Academic journal article The McKinsey Quarterly

Good News for Newspapers

Academic journal article The McKinsey Quarterly

Good News for Newspapers

Article excerpt

Luis Ubi[tilde{n}]as

Many publishers and readers of newspapers think that the industry is declining. It is true that overall circulation is lower than it was before broadcast TV, cable TV, and the Internet made huge inroads. Yet by comparison with those mass media, the position of newspapers suddenly looks quite strong: the audiences for up-and-coming media remain terribly fragmented, so newspapers, though diminished, have once again become something like a broad-reach medium. In the United States, they reach 59 percent of the adult population daily, a penetration rate higher than that of prime-time TV, at 42 percent, or of radio, at 25 percent. Instead of substituting on-line publications for newspapers, readers commonly frequent the World Wide Web sites of their usual papers or use the Internet to complement the print media. In fact, many newspapers have succeeded in extending their readership bases by attracting new demographic groups to their Web sites.

Perhaps it should therefore be no surprise that newspapers around the world have been aggressively raising their prices. What is a surprise is the fact that, in seeming defiance of the standard inverse relationship between price and circulation, this development hasn't driven away readers. In an industry that has been shrinking for decades, such evidence of price elasticity is very good news.

Indeed, even in mature markets, newspaper prices have increased much more than those of other daily goods. In emerging markets, as Exhibit 1 suggests, circulation growth is very strong, and individual newspapers, such as the Times of India and Brazil's O Dia and O Estado de Sao Paolo, have achieved growth rates of up to around 60 percent over the past five years.

Exhibit 2 maps changes in circulation against changes in inflation-adjusted prices for top newspapers in each of nine markets around the globe during a period of six years. You would expect circulation to decrease as prices increased, putting most of the dots along the diagonal or into the shaded areas, but more than half of the newspapers actually fall outside them. …

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