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 Running head: STRATEGIC PLANNING 1
Strategic Planning at the Chronicle Gazette
Name
Institution
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Introduction
The Chronicle Gazette is a leading newspaper in the United States with a circulation of
225,000 customers. Over the past few years, it has been facing a decline in its customer base and
revenues. This is mainly due to the increasing dominance of the Internet as a means of
disseminating information and news. The newspaper publishing industry in the United States is
going through a difficult phase with declining revenues. Both subscription revenues and
advertising revenues have been steadily declining. One of the main causes for this downfall is
that readers are using the Internet to get news content for free and are reluctant to pay. The
global economic recession has cut down the advertising revenues for newspapers. Cost of
publishing has increased and a majority of newspapers have increased prices. This has further
distanced consumers from traditional newspapers and made online news websites more popular.
The main purpose of this report is to present measures for The Chronicle Gazette to boost its
circulation and increase profits. The report will analyze the newspaper industry in the United
States giving details of its present status and future position. It will also present facts on the
factors that have lead to the decline of the industry. The report will analyze the trends in the
newspaper industry and the strategies adopted by leading companies in the industry. It will
provide details on the measures adopted by companies in the publishing industry to overcome the
losses. By taking into account the internal and external factors affecting the industry and the
publishers, the report will present the measures to be adopted by The Chronicle Gazette to
increases its advertising revenues and widen its readership base.
The United States Newspaper Publishing Industry
The main products of the United States newspaper industry are daily, weekly, monthly
and Sunday newspapers. The United States newspaper publishing industry consists of
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approximately 2,000 companies with total annual revenues of nearly $30 billion. The main
sources of revenue for the industry are advertising and subscriptions. Advertising revenues
constitute the majority of the newspaper industry’s earnings. The leading companies operating in
the industry include News Corporation, The New York Times Company, Gannett Company,
Tribune Company, The Washington Post Company and Hearst Corporation. The total daily
circulation of the newspaper industry in the United States is nearly 50 million (Hoover’s Inc.,
2010).
One of the main drivers of the US newspaper industry is the state of the national economy. The
economy has a direct impact on both advertising and circulation. The majority of overhead costs
incurred by companies in the industry are fixed. As a result, profitability is driven by sales and
marketing. The marketing strategy of companies needs to be strategic and innovative to increase
circulation and boost profits. The larger companies have the advantage of economies of scale and
size by using shared resources in publishing a number of newspapers. Smaller publishers are
better suited to serve smaller markets (Hoover’s Inc., 2010).
Over the past few years, there has been a steady decline in the readership of newspapers. An
increasing number of people are using the Internet to read and view news online for free. Due to
the advancements in Internet, people have free access to news and information online twenty
four hours a day and seven days a week. The news content is available in real time and can be
accessed anytime anywhere in the world. The majority of these online news providers do not
levy a fee. As a result, the number of readers willing to pay for news content is reducing and this
has a direct impact on the sales of newspapers.
There has been a significant reduction in the total number of newspaper copies circulated
in the United States over a ten-year period. The total number of newspaper copies circulated
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(including daily and Sunday newspapers) in 2000 was 115,194,000. This number has
significantly dipped to 97,712,000 in 2008. Simultaneously, advertising revenues have also gone
down steadily over the years. Advertising revenues has dipped from $48,670 million in 2000 to
$24,821 million in 2009 (Newspaper Association of America, 2010). Over the past decade, there
has been a consistent dip in revenues and profits for newspaper publishers. On an average, the
reduction in circulation numbers was under 1%. With the Internet growing in importance and
popularity, the readership base of newspapers have been affected. People are able to access news
content online for free. Cost conscious readers have stopped buying newspapers and increasingly
use the Internet for news and information. In addition to this paradigm shift, the global economic
recession has added to the woes of the newspaper industry. The rate of decline in newspaper
circulation was 2% in 2005. This increased further to 3% in 2007. At the end of 2008, the rate of
decline in newspaper circulation in the United States stood at 4%.
For the six months ended September 30, 2009, newspaper sales reduced by 10.6% for daily
newspapers and by 7.5% for Sunday papers compared to last year (The New York Times
Company, 2010).
During the period from April to September 2009, the circulation of daily newspapers in
the United States reduced by 10.6% to 30.4 million copies compared to the same period in 2008.
During the six months ended September 30, 2009, the circulation of Sunday papers fell by 7.5%.
Advertising revenues have also reduced by 27.2% in 2009. Due to the sharp declines in
subscription and advertising revenues, newspaper publishers across the United States have taken
a number of measures to overcome the downturn. Almost all the major newspapers have started
publishing their news content online and maintain independent websites. However, the
newspaper publishers are finding it difficult to bring in more advertising revenues for their online
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content and are unable to negate the losses from print advertisements. Most of these newspapers,
charge readers a certain fee for access to their websites. Many readers are reluctant to pay for
newspaper websites as they have free access to other online sources (Los Angeles Times, 2009).
