Business sentiment in the newspaper industry has taken a downturn. More than half (55.4%) of respondents in a survey by publisher organisation WAN-IFRA say they are pessimistic about the next 12 months. This is a significant shift from last year when over 80% said they were optimistic after the pandemic. 69% said artificial intelligence would have the biggest impact on their business in the next two to three years.
“The several ongoing challenges and risks have taken their toll in terms of business sentiment”, WAN-IFRA says.
However, the organisation says, yet there are causes for optimism, as revenue diversification progresses and publishers double down on new revenue sources and editorial products.
“The mood in the industry has changed, and publishers find themselves in a more unpredictable business environment due to a number of challenges, including high levels of inflation, rising paper and print costs, as well as ongoing changes to advertising markets”, the World Press Trends study shows.
The analysis is based on an online survey distributed to industry leaders. 167 news executives from 62 countries took part in the survey.
“The mood is somewhat more positive when publishers consider their medium-term prospects, as the level of pessimism drops slightly (46.4%) when survey participants were asked about their outlook for the next three years.”
“But there is also a group of publishers who view the future with strong positivity: almost a third (31%) indicated that they are “very optimistic” about where their businesses will be in three years’ time”, according to WAN-IFRA summary.
The survey shows especially publishers in developing economies have high expectations for their revenue development. Companies in these markets expected revenues to rise by 24% year-on-year for 2022, while respondents from developed economies said they expected revenues to grow 8% for the same year.
“Publishers say that advertising and reader revenues remain the most important revenue sources, accounting on average for 47.7% and 35.8% of their earnings respectively.”
Revenues coming from new types of activities (such as events, contract publishing and e-commerce) account for 16.7% of total earnings, up from 13.2% last year.
Publishers also said that their revenues coming from new activities increased by 21.5% over the last 12 months, making it their fastest growing area for revenues.
“Although declining, print continues to have a key role: combined, print advertising and print circulation generate more than half (53.5%) of the total income seen by our respondents, down from 56.1% last year.”
As in previous years, editorial and content costs are the largest area of expenditure for news publishers, accounting for 32.4% of total expenditure, broadly the same as in the previous year.
“Print costs, however, have seen substantial growth: they now account for 19.6% of costs, up from 14.5% last year, most likely a result of increases in energy and material costs globally.”
“In terms of investment areas, our respondents indicated product development and R&D (88%), as their top priority, followed by reader revenue and other revenue streams, as well as investment in advertising (all 84%).”
“Given the current level of attention on new AI tools, it is perhaps not surprising that many publishers see AI as a game changer among new and emerging technologies: over two-thirds (69%) said AI would have the biggest impact on their business in the next two to three years. Other technologies that publishers are following closely include 5G (28%) and the Metaverse (16%).”
Market research firm International Data Corporation (IDC) has earlier said that the fastest growth in AI spending will come from the Media industry with a five-year CAGR (compound annual growth rate) of 30.2%.
Publishers expect diversification to continue fast, anticipating new revenue sources to become an even more substantial part of their revenue structure. “Our respondents said they forecast nearly 24% of their overall revenue to come from non-reader and advertising sources in the next 12 months”, WAN-IFRA says.
“Within the category of new revenue sources, Events remains the most important area, with about a third of respondents both in developing and developed countries highlighting it as a focus activity in the near future. E-commerce, partnerships with platforms and membership models follow it as other new revenue streams that publishers expect to be focusing on in the next 12 months.”