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Quick Summary

Newspapers have tried a host of measures to halt the long-term decline in their readership, but they haven't stopped consumers from turning to TV and the Internet for news. Some publishers think that the answer is to switch from the broadsheet to the tabloid format, but doing so isn't a panacea.

The take-away
Unless the risks are lessened and the change is managed well, switching to the tabloid format can alienate longtime subscribers, advertisers, and editorial staffers.

Dwindling Readership: Are Tabloids The Answer?

14 min
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As consumers have increasingly turned to television and the Internet for news, the circulation of paid newspapers has declined - by 2 to 4 percent annually for more than a decade in most developed markets. The trend is set to continue, particularly as growing broadband penetration encourages the wider use of online media. In addition, free commuter tabloids, available in many big European and US cities, have lured away some paying customers. As a result, the revenues and profits of traditional newspapers are under intense pressure.

Newspapers have fought back with free subscription trials and other promotions, with advertising platforms such as new or expanded feature sections, and with better home and newsstand distribution. But struggling publishers often seek the quickest method to cut costs and increase circulation without harming ad revenues. Many, particularly in Europe, see their salvation in changing formats: they believe that switching to a more compact one, such as the tabloid format, may lift circulation by attracting disaffected newspaper readers, particularly teens and women. Higher circulation, in turn, stimulates demand for advertising, so newspapers can raise their ad rates. In some cases, the price of the newspapers can rise as well.

1) Several important broadsheets across Europe have recently converted themselves into tabloids, and the format has proved popular, with circulation rising by an average of 6 to 8 percent in the year following the transformation.

2) The Independent - the first of two quality morning papers in the United Kingdom to convert itself into a tabloid - is a particularly successful example, having increased its circulation by 18 percent within six months of the format switch.

3) Market research also indicates that tabloids enjoy above-average circulation growth among younger and female readers, whom advertisers covet.

But changing the format of a newspaper carries big risks. Despite the potential for a quick uptick in circulation, churn among one profitable category of readers 'subscribers' may rise because of their reluctance to accept the change. At newspapers that rely on subscriptions rather than newsstand sales, subscriptions may fall by 3 to 5 percent as longtime readers switch to other broadsheets or content themselves with other media. And most newspapers see an initial drop-off in advertising revenues when they make the change. These problems, as well as resistance by employees, can derail the process.

To carry out a format change successfully, newspaper publishers must manage and mitigate all these risks. A change-management effort is necessary to ease the employees' concerns about the impact of the new format. Publishers must also find ways to keep advertisers and subscribers happy while extracting the maximum economic benefit. Ultimately, the process of changing the format benefits newspaper publishers by inducing managers to look more closely than ever at business processes throughout the organization.

The risks
When publishers change formats, they count on reducing costs, but in this respect they may be disappointed. Although newspapers sometimes save money on newsprint, other printing costs are fixed if capacity is located in-house, as it often is. Distribution costs are generally negotiated on a per-copy basis rather than by size.

Cost savings may therefore do little to offset the most important negative impact of format change: lower advertising revenues. No matter how well executed the change, the great majority of newspapers initially see them fall, for several reasons. As the pages shrink, so do the ads (a full-page ad is only half its previous size), and advertisers may be unwilling to pay the same price for what they see as less consumer exposure and recognition. They may also be concerned about placement - worried, for example, that an ad in the back pages of a 100-page tabloid will have far less impact than an ad in the back of a 50-page broadsheet. And newspapers sometimes use a format change to introduce a new advertising rate card, meaning potentially higher rates and the end of previously negotiated discounts. Such increases are unlikely to be received well by advertisers, but publishers can present them with a convincing case for the change.

Another reason for the decline in ad revenues involves the public perception of tabloid newspapers. Broadsheets are associated with serious news coverage, tabloids with more frivolous content. Advertisers accustomed to the kind of reader associated with the broadsheet format may see the change as a reason to take their business to other broadsheets or to alternative media.

A poorly executed transition can therefore be disastrous. One national European newspaper lost almost 50 percent of its advertising revenue per page when it converted itself into a tabloid. While the losses vary, we estimate that a format change puts as much as 20 percent of a newspaper's ad revenues at risk. Even though it can recoup some of this loss by raising its price per column centimeter as circulation increases and it reaches new reader segments, advertising revenues tend to suffer a net reduction of 10 to 15 percent. Losses are typically recovered after a couple of years, however. Le Matin, a Swiss newspaper, lost 13 percent of its advertising revenue after the conversion but recaptured its losses in about two and a half years. Much of that success was attributable to a readership increase of 12 percent.

