East African media in hot waters: The ill-prepared will be eaten

• While studies show that more people are interested in and are reading news; they are not reading it in newspapers.
• New Media the way forward, but the road will be rough.

As the leading media house in East Africa, Nation Media Group is in a position where, rightly, it attracts a lot of attention and the praise and criticism that come with it.

Sometimes, that requires that we explain to the public more about our actions, and also to give direction on what is happening in our industry. In summary, sitting in Nation Centre, we see East African media is headed for some tough times, but which also offer new opportunities to be innovative and strike in fresh directions.

This situation has been created by a crisis that, in a different time and place, should actually have created a clear opportunity for the regional media to grow much richer.

This is because, in times of crisis and dramatic news, people turn to TV, radio and newspapers in great numbers. As a result, the media business usually does well.

The present global economic meltdown which, by the time it ends, will have led to the loss of anything up to 55 million jobs worldwide and the closure of hundreds of thousands of companies, is the biggest such crisis of the last 65 years.

The crisis comes on the back of record global TV viewing and newspaper reading sparked by the enormous interest in Barack Obama in all markets across world. Millions more people, therefore, have stayed tuned following news on the financial crisis.

Drifting Ads

This time, however, the media is not laughing all the way to the bank. Instead, in the US and the west generally, dozens of once-prestigious newspapers are filing for bankruptcy, closing, or becoming online-only media. This is because advertising that was already drifting from network TV and newspapers to the Internet, is quickly drying up.

So while studies show that more people are interested in and are reading news; they are not reading it in newspapers. They are reading it online, where it is mostly free —and the advertising is following them there.

“Yes”, some might say, “but these things global events rarely play themselves out the same way in Africa”. In fact, declining circulations, on the face of it, seems to be a problem mainly afflicting the industrialised west. According to the World Association of Newspapers, while circulation is down sharply in the US and Europe, in Asia it has continued to grow topping a readership of 347 million – up from 300 in 2003!

Because of this, there is a tendency in Africa in general, and East Africa in particular, for media houses to take the view that circulation is something that can still be fixed by making small tweaks to newspaper content and design, and throwing a little more money at marketing and circulation. However, time might have arrived for a radical rethink.

For companies like Nation Media Group and The Standard Group, print is still the goose that lays the golden egg and the tendency has been to innovate heavily within newspapers. So we have witnessed a lot of new sections, even new publications – NMG launched (and we recently closed) Daily Metro, and there is the Nairobi Star.

While on present form there might be justification for this, at NMG when we took a hard long look at our industry term, it became clear that that was a strategy that was only good for the short to medium term.

Once we shifted to a big picture of the media business in our region, the only decision that was left then was whether to make the decision to exit from our down-market Daily Metro now and channel management time, company resources, and the skills of many of the journalists into building the future, or to continue spending the resources on a project whose time might have passed.

These are always hard and unpopular decisions, because people’s lives and the livelihood of colleagues whom you have known and grown to love for years, are involved.

But sometimes you have to cut a tree, to save the forest. The Kenya newspaper market, if we are to face reality, is probably closer to the troubled western media markets, than it is to the flourishing scene in Asia.

Growth

But first, to the good news. While in the west publications are struggling, there are some that are doing very well. In the last year in the US, the Wall Street Journal was the only major newspaper that saw a rise, however modest, in its circulation. It inched up to a circulation of 2,082,189, a growth of 0.61 percent.

Among the very few magazines in the English-speaking world that have seen significant circulation rises in recent years are the New Yorker, and perhaps unsurprisingly, the London-published The Economist, which has been performing very strongly in the USA and recently broke the 1,000,000 circulation mark. The Economist is now in the unusual position of being read more abroad, than at home!

There is something there that we shall speak to after we reflect on the situation in the rest of Africa, and here in Kenya.

The largest circulating newspapers in Africa are found in Egypt. For example, Al Akhbar circulates about 1,160,000 and the prestigious Al Ahram manages about 900,000, almost tied with Al Goumhouriya.

In South Africa, though the down market juju-and-gossip fare, Daily Sun, notched a high of nearly 600,000 at one point, the prize belongs to quality Sunday Times at about 250,000. That is close to the circulation of our Sunday Nation, the highest circulating newspaper in East and Central Africa. The Daily Nation, too, has a circulation far higher than that of all competitors combined on any given day of the week.

Business Daily is a strong-moving brand, and of course The EastAfrican is probably among the top 10 most profitable newspapers in the world based on the return per shilling invested. There are various lessons to be drawn from the examples of The Wall Street Journal, the fortunes of Al Akhbar, Al Ahram, The Sunday Times, the Daily and Sunday Nation, The EastAfrican, and lately Business Daily. It is that the viable market in print is for up-market or serious publications in most of the world. These newspapers will probably have to be more niche, with increased cover prices and advertising rate cards to survive in the long-term, but their trajectory is clearer than that of papers at the lower end like Daily Metro was.

Though it had a lower circulation than Daily Metro, Business Daily grew very quickly into a sustainable business. Not only did that prove the trend that quality publications weather difficult times better, but if we project that in future specialist and middle and up-market niche publications will yield more dividends than downmarket mass ones, then it becomes clear that Business Daily had to take the prize.

Enclaves

All that still leaves the question of the success of Daily Sun begging for answers. Rightly so. First, South African townships and slums are not wholly slums in the extreme sense in which Nairobi's Kibera or Mathare are. Because of their evolution in the apartheid era, they actually have some middle class enclaves in them. You find an economic mix there that you don’t find in Kibera.