Major newspapers are undertaking cost-cutting measures by downsizing their staff and reducing
the content. They have also increased the prices of single copy purchase. These measures have
left many consumers moving away from buying newspapers and looking to the Internet for other
free sources for their news and information needs (Los Angeles Times, 2009).
Status of Newspaper Leaders
In the United States newspaper publishing industry, the three forerunners are The Wall
Street Journal, USA Today and The New York Times. The Wall Street Journal is the largest
selling daily newspaper in the United States. It is published by the Dow Jones & Company,
which is owned by News Corporation. Apart from the US editions, the Wall Street Journal also
has Asian and European Editions. For the six months ended March 31, 2010, the daily week day
edition of Wall Street Journal has a circulation base of 2,092, 523 subscribers. For the same
period, its weekend edition has a circulation base of 1,913,284 customers (Audit Bureau of
Circulations, 2010). The Journal has also a strong e-subscription base. As of April 2010, the
Wall Street Journal has the highest number of e-readers for its online newspaper editions with a
subscriber base of 414, 025 customers (Audit Bureau of Circulations, 2010).
The Wall Street Journal has recognized the importance of the Internet to the newspaper business
and formulated their strategy accordingly. They publish their news content online but not all of it
is for free. The Wall Street Journal has adopted a price model of free and paid access.
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A lot of the news coverage, including political news, opinions, sports news, and art and
entertainment news is available for free to all online readers. It charges its readers a fee for
certain niche business and financial news. The subscribers are willing to pay for this content as
they may not get it anywhere else. The online edition of the paper has been able to attract
significant traffic on its website as a majority of the news content is available to everyone. This
has helped in bringing in more advertising revenues. The Wall Street Journal has been successful
in adopting a publishing model that offers both free and paid content. It has been able to attract
more traffic for its web editions by publishing popular content for free. The Journal has been
able to attract readers to its websites and charge for reading niche news content.
USA Today is a major daily newspaper in the United States owned by Gannett Company.
It was established on September 15, 1982. The newspaper also has an international edition.
During the six months ended March 31, 2010, USA Today had a circulation of 1,826,622 (Audit
Bureau of Circulations, 2010). During this period, the circulation of USA Today fell by 13.6%
and the number of subscribers reduced to less than two million.
The New York Times is another major daily newspaper in the United States. It is founded
and published in New York City. The paper is owned by the New York Times Company. During
the six months ended March 31, 2010, The New York Times had a circulation of 951,063 for its
daily newspaper. Its weekend edition had a circulation of 1,376,230 during the same period
(Audit Bureau of Circulations, 2010). The circulation of the New York Times fell by 8.5% for its
weekday edition to approximately 950,000 copies. The Sunday edition of the New York Times
faced a decline of 5.2% to approximately 1.4 million copies (The New Times Company, 2010).
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Reasons for Declining Circulation and Revenue
The emergence of the Internet and its increased use by people for all their news and
information needs have had a dramatic impact on the newspaper industry’s fortunes. There has
been a paradigm shift in the readership base of newspapers in the United States. The global
economic recession and slowdown has added to the woes of the newspaper publishers. As a
result, circulation figures are at an all time low. This has affected the other major source of
income for the publishers, which is advertising revenues. Businesses are looking at advertising
space on the web as a more viable option than print advertising due to its visibility and cheaper
costs. To overcome the losses from the decline in readership and advertisements, newspaper
companies have increased their newsstand and subscription price. Some publishers have also
restricted the supply of their newspapers to only profitable areas. They have cut down on
circulation to remote and far flung places as the revenues do not justify the cost of delivery.
The newspaper industry in the United States is highly concentrated. Even though publication
takes place at the local levels in various cities and towns, the ownership and governance of the
newspapers is centralized and controlled in the major cities. The top 50 companies control
approximately 80% of the market (Hoover’s, Inc., 2010). There is increased ownership of
newspapers by chains. Newspaper chains have grown both in numbers and size over the years.
There is reduced competition among the newspapers especially in smaller towns. There has been
a change in the policy of the government and political parties towards the newspaper publishing
industry.
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Political parties do not extend the kind of support to newspapers that they once did. Even
they are spending more time and money on online campaigns and promotions to increase their
reach at minimum cost. Advertisers are also very choosy in budget outlays for print advertising.
Due to the economic recession, the budget allocation for advertising is restricted. As a result,
businesses are willing to advertise only in the newspapers with large circulations. The smaller
papers suffer losses due to this and eventually have to shut down operations (Potter, 2005).
A major demographic factor for the decline in the readership base of newspapers is that the
younger people have deserted the printed paper for numerous online sources of news. A number
of free news content is available on the Internet for meeting their news and information needs.
The news content can be accessed in real time coupled with video coverage. Online news content
can be viewed anytime from anywhere in the world. According to Pulizzi and Barrett (2009,
p.13) “studies show that the average age of a newspaper reader today is 60, which is not the ideal
demographic for most organizations.” The newspapers are not able to increase their circulation
figures as they are unable to increase their readership base by attracting younger customers.