A third risk of format change arises from a newspaper's workforce. Editorial staff members, always influential, typically don't see the value of a format change. Garnering their support requires a substantial managerial effort. No newspaper makes format changes primarily to please editors, of course, but they are crucial to the success of the project. Many staff members will have spent their whole careers with the newspaper. They may be concerned about the perceived deterioration of editorial quality, changes to the paper's internal culture, the impact on the way they work, and possible layoffs - particularly as the newspaper reconfigures itself and perhaps reduces the amount of content it publishes.

Getting it right
One leading European quality newspaper had promising results while converting itself from a broadsheet into a tabloid: readership immediately increased by 22 percent among teens and young adults and by 16 percent among women - higher than the average among other newspapers that changed formats. Some regular readers were lost, but there was a net increase overall. The short-term decline in advertising was limited compared with the experience of other newspapers that changed formats. The newspaper was able to raise its prices per column centimeter and even enjoyed higher advertising revenue in the medium term.

The newspaper succeeded where others lagged behind because its leadership implemented a program to manage and mitigate risk. As a starting point, the publisher decided that the desires of the readership would be the driving factor throughout the conversion process. This priority might seem obvious, but not all publishers adopt it. The newspaper made efforts to understand the needs and wants of its readership and, in particular, to identify underserved but desirable segments. What types of content do readers like and dislike? When and where do they want to read their newspaper? Market research found, for example, that younger men wanted more sports and that younger women wanted more articles about home and health issues. These were segments highly desired by advertisers but hard to reach through most print media, particularly newspapers. In response, the newspaper redesigned its content to appeal to young urban readers. Although such research may be time-consuming, it is essential.

Progress must be measured if it is to be sustained. Before introducing the new format, publishers should prepare key performance indicators (KPIs) for the entire organization. These might include editorial KPIs for the readership's view of the newspaper's quality (as measured by surveys), printing KPIs that measure the waste of paper, advertising KPIs that monitor responses from important advertisers, and distribution KPIs that set cost targets. Using these metrics, management can make midcourse corrections, even as the new format attracts fresh readers and encourages advertisers.

Format change must be carried through in a conscientious way that gets and keeps everyone on board. Meanwhile, the newspaper must adopt best practices in its advertising sales and pricing. Our work suggests three areas of focus.

Building consensus
As with other change-management programs, an important part of managing the risk of a format change is to build consensus within the organization. Managers must outline to employees the financial and competitive situation of the newspaper as frankly as possible, explaining and communicating the need for change and the potential for growth once it has taken effect. A failure to reach at least some level of understanding will jeopardize the format-change program.

With the broad outlines made clear, managers must convince the various stakeholders that change is required in view of the challenges facing the newspaper - declining circulation and adverting revenues, for example. Each department should present its perspective on the proposed changes, relating its outlook to the work it performs and outlining the actions required to make the transition successful. Managers must prepare carefully and keep the tone positive and constructive, since these conversations can be difficult. Although they are sensitive, they are essential to securing the all-important internal buy-in.

In particular, the commitment of the editorial team is critical; these workers are both mobile and vocal, and they play a substantial role in the transition's ultimate success. They may find it hard to accept the need to adjust the newspaper's editorial content, layout, and style in order to capture readers. But at some newspapers, editors have lost touch with certain elements of the readership. Reconnecting with such readers is difficult but essential to success.

To build support from the editorial team, newspapers have used timing and information: Most of them introduce the tabloid style (shorter articles, for example) gradually. Providing factual information about what is actually happening in the marketplace might also help to counter established beliefs within the organization. Given a newsroom's ingrained mistrust of the publisher, there's no guarantee that this approach will work, but the sharing of information improves the chances for mutual understanding. The process might also include an effort to build pressure by getting the more senior department heads on board.

At one European newspaper, the publisher wanted to introduce what it regarded as no-regrets business changes in anticipation of a format conversion. These initiatives were based only on guesswork; management had no facts to justify them in discussions with employees, so the newspaper's staff -particularly the editors - opposed them. Management, unable to back up its arguments constructively, abandoned the proposed efficiency initiatives.

By contrast, management at another European newspaper based the process of format change on broad market research that examined not only the readership's perception of the editorial content but also other marketing considerations, including distribution, layout, and where and when the newspaper was read. The results gave its management concrete arguments that persuaded stakeholders that it had to change. It went on to implement efficiency initiatives that increased its earnings before interest and taxes by 10 percent and eventually introduced a new format.

