Online Audience - 2006 Annual Report

Competition with newspapers and television for advertising revenue is front and center in the minds of those following the news industry. The economic implications are critical to the future of journalism and to what we can expect the media landscape to look like as the Net becomes a bigger factor in the American news diet.

In last year’s annual report, we cited evidence that online news use was beginning to chip away at overall television news consumption. And for the first time we saw more firm evidence of substitution in print newspaper audience numbers as well.

How do things look heading into 2006?

Newspapers

For print, there is even more evidence of cannibalization, and it seems to be occurring on two fronts, in consumption of news and in advertising dollars.

News consumption survey data from the Pew Research Center for the People and the Press confirms what we saw last year, that some consumers who go to the online version of the newspaper are abandoning the print version. According to these data, more than a third (35%) of online newspaper readers say they are reading the print version “less often.”13

Another study looked at the question more deeply, concentrating on one market — Washington, D.C. The study, conducted by Matthew Gentzkow of the University of Chicago, developed a mathematical model to assess the extent to which online news either crowds out or complements print newspapers. According to that research, the city’s major online newspaper site, www.washingtonpost.com, reduced newspaper print readership by 27,000 a day, which Gentzkow called “a moderate amount.” To what extent other newspaper Web sites might be reducing Washington Post print readership was not clear.14

There also appears to be some difference in which kinds of newspaper readers are abandoning the print version. Data from the USC Annenberg School suggests that the heaviest online news readers were spending almost the same amount of time in 2005 with both the print and online versions of the paper as they were in 2003. But lighter online news consumers report spending less time with the print form in 2005.15 That might mean that newspapers will have a harder time in the future converting casual readers into core audience.

Minutes Online News Users Spent Reading Print Newspapers, 2005

Total weekly minutes

Design Your Own Chart

Source: The Digital Future Report, USC Annenberg School Center for the Digital Future, unpublished data, Jan 2006

* Online news users are those who get news online at least one minute per week. Light use is under 60 minutes a week, medium is 60 to 119 minutes, heavy is 120 minutes or more.

Yet the trend away from the print version has become a critical issue for the newspaper industry, most notably evidence that the Web is starting to compete with print newspapers’ biggest source of revenue: advertising. At the local level, consumers are increasingly turning to the Internet, at the expense of newspapers, for information about local products and services, according to research by the Kelsey Group and Constat, Inc. About 70% of households used the Web in February 2005 to hunt for local merchants and stores — up from 60% in October 2003. And the number of households seeking information about nearby stores and services from print newspapers has slightly declined, from 73% to 70%.16

Even more troubling for newspapers, some of the online sites that consumers are migrating to are not online newspapers but sites with no news at all, such as eBay and craigslist.17 Thus, as the dollar numbers already show, some of the advertising revenue in this migration online is moving away from journalism completely.

Television

Turning to television, the data also continue to be suggestive but not conclusive. For several years, some surveys suggested that online news consumption was chipping away at television news viewing even more than with newspapers .

Three new surveys added to this sense in 2005. Research by Nielsen/Net in the winter of 2005 found that 47% of respondents who go online for news or information said they spent more time online than a year before, and some 20% said they spent less time watching television.18 And a survey by Big Research, an online marketing research firm, looked at general media use among Americans 18 to 24 years old and concluded that increased use of new media in that age group had had a “negative effect” on television viewing.19 Finally, survey findings from Jupiter Research suggest Americans are now spending as much time with the Web as they are with television.20

But there was some contradictory evidence in 2005 as well. Prof. Bob Papper of Ball State University argues that telephone surveys of ten fail to provide full information on how much media Americans consume every day. For the last two years, Papper has conducted observational studies in Muncie, Ind., that found no evidence that overall online consumption comes directly at the expense of overall television consumption.

And Papper’s conclusions are supported by the large base of data on the Internet from the Center for the Digital Future at the USC Annenberg School . It found that weekly television viewing increased last year among online news consumers , particularly among the lightest online news consumers.21

Minutes Online News Users Spent Watching Television, 2005

Total weekly minutes

Design Your Own Chart

Source: The Digital Future Report, USC Annenberg School Center for the Digital Future, unpublished data January 2006

* Online news users are those who get news online at least one minute per week. Light use is under 60 minutes a week, medium is 60 to 199, and heavy is 120 minutes or more.

In the end, the impact on television is now less clear than it appeared to be a few years ago, and is something to watch.