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The newspaper business’s reliance on the industrial machine of printing and distributing is often understated. It’s a delicate ecosystem that can have a real effect on publisher margins – as the fluctuation in newsprint prices since the early 2000s has shown.
The other fact most people don’t realise is that the advertising inserts you get with your weekend papers – those supermarket offers you throw away – are worth a lot and it’s the newsagents and postmen and women who make sure those are delivered, not the publishers.
So what if the postman says no and finds more profitable business elsewhere, away from newspapers? American publishers could be about to find out – with some fearing a loss of up to $1 billion (£633 million) in revenue thanks a new deal between a leading direct mail company and the US Postal Service (USPS)(AP, via Businessweek – see also DMNews.com).
It comes down to an agreement signed with direct marketer Valassis to send advertising flyers and leaflets to households via the US USPS which will see up to $107 million (£67.7 million) of new revenue generated in the next three years. Advertisers would be offered placement in a mid-week bundle called Redplum – newspapers fear the big retailers particularly will be interested in signing up and at lower costs than the press offers.
This should be seen in the context of the USPS’s staggering financial situation – $5.2 billion net loss in the last quarter – but also as the latest blow in an ongoing battle between newspapers and direct marketing. The National Newspaper Association’s president Reed Alfinson pulled no punches earlier this year when commenting on a (separate) USPS direct mail programme:
“Post offices should not be in the direct mail business… If it is going to try to become an advertising sales force, it is going to sacrifice some of the high degree of trust it enjoys from the general public. And it certainly will make newspaper people more skeptical of its value.”
So the newspaper groups are upset, predictably, because they feel that advertisers should do business with them instead of the post office, in the same way they might feel that readers should buy the newspaper instead of reading the panoply of free content available on the web.
There are also those who think newspapers are under-priced because folks are “happy to pay $3 for a latte at Starbucks”, even though this ignores the complex reasons why $3 is acceptable for a Starbucks.
But as Jeff Jarvis once put it, “should is not a business model“. And increased competition for marketing spend is inevitable as the amount of channels with which marketers can reach people continues to grow and spend shifts online.
And if that’s not enough to make you evaluate your future advertising strategy, I don’t know what is.