community continue to thrive?) – we predicted that a takeover would happen in the story below and explained why, so please read on.

Both magazines – TV Guide and Business Week – are part of the newspaper world’s neuroses about their diminishing role in news distribution and the information superhighway as social media continues to grow in importance. Still, the starting point of any big news story from the blogosphere is often a front-page article in one of the major dailies such as Le Monde, the Financial Times or Business Week.

Unfortunately, headline stories have failed to compensate for the large drop in advertising and print subscription revenues during this financial crisis. And no, digital subscriptions will probably not offset those losses, as we outlined here:

Why Kindle subscriptions cannot offset print media’s losses in advertising

So what exactly do TV Guide and Business Week have in common? Apparently, both are only worth a dollar, because OpenGate just bought TV Guide for that amount and publisher McGraw-Hill is considering giving away Business Week for the same. The 80-year-old financial magazine recorded increasing losses during the last few years.

What went wrong?
As a print business heavily exposed to financial advertisers, Business Week was hit hard by the financial crisis. According to the Publishers Information Bureau, its advertising revenues fell by a third to $77.8 million during the first half of 2009. Nevertheless, Business Week claims a circulation of 936,000 and 4.8 million readers, which is nothing to sneeze at.

But somehow things just don’t add up: expenses for its editorial content exceed its revenue obtained through advertising and subscription fees. To make things worse, Business Week is not alone out there: at least two more magazines target a similar market (Forbes and Fortune). All three have a decidedly US focus, both in terms of reporting and target audience; therefore they cannot try to offset primary market losses by going after a more global audience. The Economist has pursued this avenue with some success, claiming growing subscription rates and a smaller drop in advertising revenue.

Challenges posed by social media
Unlike many others in print-media, Business Week saw the writing on the wall a while ago and took action. For instance, it was one of the first print publications to dip its toe in the internet waters by establishing Business Exchange, a platform for business people to share ideas and connect with others.

We participated in the Business Exchange during alpha- and beta-testing (Fall 2008) and it has been an interesting ride, to say the least. For me the question was always what the platform might add to others such as LinkedIn.

The platform’s motto seemed promising: “Join Business Exchange to access the most relevant content for you, filtered by like-minded business professionals.”

And yes, some interesting reading was pointed out through the platform and it even sent some readers to this blog or our web-based blog benchmarking tool (My.ComMetrics.com). But will those additional readers subscribe to our emailed posts, RSS feed or, most important, start using our software? If not, should we care about this additional traffic?

I cannot claim to have an answer yet.

User-friendliness
Recently, we addressed usability and the KISS (Keep it simple, stupid) principle when it comes to operating systems or browsers. Sadly, Business Exchange does not follow these principles. For instance, as you log in, the screen to the right comes up while you are connected to another page. Then you get to download plenty of additional stuff, including advertising that teenagers hate. If you are stuck using a 56 kb modem or its equivalent, the whole process is a nightmare, because your connection is too slow to download the additional flash codes, etc., meaning several attempts must be made to get in. A real waste of time for the user.

We did a field test with some of our staff and visitors up here and they lost patience trying to complete the process, so they clicked away from the page. This means another potential client lost because of a login procedure that is too cumbersome and overburdened with unnecessary code that eats up bandwidth you might not always have. Why?

Bottom line
Auctioning a print business heavily exposed to financial advertisers during a worldwide recession will be a challenging task. While digital subscriptions are unlikely to offset falling revenues from advertising, a social media adventure like Business Exchange does not appear to do much better. Poor execution means the venture did not get the traction the Business Week folks might have hoped for.

What is the value proposition for Business Exchange? Why do I need to invest time and resources to participate? Are the contacts, know-how or added value I get with this platform not available elsewhere or through other means (e.g., LinkedIn and Plaxo)?

Okay, now it’s your turn. What is your experience with Business Exchange compared to other platforms – has it added value for you that others could not? Are such platforms another way for print-media to stem the tide of revenue-loss? It’s okay – be honest. We want to hear what you think, and yes, we can take it. Thanks much.

