Newspaper publishing comprises spending on daily, weekly and Sunday print newspapers by advertisers and readers, as well as digital advertising on newspaper websites and mobile applications. Spending by readers includes newsstand purchases, subscriptions, payments for newspapers delivered to mobile devices and fees for accessing online content.
The Swiss Newspaper Market
For decades, newspapers have been an essential medium in Switzerland. Printed newspapers and newspaper publishing were well established. In the past five years, however, newspaper publishing has declined. This is common throughout the world, with a single exception. Latin America is the only region where newspaper spending continues to grow, thanks to economic growth and successful digital-charging schemes.
In Western Europe at large, the old era of newsprint is gradually disappearing, as consumers increasingly use new information sources. This has pushed down circulation. Between 2011 and 2015, publishers have reduced their average print run by almost 15% and thus diminished circulation revenue. In Switzerland the decline has been less steep, 3% overall and approximately 4% for free-newspapers. Free-newspapers are also contracting across Western Europe, after growing for several years previously. Digital circulation and advertising revenues are growing, but still, they are not compensating the ongoing decline in print. The digital sector is able to lessen the diminution of the overall newspaper publishing market though.
Industry fortunes are still closely linked to national economic performance, as well as structural change. Greece and Ireland have seen the strongest reductions in newspaper revenues, while, for example, German publishers managed to hold revenues steady. Switzerland’s newspapers were between those extremes.
Growth in digital circulation has been strong in past years, and it still is in 2016. Nonetheless, growth today is weaker, and we expect it to slow further, as publishers begin to approach their maximum of possible subscribers. Additionally, publishers are still struggling to monetise their online channels. Here, the introduction of new pricing models might be worthwhile. Because of the prevailing “free-content culture”, publishers will need strong arguments to convince customers to pay. Introducing so-called “paywalls” is one option some publishers have chosen. Most paywalls in place are “soft”, i.e. non-paying users are not blocked entirely. This “metered” approach allows consumers to read a certain number of certain articles for free, before payment is required.
Switzerland’s newspapers are not entirely comparable to those in other countries, because of language diversity. The linguistically fragmented Swiss market depicts a challenging market situation for Swiss publishers. However, this is likely one of the reasons why local newspapers remain or even gain importance in Switzerland.
As advertising revenues decline, and reader revenues become more important, so too does the importance of satisfying content. In today’s globalised world, it is nearly impossible for comparatively small Swiss publishers to keep up with the flood of instant, international news. National newspapers are, therefore, increasingly focusing on reporting background news. A good example is the Neue Zürcher Zeitung, which was revamped earlier this year.
Like print circulation, print advertising is continuing a downward spiral that started in 2012. Although revenues from digital advertising are growing, total newspaper advertising is falling, because growth in digital advertising is not yet strong enough to compensate the losses in print advertising. True, print advertising was expected to shrink, but the scale has been startling. Its decline continues in 2016 at a surprisingly high rate. Especially the Sunday papers are suffering heavily under a collapsing print advertising market.
As seen in 2015, advertisers are crossing over from traditional formats like print to new digital media offers. This shift causes a decline for the entire Swiss newspaper advertising market since the revenue in digital are not yet able to compensate the loss in physical print. Although many publishers have built large online audiences to offer display marketers, advertisers still crave the kind of returns and efficiencies guaranteed by pay-per-click platforms.
In digital advertising, ad blocking has become a revenue blocker. Worldwide, nearly 200 million people use some form of ad blocker: in 2015 this cost publishers $22 billion in lost ad revenue. The problem is as real in Switzerland as it is elsewhere.
Historically, circulation revenues at Swiss newspapers have been less than those from advertising. This is still true, but there is an ongoing, strong shift to circulation revenue. We expect this change to continue in the coming years. Globally, the economics of newspaper publishing already have passed a tipping-point: circulation revenues now exceed those of advertising. Meanwhile, more news is moving online, and emerging markets’ demand for news is growing. Thus, global circulation will increase, while revenues will decline, which will lead to a decrease in overall newspaper revenues. Given Switzerland’s slow shift to digital, we expect overall newspaper revenues to decrease faster than the global average. This trend should slow, when Swiss publishers improve monetization in digital channels and circulation revenues finally compensate print losses.
Swiss newspaper publishing remains special, not only because of its distinct geographic and linguistic boundaries, but also thanks to its influence on politics. In Switzerland’s direct democracy, most decisions are taken at local or regional levels, which makes local and regional news particularly important in the political discourse. Thus, as in the past, local businesses advertising in local newspapers is the most significant source of advertising revenue. Local newspapers are this sector’s winners – they might be the way for print newspapers to withstand the digital transformation.
Compared to 2015’s estimates, the 2016 prognosis for compound annual growth is slightly more positive. However, there are still several trends that lead to a rather pessimistic outlook. Most notably, publishing suffered severely from the strong Swiss Franc in 2014. When the euro/franc exchange-rate floor was eliminated in early 2015, especially print advertising was expected to decline sharply. Even though this effect is vanishing now, the print advertising sector is still suffering remarkable losses. The fact that this negative development remains strong in early 2016 dampens the optimism of forecasts. In the long run we still expect the print advertising to shrink, however at a pace that slows down.