Secondly, Daily Sun launched at the right time just before the major shift by middle market and low-end media consumers to the Internet, mobile phones, and other outlets. Against this backdrop, while NMG’s strategic goal of capturing young readers and recruiting future eye balls for the mature Daily and Sunday Nation brands was sound, it came at a point where the most Daily Metro could do was survive, but never grow into a big profitable paper. These are things that you only find out through practice, and cannot anticipate when you are doing business plans.

Interestingly, in early May the Swedish newspaper group Metro International agreed to sell its loss-making USA papers, with a combined circulation of 590,000 daily copies reaching some 1.2 million readers. You would say that is strange, because 590,000 is a very healthy number. However, The Metro daily, is financed entirely by advertising and handed out for free to commuters.

Our Daily Metro wasn’t free, but with a cover price of Sh20, it was the lowest-priced in the market, which means it needed to achieve very high revenues in advertising. However, advertising in print is being consolidated in the bigger titles like Daily Nation and The Standard, starving the smaller papers.

Most of the type of readers Daily Metro was targeting get their news over the Internet and mobile, mostly free, so for big companies like NMG with its attendant cost structures, there were limits as to how much the business could be grown around a more aggressive circulation strategy. Though this shift to the Internet is something that, no doubt, we have all been watching, the problem is that apart from a few companies like the Norwegian conglomerate Schibsted, hardly any media companies in the world have figured out how to make money big online.

Numbers

But the bigger story here are the long term trends in advertising. In 2004, print had 46 percent of total media spend in Kenya. This year, that has fallen to 13.2 percent. The real big winners have been radio, which has grown from 22 percent in 2004, to 55 percent in 2009! We don’t have figures for Internet, partly because of the difficulty of measuring it.

To appreciate why all media executives and editors have to worry about these numbers, let us examine another very instructive study, by Consumer Insight. The survey showed that radio use increased from 87 percent in 2006 to 91 percent in 2008; TV moved from 66 percent to 74 percent, but newspapers fell sharply from 84 percent to 69 percent, magazines too slid from 61 percent to 49 percent, and Internet remained largely flat from 16 percent to 15 percent. The big news was the number of people reporting to have ever used mobile phones – this rose sharpest from 71 percent to 86 percent.

In other words today, there are more people who have ever used the mobile phone, a gadget that has been available to the mass market in Kenya for barely 10 years, than have ever read newspapers or peeked at a television screen! Yet newspapers have been with us in Kenya for over 100 years. While newspaper circulations are holding, fewer people are reading them, thus raising the question of where the newer buyers of print will come from after the current generation passes on.

This becomes all the more critical, because with the arrival of under-sea fibre optic cable around the corner, and thus the removal of the two things that have significantly slowed Internet uptake in East Africa – connection speeds and price - we need to be prepared for an explosion that will challenge all of us in the traditional media of free-to-air TV, newspapers, and radio.

This is because, as in Asia, the main method of accessing the Internet in Africa is clearly turning out to be the mobile phone, not the desktop computer or laptop.

With prices of smartphones such as the Blackberry and the iPhone becoming every more affordable – and the cable landing – my sense is that handheld devices will be the medium of first choice for news and information, traffic updates, bill payments, and even classified ads in the not too distant future in Kenya.

Grappling with these changes, it made sense to exit the low-end print market (where we had located Daily Metro), and to focus more attention on the future – our relatively new Digital Media Division, and more recently the formation of the Africa Media Division.

The Africa Media Division in the months to come will be publishing an upmarket magazine, but not exclusively for the local market – that wouldn't work. Rather, learning from The Economist, we will establish a brand that has an appeal to a certain kind of reader of African news who is not bounded by border, gender, or race, but wants to have a generalised intelligence on the continent in one place. As Time magazine has demonstrated on several occasions, the envisioned magazine will only succeed through a strategy that is closely bound with the Internet.

Will the Digital and Africa Media Divisions succeed? Yes, we are confident that they will even though the road will be rough. We have no choice but to see to that, but also we have the minds and determination to chart out a successful course in this extremely changed technology and economic environments.

But we are also very alive to the fact that we are not the only ones trying to find a new way. As I noted earlier, everyone in the world is still trying to find a model that works in this fast changing environment.

There is no doubting who the winners will be. It will be companies like NMG that are grappling for answers and trying to make new media work. Not those that are doing nothing.

In the UK, bold thinking around the future led to two of the most different media companies in every sense of the world – The Daily Mail and The Independent – sharing an office and some common backend services.

I expect that soon, especially when digital TV arrives and we have 100, not six channels, in addition to thousands via cable, in broadcast we shall come round to developing and sharing things like production services.

Understandably, competitive pressures have so far necessitated that every major newspaper in Kenya – and indeed Uganda and Tanzania – establish its own printing press. That is a model that will also be called into question in future, and we might have to consolidate. Newspapers and other media are in the business of providing news, information and entertainment, and are not manufacturing companies that should be bogged down with spending huge amounts of their budget on machinery, warehouses, and inputs.

We don’t know what the total shape of our future media market will be like. We can predict that it will be better, because only the best will survive the competition. What is sure is that the change is already here with us. Next year NMG celebrates its 50th anniversary — and then we will set out perhaps an even more remarkable 50 years.

*This article is also published in the June 2009 issue of the freedom of expression magazine, ET, published in Nairobi.