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Failure's Lessons

Phillip De Wet

What does the demise of ThisDay tell us about the daily newspaper model in South Africa? Phillip de Wet analyses the reasons behind his former employer's downfall and asks whether the remaining crop are comparatively healthy.

With perfect hindsight the short-lived ThisDay newspaper was bound to fail.

Proprietor, funder and editor-in-chief Nduka Obaigbena showed very little understanding of the South African market and various advisors and executives either failed to see (or could not convince him) of the realities the paper faced.

Obaigbena’s foray into retail through the acquisition of some CNA stores was an unqualified disaster. He was caught flat-footed by the significant strengthening of the rand against the dollar. He overestimated both his ability to secure lines of credit in South Africa and the willingness of suppliers to put up with late payment. He mistakenly believed that subscriber numbers would grow through word-of-mouth, the kind of street-level buzz that had made the Nigerian ThisDay such a success.

The paper also faced a number of competitive hurdles that future entrants into the market may want to take note of. Dependent on competing groups for printing and distribution, it found that it had to abandon the American tabloid format originally planned, that printing slots were inconvenient and inflexible, and that street vendors had no incentive to actively push the publication. Other problems were less obvious but often even more expensive, such as the cosy relationship between existing players that at first barred ThisDay from using traditional street pole advertising.

Most if not all of these issues could be overcome by good advice, innovation, teeth-gritting and plain old pluckiness, such as threatening anti-competitive complaints. At various times during the year that the paper appeared, a combination of these strategies were working.

Inherent financial problems were not easily addressed, however, and in the long run may well have seen ThisDay fold even had the flow of operational funding from Nigeria not dried up.

At its peak - according to management - ThisDay was spending roughly R8-million per month, most of it on staff and printing. In a good month revenues were around R4-million.

That level of expenses seems more than a little excessive given the size of the South African market, and ThisDay made several abortive attempts to cut down on the lavish spending that had raised eyebrows even before the financial troubles became obvious. Lack of money apparently left it unable to save money, however; it could not move to cheaper offices because it could not afford moving expenses and it could not cut down on staff because it could not afford retrenchment payments.

On the other side of the coin revenues seemed to hit a glass ceiling. Sales staff initially complained that advertisers were loath to experiment on a new product even at significantly discounted rates. Later they believed that competitors were using the paper’s increasingly obvious financial problems to warn advertisers away. Obaigbena himself complained of “unfounded rumours and half-truths, especially to advertisers” in a statement shortly before the paper stopped publishing.

ThisDay’s failure stands in stark contrast to the growing success of its downmarket mirror the Daily Sun. But the clumsy management of ThisDay and the huge popular appeal of the Daily Sun may not be the most fundamental difference between the two. Looking at the bigger picture, the model on which ThisDay was based may have meant it was never going to be an attractive vehicle for key South African advertisers. Its decision to go national rather than regional is a case in point.

Advertisers have a wide choice of niche publications that can be used to reach a segmented market of spenders; on newspapers alone, they have the option of a healthy number of mass-market titles that reach a broad audience cheaply, most of which are regional papers targeting distinctive geographical readerships.

ThisDay, in hindsight, did not have the budget to be a national paper. But its management rejected the idea of at least starting life as a regional paper, which now seems to have been another critical mistake.

A recent roadshow conducted by Ads24 and The Inc - “A Case for Daily Newspaper Advertising” - made the convincing argument, based on the Bokomo brand, that regional advertising can positively influence buying behaviour. (The research was conducted using the daily newspapers Beeld, Daily Sun and Pretoria News in Gauteng, and Cape Times, Cape Argus and >Die Burger in the Western Cape). Similar foreign research has consistently come up with the same result; certain advertisers are able to move their product through the use of regional daily newspapers.

Nonetheless, ThisDay was very clear on its “national” target market: educated people who prefer thoughtful political and economic coverage over the popular crime-scandal-celebrity mix. Such readers, it believed, would automatically fall into a high living standard measurement (LSM) group with significant disposable income, or would aspire to fall into that group.

The paper never got around to conducting a reader survey, but anecdotal evidence showed that it had succeeded in gathering a small, well-heeled audience. It seems, however, that the assumption that advertisers would be eager to reach such an audience was mistaken.