The global downturn may have bottomed out, but shrinking advertising revenue has forced newspapers to tighten their belts:
- New York Times: 1,300 editorial staff, 54 percent of revenue from advertising, big losses in Q1 of 2009
- Financial Times: 550 editorial staff, faltering advertising in Q1 of 2009
- Tages Anzeiger: 177 editorial staff after May 2009 cuts of 50 full-time editorial positions
All newspapers are feeling the pain, most due to lower spending on real estate, automotive, help-wanted and movie or theatre ads. Will this trend continue and will ever more newspapers be filing for bankruptcy?

Things change
When I was growing up, my parents read the Neue Zürcher Zeitung (Mon – Sat, three editions daily!) and the local Anzeiger des Bezirkes Horgen (thrice weekly). As a young adult in Los Angeles, there was the Los Angeles Times (daily), the Progress Bulletin (daily), the Daily Report (daily) and the Claremont Courier (twice weekly). Today, the LA Times is under bankruptcy protection, the Anzeiger des Bezirkes Horgen is part of a larger group, the Daily Report and the Progress Bulletin have merged to become the Inland Valley Daily Bulletin, and the Neue Zürcher Zeitung only publishes once a day.

Trend 1: The overall market size of paying newspaper subscribers continues to shrink – fewer people are willing to take the time to read a newspaper and even fewer (especially the young) will part with their hard-earned cash for this service.

The allure of a zero
Many cities are ‘blessed’ with a free daily that is distributed at railway stations or other high-traffic public places.

We ourselves have experienced that even additional intelligence and analysis does not make some people (see image at right) willing to register in order to download content for free.

Trend 2: Resistance to paying for news in print or online is increasing, in part because it is already available for ‘free’ somewhere else.

Of course, this does not address quality or depth of reporting and insights provided through ‘free’ news vs. paid content. Nevertheless, ‘free’ is so popular that quality concerns seem too small to sway many to paying for content.

Watch the trends
To make matters even more complicated, it is becoming more difficult to easily assess whether paid content really is better than ‘free’ content. In part, this is the fault of newspapers themselves. For instance, newspapers increasingly publish supplements that carry little editorial content but much glossy advertising (e.g., How to Spend It from the Financial Times).

A similar problem is illustrated by the LA Times, which decided to provide ad space on the front page for a fake news story (see yellow highlighted story in image at left).

Such and other developments mean making a distinction between quality editorial and paid content ever tougher for subscribers. As a result, reluctance to pay for anything is growing.

Unfortunately, publishing a digital version of the newspaper does not appear to be the answer to decreasing subscriptions and lower advertising rates for the printed version of the paper. For instance, a monthly Kindle subscription for the Financial Times is $9.99, plus tax in the US. Rumour has it that Amazon wants 70 percent of such subscription revenue and the right to republish the newspaper’s stories on other portable devices. Making a mere $25 from an annual digital subscription as the content provider leaves something to be desired from a capitalist’s point of view.

Multi-platform distribution (e.g., using video, digital and print channels) is here to stay, but it will not stop media houses’ revenue-erosion. Worst is that not only did print advertising drop, but online advertising growth seems to have slowed as well in the first quarter of 2009.

Trend 3: Newspapers are becoming ever more dependent on different revenue streams, making the protection of news content from advertising interference a growing challenge.

Bottom line
A viable strategy for stopping the revenue-erosion for news providers requires addressing two key issues:

1) using content across platforms: a two-hour interview with an expert can result in different content for different platforms – besides publishing the interview in print, it can also be made available as video (in part or complete) and/or an edited version can be made available to subscribers as a free podcast; and,
2) finding different revenue streams: a newspaper can explore different ways to generate revenue in addition to advertising, such as delegate fees collected for attending workshops, conferences, cultural events, etc. as organized and promoted by the newspaper.

The above indicates that a shrinking market with ever greater competition requires innovative use of high quality content. Most importantly, the latter helps in distinguishing oneself from the free sheets that may re-print corporate press releases or syndicated stories as delivered to them by such services as Bloomberg or Reuters. Survival of the fittest in a shrinking market for paid content requires savvy and innovative use of both technology and content to produce a desirable product for the niche market of consumers who are willing to pay for what they get.

Also of interest: results from the 2009 FT ComMetrics Blog Index.