Well-planned marketing to advertisers
Success requires a coordinated approach that communicates the benefits of the format change to readers and advertisers alike. Market context is paramount: publishers in niche markets with limited competition have an outlook and approach different from those of publishers facing a number of competitors that advertisers can pick and choose at will. In either case, newspapers must be able to supply facts that demonstrate the virtues of a new format: they must, for example, prove that display advertising will get as much recognition in a tabloid as it would in a broadsheet. They also must show what kinds of readers will be attracted to the new format.

A first step is to segment the advertisers; while segmenting the readership is a familiar idea, fewer newspapers segment them. Grouping advertisers into logical, manageable categories makes it easier to analyze how format change will affect them and how they will respond. Among ways of categorizing advertisers, two are typically important: the size of their advertisements and whether they are local or national companies. Segmenting for ad size is important because bigger usually means more revenue. Local versus national matters because a local advertiser that buys full-page ads could turn to direct marketing to achieve similar results. The idea is to be able to anticipate the advertisers' responses to a format change, to develop an action plan for all types of advertisers, and to see whether they will accept an increase in the price per column centimeter.

Once newspapers have segmented their advertisers, they must build an effective rate structure tied to these categories. The structure should give advertisers incentives to stay and, ideally, to increase their spending. It should also take into account the elasticity of the demand of different advertisers; for example, they may be willing to pay the same amount or more for large ads but insist on lower prices for smaller ones.

At the same time, newspapers must deal with their existing rate cards. As the circulation of newspapers has declined and their negotiating position has weakened, they have typically worked out individual deals with any number of advertisers - deals allowing ever-greater discounts or rebates, often indiscriminately. A format change is the optimal time to present each advertiser with a new rate card and to work hard to make the adjustments sustainable by gaining agreement on a clear and favorable rate plan. To do so, a newspaper must communicate the new format's value as compared with that of alternative media options and, at the same time, work out the details of the new rate card with the goal of increasing overall revenue.

At first, advertisers are likely to be skeptical; many will question the new format's impact. To address such concerns, publishers can deploy a set of fact-based tools. Examples include "ad-track" surveys (test groups note the ads they remember from tabloids and broadsheets) and the "eye-track" approach (independent researchers measure how much time individuals spend looking at an ad or a page). Both approaches indicate that quarter-page and smaller ads in tabloids do indeed get less attention than similar ads in broadsheets, but full-page and half-page ads attract about as much - or more - attention.

One European newspaper used these approaches as a basis for introducing a new rate card. Advertisers initially reacted negatively to the proposed significant increase in the price per column centimeter. Then they heard the facts. The newspaper was able to increase prices by up to 100 percent on most large ads. It obtained smaller price increases for ads of one-quarter page and under.

In another European example, however, the publisher neglected discussions with advertisers. As a result, they didn't acknowledge the new format's advantages, so the publisher had to keep the price per column centimeter constant. This decision implied a big loss in advertising revenue when the size of a page fell by almost 50 percent.

Reducing reader churn
Publishers must do what is necessary to retain readers during the changeover. Subscribers, in particular, offer publishers many benefits, including, most obviously, a consistent stream of cash. They also enable a newspaper to have a more predictable and efficient distribution system, as well as better data for the advertising sales force, and it may be possible to sell them other products and services too.

Some readers are more valuable than others - for example, by virtue of how long they have subscribed or their attractive demographics. Accordingly, it is important to introduce a structured approach to avoid losing the most valuable readers during a format change. One way is to get a perspective on their overall customer lifetime value by analyzing dimensions such as acquisition and maintenance costs, the length of subscriptions, the advertising potential, the cost to serve, and the possibility of selling other products. When the newspaper has identified its most important subscribers, it can determine their particular needs through market research surveys and use the findings as the basis for an outreach plan.

Leading newspapers have used these customer-lifetime-value programs during format changes. One such program helped a European newspaper not only to retain virtually all of its most valuable subscribers but also to cut subscriber churn as a whole compared with the levels prevailing before the format change. The reduced churn resulted from effective, consistent communication with readers about the benefits of the new format.
This Article is authored / contributed by ▸ Albert E. who travels from Ulm, Germany. Albert is available for Professional Speaking Work both Virtually and In-Person. ▸ Enquire Now.

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