2012 Another year of strife, but nuggets of opportunity. In turbulent times, we slide further into another financial fog.

At the time of writing the Euro is in chaos. But even if this is resolved, we will continue to face a long up-hill struggle in Western economies. Before I move on to making any Nostradamusian predictions lets just quickly review what I said this time last year, and what worked out; not something that any self respecting forecaster or analyst would ever do, but as a Scottish Presbyterian, I can never avoid a bit of self flagellation. So I said. Things cant get any worse. Weve said goodbye to classified. And realised the pitfalls of over-relying on cyclical profitability. Things have got a lot worse economically, but for publishers, things couldnt get much worse. While publishers have done some good work in further removing costs, they have also aggravated their own weaknesses by pretending the issue of cyclical profitability does not exist, and have instead slashed investment in the core aspects of our industry in pursuit of an illusionary digital Nirvana. Should I blame shareholders for this? Im tempted to. But in many cases publishers have failed to persuade their shareholders of the nature of the cyclical reality, and how by investing in the business as you come out of the recession, revenues can rocket the long-term value of the company. Analysis of how good companies managing the cycle, shows that the two drivers of long-term value creation are innovation, and a willingness to take the pain in bad times in order to reap better profits in the good ones. In newsrooms, there has been a vague attempt to retain creative roles, and reduce what were generally, certainly in Anglo Saxon markets, an over dependence on production staff. Too little has been done too late, to revitalise staff and engender a sense of entrepreneurial enthusiasm. A survey I undertook recently of editors attitudes in the UK XX weblink, suggests that there remains a great enthusiasm and optimism, but they lack support in terms of training and investment in staff development for the world that lies ahead of us. Something that our newsroom staff are only too willing to take on. In advertising, publishers have continued to cut their sales resources, completely unmindful of the fact that when business recovers, which it will, they wont have enough resources to recover revenue from a range of oblivious new-entrants. Lest one seeks to blame the internet for this trait, it has existed to my certain knowledge since the early eighties. And have you noticed how the word Circulation (perhaps the older readers of this article can explain to our younger colleagues what this is) has disappeared from the industry lexicon. Globally it accounts for around 47% of total revenues, compared with 6% from digital, and another 47% from print advertising, but apart from the worthy attempts by INMA to keep the subject on the agenda, every where you look digital is the only word on the agenda, and digital isnt delivering the value our industry should be realising. Next I suggested that: The biggest issue must be the exploitation of focus. For 90% of the worlds newspaper industry, our business is Local which is where the battlefield will be. Worldwide average daily circulation is 17,000. The world may be large, but for most people, their lives have small horizons. This issue has never been hotter and now we are seeing a movement by media regulators to create local TV stations. The combined vision of local print, local broadcast, and digital interaction is an extraordinarily compelling concept both socially and commercially. In five years time, this will be seen as one of the initiatives that succeeded. And I believe it can be immensely profitable.

Last year, I also anticipated the concept of search 2.0, and the concept of more granulated search. Not only is this beginning to happen, but we are also seeing a more intelligent delivery of tailored content, that combines fuzzy search with audience preferences, with targeted advertising. As I said this time last year. Combined with local search, across both content aggregation and targeted communication mix, this is a potent force. There are new content management algorithms, for both editorial content, and advertising delivery that will deliver a growth in news content consumption (maybe even payment for content, but dont hold your breath). There are result based pricing models that bare no relation to cost-per-thousand analogue pricing, backed with better targeting and advertiser/audience clustering methodologies, that will exponentially drive communications revenues fast. This is one exciting revenue space, and the technology and implementation required to deliver this dream is simple, and here. So to 2012 and what would I now add into the mix? eReaders the game changer While it was obvious before, eReaders, tablets call them what you will are now confirmed as the killer device. My view isnt based, as so many others have been, on romance, but on real statistics on consumer behaviour: Amazon reports that one in three books available digitally are bought digitally; French publishers have reported that reading times of eReader applications are as high as those of printed newspapers; American publishers have found that subscription conversion and retention levels for eReaders are higher than for print products. A German study found that older people read faster on the iPad than in print; By 2013, 25% of Internet users will be eReader based.

