This may very well be a white Christmas, but for much of the country holiday dreams have turned into a nightmare. The current recession and financial uncertainties are resulting in substantial layoffs, which are then only compounding the economic downturn.
Take the media sector, which was already experiencing financial challenges due to technological advances and shifting consumer habits prior to the recession. Media companies are slashing costs, streamlining operations and purging their payrolls. Newspaper staffs, network entertainment divisions and news departments are all being reduced. A lot of very creative and smart people are out of a job at a time when hardly any company is hiring.
Advertising dollars, which were already spreading out over an ever-increasing number of alternatives, are now melting away faster than snow in Las Vegas. Automobile advertising represents 20% or more of a broadcast network's revenue. For a network with $4 billion in ad sales, automobile companies account for about $800 million in revenue. Automobile advertising can account for as much as 50% of a local television station's revenues. Of course, car ads are the lifeblood of local newspapers. So, what if two major automotive companies go out of business? The Detroit Free Press has already announced it will only offer home delivery three days a week.
Journalism, while still a popular subject in college, has been buffeted and battered by the winds of change. Americans are altering the way they get their news. Gallup just released a poll measuring shifts in the popularity of news sources over the past two years. Local TV news ranks first but it has fallen from 55% to 51%. Local newspapers saw a decline from 44% to 40%, and the broadcast network's evening newscasts declined slightly, from 35% to 34%. The real winners were cable news, up from 35% to 40%, and the Internet, up from 22% to 31%. Keep in mind that this past November CNN had the highest rated election night coverage, for the first time surpassing all three of the traditional broadcast networks. And Fox News and CNN each led the ratings during one of this year's presidential debates, another first.
A few days ago a group of journalism students toured a national news organization. A top cable news executive asked where they got their news. While a couple said they occasionally watched local news, none watched the network evening newscasts. A handful read a daily newspaper, but most went online to The New York Times or CNN site. Many watched some cable news each week, mostly CNN and Fox News. Yet all of them expressed concern about where they will be able to find a job and what the future will bring for their chosen profession. That concern is palpable among many formerly well-compensated and very talented journalists who have been squeezed out of the system.
Consolidation of media companies will accelerate in 2009. One or two traditional broadcast networks may very well have new owners by the end of next year. Meanwhile, reductions in operations and personnel will continue, and programming strategies and business models will be driven by financial necessities. The Internet will provide more and more revenue to the bottom line, but not enough to totally offset ad revenue losses. Local media outlets will increasingly rely on "central" content providers or aggregators and less on their own staff. Wages will be reduced, well-known talent will be let go, more reporters will be required to shoot and edit, unions will give concessions and capital budgets will be slashed. "Cough up the bucks," as Neil Young sings in his recent release.
The media industry is evolving at an ever-increasing pace. Web 2.0 is quickly becoming Web 3.0. Of course, no one is totally future proof. However, those who can reinvent themselves will be in the strongest position going forward. Those who adapt to and embrace technological and business changes, and who offer talent and imagination, will have the best chance in tomorrow's workforce. No matter the distribution platform, well produced, interesting and relevant content will be king.