The death of a newspaper model

The most widely read newspaper in Denmark, Nyhedsavisen, has folded. Late yesterday the staff was informed that extra money for publication won’t be released by the papers lead investor, Skype-investor Morten Lund.

From a reader perspective this is bad news, since Nyhedsavisen was arguably the best of the freesheets. But more than that it signals the end for the broadly distributed newspaper model.

Basically, Nyhedsavisen competed on two parameters beyond the journalistic quality: Circulation and very competitive pricing on its ad inventory. The former drove up cost, the latter drove revenue levels down. It simply had to end at some point (unless of course an investor was willing to continue to throw good money after bad). It’s basic math.

What Nyhedsavisen showed was that having a widely read paper and providing a high number of contacts to advertisers isn’t enough.

Today, there are much better opportunities for targeting individual target groups, and advertisers are doing this in an increased way. Thus, the broadly targeted product moves towards commodity status, and it becomes really hard to make the revenue to justify the costs of production and distribution.

The remaining players on the market for freesheets express hope that competition will now be ‘normalized’ enabling them to claim higher prices for their inventory. But why would it? Why would advertisers start paying more for the same, just because one player has folded? Especially considering all the alternatives? I don’t think they will.

Instead the media companies should sit down and take note of this. Yes, Nyhedsavisen was to a large extent a rogue project that created more havoc than sustainable business models. But the signal from the market is clear. This newspaper model is dying.

Vad NU! is a consultancy company owned by Mads Kristensen and specialized in helping clients take advantage of the business opportunities created by new media. Click to learn how I can help you and your company.