In Perspective: the failing newspaper model, a unique Singapore problem?

Why is SPH share price falling?

SPH’s recent plight and subsequent restructuring has been suggested to be a management issue, symptomatic of the uniquely Singaporean way of placing overpaid, under-qualified elites at the top.

But is SPH’s plight really a problem unique to Singapore?

A business model disrupted and broken by the internet

Take a look beyond our shores. The newspaper business model is in crisis globally – not just in Singapore. Globally, the business model is broken.

In addition to news and feature journalism of public value, newspaper also provide information of interest like weather forecasts, sports scores, stock prices, TV and radio guides and comics.

Before the advent of the internet, the newspaper was the only place to access much of this information and a major portion of newspapers’ revenue came from advertisements. Everything changed with the internet. The internet provides better ways to access non-journalism information. Consequently, the newspaper has become significantly less attractive to advertisers.

The revenue crisis

The revenue crisis is faced by newspapers all over the world. It is not a unique SPH crisis.

Not too long ago, the Australian government talked tough about making Google and Facebook pay Australian news businesses for linking to, or featuring, these publishers’ content. It was an attempt to alleviate the revenue crisis facing news publishers. Facebook responded by threatening to remove Australian news stories and Google says it will shut off search to Australia.

The media industry has faced “unprecedented disruption” in recent years. In SPH’s case, the company’s operating revenue has halved in the past five years due largely to a decline in print advertising and print subscription revenue.

The future of newspapers

Most major newspapers have either been bought out by billionaires or controlled by foreign companies.

The Washington Post was purchased by Jeff Bezos in 2013 for US$250million, while the Financial Times is now controlled by the Japanese holding company Nikkei. In the UK, the BBC has been funded mostly by license fees charged to every household.

In 1993 the New York Times paid $11 billion for the Boston Globe. 20 years later, it sold it for $70 million, at a 93% loss.

In the last 15 years, 20% of newspaper in the United States have gone out of business. Ad revenues are down over 55%.

In an interview with Yahoo Finance editor-in-chief Andy Serwer in 2019, Warren Buffet was bearish about the newspaper business model. He said newspapers will disappear.  And the reason? Newspaper is all about ads. As much as the news business has been disrupted by technology, so too has the ads business been disrupted by the internet.

Public-interest journalism

Public-interest journalism plays a critical in the effective governing of a country. Take this pandemic for example. The timely release of information about COVID-19, the measures taken to contain its spread and the exhortations from the government, and the timely rebuttal of falsehoods have kept Singaporeans well-informed, calm and united in facing the crisis.

In the age of the internet where falsehoods abound and spread like wildfires, public-interest journalism becomes even more critical and essential in maintaining peace and stability.

Funding public-interest journalism through advertising no longer viable

Newspapers need funding if they are to remain high quality, and provide balanced coverage. But the funding of such journalism through advertising is no longer viable for obvious reason explained earlier.

An example to look at is Norway. The Norwegian government has been propping up their media since 2006, providing them with funds from NOK 303 million (S$48million) in 2006 to NOK 427 million (or S$68million) in 2020.

France supports its media with billions of euros . A report commissioned by the French government in 2010 said that the country’s press is being kept in a state of “permanent artificial respiration”, with state aid. This aid is still required, even though France’s main newspapers are owned by business tycoons.

Closer to home in Australia, the government provided AUD $50 million (~S$51 million) to over 100 newspapers and broadcasters last year.

Competition with tech giants for advertising dollars

The trouble with the newspaper business model comes down to advertising revenue – which today largely flows into tech giants such as Google and Facebook. A newspaper business can barely survive on subscriptions alone.

ST’s readership has steadily increased, with digital readership in particular growing fast. Digital readership grew 67% over the last five years, from 177k in 2015 to 297k in 2020. Its overall readership also grew 23% over the past two years to over 450,000 subscribers today.

And importantly – Singaporeans trust our mainstream media. The 2019 Edelman Trust Barometer found that 71% trusted traditional media outlets, continuing an upward trend of 70% in 2018 and 62% in 2017. There’s even been a 25 percentage point increase in Singaporeans’ engagement with the news.

Not a management issue

Let’s also not forget the crucial role of the media during this pandemic, where you need reliable, quick and accurate information.

The crisis faced by SPH is not a uniquely-Singapore management issue. Rather, it is a global crisis for the newspaper business model.

The business model has to change. Public-interest journalism has to remain.

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