Although print advertising revenues continue to fall, they will remain the primary source of income over the forecast period. Reader spending, although declining as well, will become ever more important. As print advertising and circulation revenues are falling, revenues from digital offerings are expected to continue rising.
We do not assume that, in the near future, digital business will supplant print entirely. True, print is struggling, but it has potential for innovation that could renew interest from particular consumer groups. While national papers have grown their digital revenues, many regional and local papers have actually had problems fostering interest in their digital offerings. Regional and local audiences remain print oriented.
Similar to 2015, only a handful of publishers put out most of Switzerland’s newspapers. The market is dominated by four players: Tamedia, NZZ Mediengruppe, Ringier, Somedia (previously Südostschweiz Medien) and AZ Medien AG. With its free-newspaper 20 minutes, available in all Swiss regions and languages, plus a variety of important newspapers such as Tages-Anzeiger, Tamedia is the highest-circulation publishing house in Switzerland. It is followed by NZZ Mediengruppe with titles like Neue Zürcher Zeitung, St. Galler Tagblatt and Neue Luzerner Zeitung, and then Ringier which offers Blick as its flagship newspaper.
Moreover, the market entrance of Admeira holds potential for changes to the competitive landscape regarding newspaper advertising.
In contrast to fast-paced newsfeeds and instant, internet-based news, a growing number of daily print newspapers are adapting the style of weekly papers. Articles are growing longer, more background is provided, and more exclusive-stories from the region or locality are included. Nonetheless, this distinction – putting long background in print, and putting fast, short news online –is not applicable since platforms such as Spiegel.de offer their best background online, at no charge. Publishers will need to find other ways to increase readers’ willingness to pay.
Several big newspapers are pioneering multimedia stories. The biggest underlying trend is news on smartphones, which boosts the reach of newspapers and increases the importance of mobile advertising.
Social media is becoming increasingly important. More and more people are finding their way to the news platforms and the specific news that they are interested in via social networks. Real-time journalism – from on-the-scene, not necessarily professional reporters – is becoming self-evident and ever more influential.
Established publishers are still struggling to create value through digital channels as they did with printed newspapers before. Several price models and payment methods have been introduced and tested, but an ideal solution has not yet emerged.
Swiss publishers must continue to think about new revenue sources outside the publishing market in order to compensate for the decline in their traditional market. The online classifieds segment has witnessed various acquisitions by publishing houses in recent years. Tamedia and Ringier are dominating the market with websites like tutti.ch and autoscout24.ch. As Marc Walder, CEO of Ringier, which already generates 32.1 per cent of its revenues through digital offers, puts it: “If you are not disrupting yourself, you will be disrupted – and vanish.”
Switzerland’s newspapers face fundamental changes. First, advertising money is moving away from classic media into new digital channels and advertising campaigns. Moreover, advertising revenues are losing importance compared to circulation revenues. Newspaper publishers everywhere, and especially Swiss ones, must innovate to survive.
A key trend here is the radical change of reading behaviour among the young. Unlike older people, who continue to read the news on paper. This clientele will continue to exist and generate significant revenues. On the other side, the younger generations get its news from other sources – say, their Facebook feed, or Snapchat. Thanks to its 1.5 billion worldwide users, Facebook has become an essential distribution platform for publishers. They have little choice but to try to reach its vast audience. Facebook’s dominant role in the entire media cosmos is forcing publishers to follow Facebook’s dictates – from new forms of articles to videos and livestreams.
Video is becoming a quintessential news format. Given the increasing popularity of watching videos rather than reading articles, YouTube also holds great potential to become a noteworthy player in news – or rather to capture market share from classic newspapers. Additionally, completely new players like Snapchat are entering the realm of news providers as well.
This development is not straightforward. Social media and YouTube are not simply replacing classic media such as newspapers – they are an addition to them. Readers might consult several news sources, depending on the topic, time available and interest.
In autumn of 2015, Apple launched its news reader “Apple News”. First, this collaborated mainly with major print and digital publishers. Recently, Apple News announced that any creator can create stories that provide a tailored news experience. Smaller, independent publishers are now able to publish their stories on Apple News alongside bigger publishers. Although this development is still in its infancy and limited to the English-speaking areas, it illustrates how the newspaper market in Switzerland could become more diverse and open to smaller publishers.
Auto-journalism – software that automates writing of news, is another remarkable technological advance. One example is “Wordsmith” from Automated Insights. The software generates natural language, human-sounding narratives, from data. Wordsmith turns the data into variables that serve as building blocks for text templates. Users can create text templates for their specific needs.
Imagine the following: the tool is provided with structured data, such as a spreadsheet with quarterly revenues. Based on the rules defined by the template, Wordsmith would then create the sentence: “revenues have declined in fourth quarter.” Accordingly, the data are transformed into a narrative. The template could be used every three months, to generate a standardised quarterly report. The potential for this is huge.
Comparison to Western Europe
Switzerland accounts for 4.5 per cent of the Western European newspapers market. Due to the above average declines in circulation and advertising revenues, we expect the Swiss market to shrink faster than the Western Europe average.