There has been a decline in the percentage of adults who read newspapers on a daily basis in the
United States. In 1990, 62.4% of people said that they read a daily paper. This reduced
significantly to 56.9% in 1999 and 55.1% in 2000. Similarly for Sunday newspapers, the total
readership was 65.1% in 2000, down from 66.9% in 1999 and 72.6% in 1995 (Rayport, 2003).
There has been a shift in the readership of newspapers among critical market segments,
such as women. The percentage of women reading a daily newspaper has reduced over the past
decade. The newspaper industry must analyze this important demographic of the market and
formulate strategies to attract more women readers. They could introduce special women
sections in the newspaper covering topics, such as health, careers, family and children.
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Technological advancements have changed the way news is received, reported and deliver to the
consumers. The increasing use of the Internet and mobile technology has changed the way
business is run. These technological factors have influenced the newspaper industry in the United
States to adopt newer business models. Many newspapers have digitized their news through their
own websites. There are more than 900 websites run by newspapers in the United States. A
majority of these websites carry online advertisements. At the same time, there are also
strengthening their print news divisions to increase circulation.
The competitive landscape has changed in the newspaper industry with the entry of new
media, mobile devices, media platforms and concepts. Internet companies, such as Google,
YouTube, Facebook and Twitter provide online, real time news coverage along with videos
attracting younger audiences. They have been able to take readers away from the traditional
printed media to the virtual content space. They attract a lot of traffic on their websites as a
majority of the content they offer are free to access. Due to the increased traffic, they have also
been able to attract advertisers away from print advertising to online advertising. The cost of
online advertising is cheaper when compared to print advertising. The cost of operating and
maintaining websites is also less in comparison to printing newspapers. All of these factors have
ensured that the new media companies have to been able to increase their customers, minimize
the cost of operations and maximized profits. The traditional newspaper publishers have been
struggling to adopt new technologies in their business and increase profits.
In this era of globalization, there is an increased emphasis on protecting the environment
and sustaining it for future generations. Businesses now have increased social responsibility to
function in a manner that protects and enhances the environment. The same applies to the
newspaper publishing industry. In the past few years, newspapers have been more aware of
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protecting the environment and taking measures towards this. A majority of the newspapers are
using recycled content to publish. They are encouraging newsprint manufacturers to use more
recycled content and less virgin fiber for printing newspapers. A number of publishers are also
taking steps to minimize their use of printing paper. They have taken measures to use resources
judiciously and optimize utility. The Washington Post and The Los Angeles Times have
decreased their widths to 50 inches to economize their use of newsprint (Honnold, 2000).
Porter’s Model
Porter’s model is a strategic tool developed by Michael E. Porter in 1979. It is a tool that
facilitates to assess and analyze the competitive forces in a market. It is developed on the basis
that competitive strategy must be formulated taking into account the opportunities and threats in
the industry. Porter has identified five forces that determine the competitive landscape of
industries and markets. These five forces are competitive rivalry between suppliers, threat of new
market entrants, bargaining power of buyers, power of suppliers and threat of substitute products.
The strategy of the business should be designed in a way to change these competitive forces to
the advantage of the company (Chapman, 2010).
Applying the Porter’s model to the newspaper industry, it can be seen that there is always
a possibility of increased competition. New players could enter the market. They could adopt
innovative methods to enter the market. For example, providing free copies for a trial period of
30 days. They could also provide a complementary copy with some other publication. With
regard to the bargaining power of buyers, there could be changes in the demographic distribution
of the readers. If the majority of the readers are old, then the newspaper should change its
strategy to attract more youth in buying the paper. With the easy availability of free online news,
readers are not willing to pay for news content. Newspaper publishers need to formulate a mixed
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strategy combining free and paid access. The more popular portions of the website could be
made accessible to all to attract more traffic. Pay walls can be designed for niche news that
targets specific readers. Suppliers could influence prices by quoting more price for
manufacturing the newspaper. The threat of substitute products is in the form of television and
the Internet. The newspaper industry is finding it difficult to tap the young adults market
successfully as a majority of them look to television and new media, such as the Internet for their
daily news. Publishers need to understand the specific needs of the youth and formulate their
strategy accordingly. They can increase their readership base amongst the youth by providing
increased web coverage in areas that interest them, such as business, sports, education, arts and
entertainment.
Strategy Adopted by Companies in the Publishing Industry to cope with the Challenges
The newspaper industry in the United States is faced with multiple challenges of reduced
readership, increased costs and competition from new media companies, such as Google. A
majority of the newspapers have online versions of their editions on websites. They have also
other measures to increase circulation and improve profitability. Newspapers have increased the
prices for both the subscriptions and single buy purchase. They are also analyzing the markets
they serve to understand the cost-benefit dynamic of each market. As a result, some newspapers
have cut back on circulation to remote areas where the revenues earned are more than the cost of
delivery.
The Wall Street Journal is one of the leading newspapers in the United States, which has
changed its market stra