Tradition isnt a sin Of course we must continue our digital innovations, in terms product ideas, greater attention to the divergence in terms of platforms, and also more advanced technology in terms of content management and delivery, as a outlined above. But we must somehow consider how we best retain our traditional print business. I am regularly accused of being a Luddite, unwilling to move into the new world. Which is nonsense. I first studied computer science in 1973, and wrote my first report on the implications of the internet for newspapers in 1994, and Ive spent most of the time since doing countless studies on where our industry is going. A number of things are undeniable: Today, 94% of newspaper revenues are from traditional sources, and probably in most cases all of the profits. True circulations are declining faster than ever, and advertising has taken a hammering for both cyclical and structural reasons, but my observation is that well over half of that loss has been caused by a lack of marketing activity and a reduction of resources. Publishers have themselves to blame for most of this loss, and they can stop the rot by refocusing. Also I observe that our industry has Gaderine tendencies. At one time it was free newspapers. Once a few publishers demonstrated that here was a new and effective way to attract younger readers, and build new profits, everyone had a go. The result was too many papers, too much loss, and closures and wasted investment. The same was the

rash of tabloiditis, as publishers clutched to reduced formats, as if that was ever going to make a difference. Today were all aping apps zzzzzzzzzz. Yes, we must continue to invest in digital, and yes, eReaders look very exciting, but lets not all hobble on our zimmers into this exciting party, and forget our food vouchers.

New ownership models But one thing that I think will be particularly fascinating, is how society will resolve the issue of news media ownership, and continuing investment in news dissemination. The debate has started with a few skirmishes such as, in the USA, Sam Zell buying Tribune group, and Brian Tierney and his chums acquiring the Philadelphia papers, in cases I believe with good intentions, only for both to be engulfed by the economic maelstrom and debt issues that have affected us all. In France, President Sarkozy hilariously intervened in the sale of Le Monde, which has been bankrupt for decades, to ensure it was taken over by his right wing cronies. The result was of course, that the shareholders of Le Monde, which heavily included the editorial unions, moved swiftly to hand the paper over to a pair of French entrepreneurs, and Sarkozy deniers. But other ideas are emerging. There are debates that Government might provide subsidies (as happens in Scandanavia), in order to ensure a free press, and debate, including subsidising recruitment of journalists; There is the established successful model of trust status, where businesses are created that are profit generating, but with a commitment to delivering quality news products. Examples of this are the Guardian, where the trusts other activities, support and fund the evolution of The Guardian. The Irish Times adopted this model. Schibsted has been arguably the most innovative news media company in recent years. It is a quoted stock, but within its covenants is a guarantee regarding the preservation of newspaper quality. The Washington Post has successfully diversified into education products, which now fund the core brand. The New York Times and Daily Mail both enjoy strong family ownership, where they encourage growth and diversification, but also retain a passion for their core brands (though in the latters case they sadly appear to have lost interest in their community newspapers); It is suggested that local entrepreneurs, be supported by local councils, in order to acquire and take over local newspapers from the major Corporates; Another option to be explored is that news media companies become not-for-profit charities, benefitting from tax advantages in exchange for guaranteeing reinvestment in delivery of objective news dissemination and encouragement of debate.

What is not going to work for society, for freedom of expression, or for our employees, or shareholders in the long term is the short-term, obsessive ownership by pension funds and venture capitalists, who saw newspapers as a quick injection on their balance sheets. Tough doodoo! In conclusion, I can only see more doom and gloom on the economic horizon, but there are nuggets of opportunity, and I dont believe that companies need to radically alter their broad strategies, but specifically: Apply more imagination not necessarily investment to digital. It will be the medium in the future, but dont simply follow the Gadarine; Accept that print will fund the future of the business for some time to come, and lack of love and care has caused the majority of declines weve seen in recent years; Finally we must look forward to, and collectively work toward a different structure of ownership and opportunity.

Yes there are further tough times ahead, but this doesnt mean they cant be exciting, and positive, and at some point rewarding for society, and ourselves.