Will the Internet replace newspapers within two years?

In the United States the veteran media tycoon Sumner Redstone is on the record as predicting the end of newspapers and most ink media within two years, and a complete takeover by the Internet.

Cost pressures and advertising trends support his argument. Newspapers and magazines are relatively expensive to produce and distribute, quite apart from the high cost of producing content. Advertisers are increasingly following the eye balls of readers onto the Internet.

Tipping point

Redstone sees a tipping point where the revenues from advertising and subscriptions are insufficient to support ongoing operations, let alone make a profit.

At the same time Internet websites have far lower production costs, with software increasingly standardized, and a zero distribution cost. Only the pesky journalists still need to be paid, although a significant rationalization of content production is also happening due to the Internet, with thousands of versions of the same story just no longer required.

The economic recession just speeds this process up by hitting into advertising revenue very hard. For in a recession not only will there be a drive to find the most efficient media but there is just less revenue full stop.

Will Redstone’s prediction also apply in the Gulf States? It is already happening. The recession of 2009 squeezed many fringe publications out of business and some newspapers. But regional governments and big families have been reluctant to acknowledge that losses reflect a structural change in the business model rather than just a tough year.

Eventually the continuous losses will focus the minds of even the deepest pockets. Print media is dead or dying, and being replaced by the Internet with its instant access from anywhere in the world and free and constantly updated content.

Adapt to survive

To survive the dead-trees brigade will have to adapt and change into Internet publishing houses. This is not an easy transition but it is what is happening across the United States and also Europe right now.

Yet there are huge cost savings which are exactly what you need in a recession. Indeed, the winners in the Internet publishing game are not those with the highest advertising revenues, which are never going to be as big as the print media enjoyed due to the perfect competition of the Web but those who can squeeze their cost structures to the bone.

That means eliminating layers of useless managers and back office staff and keeping the journalists who actually produce the content, and organizing websites very efficiently. This is a huge challenge and not every publishing house is likely to make it.