Building the ideal newsroom for the next 50 years
Rosental C. Alves's Page
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- Organization
- University of Texas at Austin
- Title
- Professor, Knight Chair in Journalism
- Location
- Austin, Texas
- About Me
- Professor Rosental Calmon Alves holds the Knight Chair in Journalism and the UNESCO Chair in Communication in the School of Journalism at the University of Texas at Austin. He is also the founding director of the Knight Center for Journalism in the Americas. Created in 2002, thanks to a $2 million grant from the James L. and John S. Knight Foundation, the center reaches thousands of journalists throughout the hemisphere with training and organizational capacity-building projects.
Alves began his academic career in the United States in March 1996, after 27 years as a professional journalist, including seven years as a journalism professor in Brazil. He moved to Austin from Rio de Janeiro, where he was the managing editor and member of the board of directors of Jornal do Brasil. He was chosen in 1995 from approximately 200 candidates to be the first holder of the Knight Chair in International Journalism, created by a $1.5 million endowment from the Knight Foundation.
Alves created the first Brazilian online news service in 1991, which served the network of Rio de Janeiro’s stock market brokers. In early 1995 he managed the launching of the first online edition of a newspaper in Brazil, Jornal do Brasil Online. In Austin, he created the first course on online journalism at UT during the 1997-98 academic year.
A board member of several national and international organizations related to journalism, Alves has been a frequent speaker, has worked as a newspaper consultant, and has conducted numerous workshops in several countries to train journalists and journalism professors on the use of new media. Since 1999, he has hosted the annual International Symposium on Online Journalism at UT Austin – a unique conference, gathering professionals and scholars from around the world.
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- http://knightcenter.utexas.edu
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In terms of concentration of income and occupation of the land, Brazil is a country that exemplifies the "Paretto Law" - 76 percent of the Gross Domestic Product (GDP) is concentrated in 18 percent of its territory. Only seven of its states (those in the south and southeast) are responsible for 58 percent of its total population.
These southern and southeastern regions are where more than 80 percent of all editors, readers and advertisers in the country are concentrated. The weather is temperate and cold -- a condition that favours a high incidence of subscriptions. There a higher educational level and a strong reading habit among the population that makes this a prime area for the Brazilian print media market. This is also the area where we find the largest publishers and the best circulation numbers.
In spite of this scenario, data collected in a sampling by WAN illustrate that Brazil has 42 readers per 1,000 inhabitants, compared with 582 in Japan, 330 in the United Kingdom, 318 in Germany and 297 in the United States. On the other hand, the advertising portion of the Brazilian newspaper industry corresponds to 25 percent of its total budget, differently from Germany 45.3 percent, the United Kingdom with 37.3 percent and the United States with 36.4 percent. The per capita GDP of these countries, it should be said, are at least six times bigger Brazilian per capita GDP. Issues and Advertising cost of selling is over 30 percent
Low readership, coupled with industrial costs that are dollarised and low net advertising revenues relative to other regions in the world, suggest that this type of free and unregulated enterprise in Brazil has a high mortality rate and a low birth rate. When we weigh in all these internal and external factors that are specific to the activity, they suggest a scenario that may be associated with low profit margins and a high level of debt in the press business. Hence, it creates an environment with a low incentive to develop new ventures.
In 1912, Brazil had 140 newspapers with daily circulation. This number evolved to 260 in 1930. By the end of 1980, the National Newspaper Association documented the number of daily newspapers at 380. Today, their website shows only 198. This means that Brazil has closed out a century with almost the same number of periodicals it had in the 1920s, in spite of the
new weekly newspapers, development of new urban centers and an increase in the country's population.
Circulation: Overview
In Brazil, net income from circulation of newspapers corresponds to approximately 23 percent of total revenues, which is not enough to cover the variable costs of printing, selling and delivering, generating a deficit per issue sold. This requires a annual level of funding that is almost always equivalent to the total revenue obtained with classified advertisements. This fact puts a heavy burden on the shoulders of advertising (excluding classifieds) to cover for all other operational expenses such as newsroom, administration and taxes, as well as financial expenses and profits.
As a consequence of Brazilian economic environment instability as a cautionary measure, management dedicate its best efforts to create the necessary levels of pages per issue, circulation and unsold newspapers to allow Editor to break even. All so Editors try, as much as possible to produce, sell and deliver based on their circulation revenues. In other words, it means that they need to try to pay for each issue without having to take advertising revenues into consideration. This effort ends up mutilating the product and our ability to create investments in order to improve it.
When we evaluate the financial constraints imposed upon this sector by the operational investments management have to make in order to reach its circulation goals, they also prove to be insufficient. Technologically, we could say that companies are in the 21st century as far as newsroom investments are concerned. Yet, in the 20th century when it comes to printing resources and stock counters, and in the 19th century when evaluating circulation. This leads us to the realization that circulation sits on the lowest threshold of investment priority and on the highest threshold of demand for market penetration. It is a sector of the newspaper industry with noinvestments but heavy responsibilities and dependence on the
newsroom.
Generally speaking, pools results indicate a gap between what is produced and what the market demands. We can assume that the selection of one newspaper is a "compared purchase decision" and not an "impulse decision," meaning that readers know exactly which newspaper they want to buy before they even get to the point of sale.
