Managing Disruption

By Guy Allen

20 April 2012

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With companies having to adapt to shifting markets faster than ever before, 4C's Guy Allen considers the challenges facing the newspaper industry.

History is full of companies which have failed to react to a change in the market quickly enough. From the slow demise of the UK's motorcycle industry in the 60s to Kodak's recent bankruptcy, a failure to embrace new practices can be fatal for a business. The newspaper industry is currently losing margin at a relatively slow pace but this may well change in the near future. 

During the past five years the circulation figures for UK nationals have declined by 16 per cent, one of the highest drops in Europe. This has led to a declining revenue stream from traditional print business, which has to be balanced with a disproportionate rate of growth in online revenues. The danger is that with an ever increasing number of people getting their news free online, this gradual downwards slope in revenue may abruptly reach a cliff face.  There are lessons to be learned from recent corporate history.

Transforming the High Street

HMV, the high street retailer once synonymous with music and video, was slow to react to the growing threat from online vendors and was overtaken by Amazon as the UK's leading provider of music, video and digital games.

Amazon, whose UK site generated sales of more than £3.3bn in 2011, has rapidly become a major player in the retail sector. By adding outside vendors to its site and implementing innovative practices in digital distribution, Amazon is playing a key role in driving traditional high street competitors out of business.

Figures from Kandar Worldpanel show that HMV, which recorded an 8.2 per cent decrease in sales last Christmas, now finds itself playing catch-up with online rivals including Amazon's Lovefilm and Apple's iTunes. In 2011 HMV announced plans to close down 60 outlets across the UK.

Lead or React

It is highly unlikely that British newspapers, in their current format, will maintain anything like their current circulation figures. Those that will still be around will have adapted to a market place where readily available free content rendered their traditional business model redundant.  The organisations which survive will have pioneered new business models or been quick to embrace these new models. Either way in today's market there is no room for complacency and even less for a lack of flexibility.

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