Retailers Shoprite/Checkers, Pick ‘n Pay and Spar are consistently amongst the biggest advertisers in the country, according to Nielsen Media Research. In 2004 the three combined spent more than R255-million on marketing their brands in daily newspapers.

That spending, which makes up a significant percentage of the total newspaper advertising spend in South Africa, was never likely to go ThisDay’s way, as a number of top media agency directors had regularly been saying. A handful of rich people do not make for an audience that mass-market retailers salivate over.

In fact, among the top ten advertising spenders in the country, ThisDay had meaningful relationships only with cellphone companies MTN and Vodacom, which spent just over R80-million across all daily newspapers in 2004. Even here the revenue ThisDay saw was only a fraction of what the two companies were spending, despite the “yellow paper”, a single edition of ThisDay where many pages (including the front page) were coloured in MTN’s signature yellow.

Similarly, ThisDay never managed to attract anything other than experimental smalls advertising. Consumers instinctively preferred the reach offered by the likes of The Star to the supposed available cash of the ThisDay audience. Adult entertainment was the single exception, with some providers that target an executive audience happy to use the paper. But even then, the amount of advertising space bought was relatively inconsequential relative to that of competitor papers.

A very different example in the United Kingdom - based on the success rather than failure of a paper - has media analysts in that country revising their estimates on the value of a high-end newspaper audience.

Metro, a free morning commuter paper distributed on the London underground, is increasingly seen as a threat to mainstream papers. Since its launch in 1999 Metro has grown in leaps and bounds and has seen huge adoption by retail advertisers. In February, media mogul Rupert Murdoch said his News Corp. group is watching Metro carefully for its impact on sales of the Sun. Newspapers higher in the food chain are also growing concerned, and Metro is being blamed for at least some of the woes of the Evening Standard, its Associated Newspapers stable mate.

If retailers develop an exclusive love affair with papers such as the Daily Sun and Metro it could spell disaster for any future ThisDay. The growing importance of retail advertising in South Africa is illustrated by the eerily flat revenues of major daily newspapers while the economy is growing at its fastest rate in decades. The top five earning newspapers in the country - which accounted for a combined R862-million in revenue in 2004 according to Nielsen data - saw virtually no increase in income. Instead, academic analysts say, increased spending went to electronic mediums and the likes of the Daily Sun.

The newspapers, however, say the data does not reflect an important trend in retail advertising.

“A lot of retailers are using more and more inserts and there is a pretty consistent trend that way,” says Greg Stewart, commercial manager at The Citizen. “We as a publication are seeing quite nice growth currently from the food retailers, from the wholesalers and the cash and carry outlets.”

Stewart is dismissive of attempts to read broad developments into changes in the newspaper market. He believes the natural consequences of social changes, such as the racial distribution of disposable income, is of far greater importance.

When it comes to race and politics, ThisDay had perhaps its only real success. Anecdotal evidence suggests that its readership was racially well distributed and drawn from a surprisingly wide political spectrum. Existing papers have had great trouble adjusting to the changed political landscape; the Sowetan is still trying to follow its market while “the Mail & Guardian hasn’t yet realised that the struggle has been won,” one industry observer quipped.

Political observers are also unimpressed with the direction other newspapers have taken - some, they say, have changed too much rather than too little.

“Naspers papers tend to lean so far left these days that they have left their audience behind completely,” said Dan Roodt, a commentator on the Afrikaans political landscape. “Afrikaner culture is far more progressive and liberal these days but it is still mostly just right of centre, not nearly as left-leaning as, for instance, Beeld.”

Not that Naspers should panic too much. Beeld is the biggest earning paper in the country, according to Nielsen data, even though they did fall off in circulation for the second half of 2004.

Not everyone agrees on the level of political discrepancy between papers and readers. Everyone does agree, however, that such a discrepancy must eventually impact on the bottom line. Media analysts say advertisers are interested in reach and effectiveness; political pundits believe advertisers will shy away from negative association and newspapers subjected to contrary reading by its audience.

And daily newspapers are facing immediate pressure because potential competitors see a gap in the market created by such reader dissatisfaction. ThisDay is one example, new Afrikaans Sunday paper Die Wêreld is another.

“We want to be an apolitical paper,” says editor Maryna Blomerus. “Politics is outdated; we want to empower people with information and allow them to form their own opinions.”

Phillip de Wet is a former ThisDay journalist and a regular contributor to eMedia, Wag the Dog’s breaking news product.


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