4 June, 2012

TATION pRÆSEN

Business model innovation: The Danish newspaper

industry’s response to the decline in traditional

markets

10th World Media Economics and Management Conference, Thessaloniki, Greece

23-27 May 2012

Anna B. Holm, John P. Ulhøi, and Anastasia Uliyanova

*This research has been funded by the Danish Council for Strategic

Research, 09063245 (“Digital Urban Living”). The usual disclaimer

applies.

The business environment of the Danish newspaper industry is changing

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• Changes in consumer preferences, i.e. news reading is moving

online and becoming increasingly mobile;

• New types of competitors, e.g. news aggregators, internet providers,

content providers, specialised websites and portals;

• Technological innovations, particularly general purpose technologies

such as Web 2.0, mobile broadband Internet connection, new types of

personal communication devices;

• Novel sources of news, e.g. blogs, forums, and online social

networks;

• Public subsidies go solely to printed national dailies, while online

editions and e-papers are subject to value added tax and receive no

subsidies.

Newspaper circulation in Denmark (1989-2009)

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By August 2011,

none of the

Danish daily or

morning

newspapers

had a

circulation of

over 100,000.

Source: Danish Newspaper Publishers´ Association

Research purpose

1. To analyse the existing business models of the

Danish newspaper industry.

2. To discuss how changes introduced during the on-

going development of digital platforms have

affected the dominant business models and their

core elements.

3. To investigate how leading Danish newspapers are

responding to the challenges.

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The business model framework

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Value proposition Value creation

Factors related to the

offering

• Key resources

• Key activities

• Key partners

Value delivery Value capture

• Customer segments

• Distribution channels

• Customer relationship

• Costs

• Revenue model

Source:…

Method and data

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› Qualitative research design based on interpretive methods.

› Two largest media groups in Denmark: JP/ Politiken and

Berlingske Media.

› Data sources include: • In-depth, face-to-face, semi-structured interviews with editors-in-chief,

CEOs, and other newspaper managers.

• Professional presentations from Danish and WAN-IFRA media

conferences.

• Newsletters and other archival data, e.g. annual reports.

› Inductive data analysis, with initial data reduction based on

the business model framework.

The initial response of the Danish newspaper industry - Industry consolidation through mergers and acquisitions to achieve

economies of scale;

- Cost-cutting initiatives and business restructuring, such as lay-offs of

journalists and the outsourcing of non-key activities to optimize

operations;

- Adjustments in paper formats, content and circulation to match market

demand and customer preferences;

- Free distribution of content – online newspaper editions and free-sheets

to attract readers and advertisers;

- Redefinition of competition and co-opetition with traditional rivals to cope

with increased competition from non-traditional rivals, e.g. Google,

Yahoo, etc. 7

NO INNOVATION IN BUSINESS MODELS!

- Review of value propositions for different customer groups, i.e. readers,

advertisers and marketers, and adding new value propositions as well

as customer segments;

- Dismantling the traditional business model based on a single delivery

channel, i.e. the printed newspaper, and managing multiple business

models with multiple distribution channels based on digital (Internet)

technologies;

- Creation and acquisition of online firms, portals, classified databases,

etc., to deliver value to traditional customers;

- Non-core profit-generating activities, e.g. e-commerce.

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The delayed response of the Danish newspaper industry

Danish newspapers are still faced with a declining

readership and the prospect of further declining

revenues.

One of the many explanations lies in their current

business model configurations and a disruption of the

logic of the existing business model.

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However…

Disruptive changes in the business model (1)

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Value proposition

• The offer of “free” content;

• New types of content, genres and media types and media convergence;

• Support of the overall brand, not the printed newspaper per se;

• New, specialized, niche online products and apps for the web, smart

phones and tablet computers.

Value delivery

• Fragmentation of the reader segment;

• New multiple business-to-business customers;

• Multiple delivery channels instead of one, i.e. the printed newspaper;

• Lost ownership of delivery channels and distribution of content through

third-party channels.

Disruptive changes in the business model (2)

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Value creation

• New organisational structures for producing and publishing content on

printed and digital platforms;

• New IT resources required;

• Need for journalists and communication workers with new skills;

• New key partnerships with information and communication technology

(ICT) companies.

Value capture

• Increased unit costs of printed newspapers;

• Changes in the revenue structure;

• Continuous experimentation with pricing of digital products;

• Dependence on revenues from non-core activities.

Conclusions

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› The media groups in the study initially dismissed the need to innovate

because of long-term success with their traditional business model.

› The first real innovations in their newspapers’ business models only

occurred around 2006-2007, when the media groups changed their focus

to better serve customer needs.

› However, they still need to reconsider the extent to which their existing

businesses are efficient as well as effective, and to determine which

strategies to adopt to help them cope with today’s challenges.

› Adopting technological innovations and adjusting business models is a

never-ending process – although adopting new technology seems

‘uncomplicated’ compared with adopting a new business model.

.

Implications

› Business model innovation is imperative for the newspaper industry in

Denmark.

› At the same time, the industry needs new approaches to business model

innovation in general. These can include:

› Establishing a special business model innovation function or task force in order to design

and test new business model configurations before they are incorporated into the main

business model;

› Launching new value propositions as spin-offs before they are finally adopted by the

company;

› Involving customer groups in business model innovation, i.e. user-driven innovation.

› Further research should focus on the business model innovation process,

approaches and needs, rather than studying business models of the

industry in general.

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THANK YOU!

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If you are interested in this research, don’t hesitate to contact me: • Email: annah@asb.dk

• Twitter: @annabholm

• LinkedIn: http://dk.linkedin.com/in/annaholm