Therefore, the decision to read (and subscribe to) specific publications is connected to attributes that can be subjectively perceived by readers such as credibility and, objectively speaking, content. Since newspapers tend to see themselves less as a product that needs to understand motivations, meet needs and gain (and retain) markets, it is natural for them to see readers as people who are "to be treated as readers and not as consumers" who need to be stimulated, attracted and courted.
The same mistakes are made in the area of procedures and service provided to sales channels. It puts limits on the effectiveness of evaluations based on numbers of unsold newspapers. For newsstands, which are the main channel for single-issue sales, there are no effective controls to help manage the process, leverage sales and attract new readers, except for the follow-up of unsold newspapers.
Newsstands are seen almost like newspaper depositories with passive sales, and not as retail points-of-sale. As a counterpoint to this scenario, editors keep searching for attractive promotions that may help them increase sales such as coupons, contests and discount clubs forgetting that only market researches and the newsroom and its editorial can define long-term success.
With stagnant newsstand sales, editors conclude that the way to solve the problem is to increase subscriptions. In the case of Brazil, this phenomenon is a success and profitable in the cooler areas of the south, for obvious reasons. In the rest of the country, though, this goal cannot be achieved without necessary discounts that compromise profitability. Therefore, increases in circulation based upon subscriptions generate deficits relative to industrial costs.
A No-Growth Situation
The industry operates with deficits due to costs and the low margin in total sales that leads companies into debt. The high cost of the debt brings a consequent deterioration of the product, hurting circulation numbers and, when extreme, leading the company to go bankrupt.
As consequence investments in circulation and readership relations are few or null and they are more concerned with logistics aspects as a priority. This situation makes it difficult to understand motivations, purchase habits, reading habits and expectations. In turn, it harms the interaction between the newsroom (product) and circulation (readers).
Due to the flattening of income in the country, there is a reduction in the frequency in the purchase of single issues and an increase in shared reading of newspapers in the workplace or via Internet. This shared reading blocks access to new buyers/readers and eventually results in the loss of current readers.
Newspapers look to subscriptions as the only way out in their attempt to retain readers for specific periods of time and to increase the quantities sold, struggling to compete in the advertising market. What happens, however, is a huge waste of funds and efforts because people only become subscribers of a publication if they are habitual readers of that
publication.
Therefore, in Brazil, the number of subscribers ends up being constant over an average period of time because of the fact that there is no growth in single-issue sales (new readers), which is the only way to achieve global growth. People need to know and like something in order to subscribe to it. To try to resolve this poor sales dilemma, companies have been resorting to promotions, bundling products with the newspaper or offering discounted services or products, which end up creating an artificial and temporary growth in circulation.
Recovery Tips
To begin recovery of circulation, make management understand and accept the scenario in which the company is involved. Try to convince ownership to treat the newspaper as a corporation and not as a public service or political tool.
Invest in qualitative surveys and marketing simulation models enabling newsrooms to understand motivations, trends, consumer habits, rejection and perception of the product and its competitors. Professionals need to understand what is indispensable and what are the determining factors of a purchase.
Based on these conclusions, convince newspapers to produce stories that can attract readers, especially women. Constantly surprise readers with new information. Approach topics through the eyes of the reader. Trust the power of reports; they are the product that differentiates newspapers from other media. Publish editorial that excites, touches and disturbs people. Resist the television model: superficiality
In other words, reducing subscription's sales discounts have always Price Sensitivity Analysis trying to minimize the cover price as an access barrier. As Chagas Freitas, the prosperous owner of the Brazilian newspaper O Dia (a top ten) used to say, the ideal price for a newspaper should be the change commuters get when they buy their train ticket.
Search for improvements in distribution and reduction of churn. In the area of reader relations, invest in technology that allows for following the behavior of consumers along small intervals of time while developing strategies based on observations of each inflection point detected in the monitored behavior. The goal here is zero error in the relationship between
circulation and reader relations.
The Newsroom Link It is impossible to talk about circulation and readership markets without a link to the newsroom. Circulation, after all, excluding its logistics aspects, is in itself a middle activity in this process. In reality, editors are the people who determine levels of acceptance.
Circulation is in charge of maximizing sales with the least amount of losses, delivering in the least possible amount of time for the lowest possible cost, and maintaining superior quality in delivery procedures by following the rule that errors should never impact more than one issue for each two thousand issues delivered, for example The quality of the service should be ensured so that both information and issues flow smoothly. "Zero error" and "maximum coverage" campaigns are permanent objectives.
With both of these goals reached, if it is still impossible to make circulation grow, we need to return to Adam Smith and his maxim: "The only reason for production is consumption; there is no sense in producing something that is not consumed."
In this scenario there are two choices: understand what we need to do and the demands upon us, or leave this business.
With my twenty years of experience working as Circulation Senior Consultant and also as a MBA teacher of Marketing (CRM) I am now convinced that in regard to print media, a good knowledge about marketing and its tools is fundamental in understanding opportunities. However if we isolate circulation and marketing tools and it has no support from the newsroom, no amount of marketing expertise can create superfluous consumption that marketing creates in other economic sectors. It is because newspapers did not believe in the value of such a relationship that many of them had to quit the market.
Contact: Luiz Caldeira is a Senior Circulation, Logistic and CRM Consultant and MBA Management professor at the Getúlio Vargas Foundation (FGV) in Rio de Janeiro, Brazil. He can be contacted by e-mail at lacald@terra.com.br (or phone number 5521 2610 4621)