The August 2018 Strategic Case Study deals with a company called Finch News Group, a publisher of regional and local newspapers in the fictional country of Borland. As with any CIMA case study, it’s always a good idea to familiarise yourself with some of the key trends and facts pertaining to the industry within which the pre-seen company operates. However, navigating an entire industry on your own from scratch can be disorientating and intimidating! That’s why VIVA has prepared a full real-world Industry Analysis for the August 2018 Strategic Case Study, to save you the trouble of compiling all the key facts and figures by yourself. You can access the Full Industry Analysis either on its own or as part of one of our Case Study Packs here. The full industry analysis includes both a HD video lesson of approximately 1 hour, and the accompanying powerpoint presentation. Below, we offer you just a few key highlights from the Full Industry Analysis.

 

Digital vs Print Ad Revenues

The story of the newspaper industry for the last 25 years or so has largely been one of decline, adaptation, and predicitons of doom. That time frame – 25 years – coincides with the rise to prominence of the internet. That the decline of the newspaper industry overlaps with the rise of the internet is no mere coincidence. To a large extent, the newspaper industry has suffered directly as a result of the internet. We won’t go into the precise reasons for that here (these are discussed in more detail in the full analysis). But one of the major characteristics of that impact has been the inadequacy of online advertising revenue when compared to traditional print ad revenues. In the past, the great majority of newspaper companies’ revenues came from advertising. Businesses would pay significant sums of money to newspapers with wide circulation and readership because they knew that large numbers of eyes would be on their products and brands. With the rise of online news sources, print newspapers saw declining readerships, and so newspapers found it hard to charge the same premiums to businesses for advertising space. The major problem, however, has been that online advertising space has not compensated for that decline, and has not generated anywhere near the same revenues. It is estimated that online editions of newspapers get only about 1/10th to 1/20th the revenue for a Web reader that they do for a print reader. This is borne out by the graph below, and suggests that online newspapers just aren’t getting the same numbers of people reading their online editions. They are still very far from recouping the readership numbers of 25 years ago in terms of online readers. The key strategic question is whether this is due to a failure on the part of newspapers to hit upon the right formula for online editions, or whether this is simply an indication of the obsolescence of the idea of traditional newspapers in the age of the internet. Some newspapers have trialled paywalls (New York Times); others have solicited voluntary donations (The Guardian); still others have gone the route of freesheets (Metro International). It is not clear yet which model, if any, is optimal and sustainable…

 

Fake News, Clickbait, and Integrity

The phenomenon of fake news, technically speaking, has been around for centuries. However, in the modern era, fake news has taken on a whole new significance in terms of the scope of its potential influence – especially in the context of politics and national elections. Social media and “viral” dynamics now mean that fake news stories can spread rapidly and gain a veneer of legitimacy as they get shared by otherwise trustworthy news sources. In the 2016 US presidential election, for example, accusations and evidence of fake news stories emerged repeatedly, with many mainstream news agencies being caught out by stories that had an appearance of authenticity. Interestingly, a June 2016 poll by Axios and Survey Monkey found that 72% of Americans believe that "traditional news outlets knowingly report false or misleading stories at least sometimes."

In the online context, there are also strong temptations for traditional newspaper companies to publish shocking and sensational stories as they struggle to boost online readership. In some cases there is evidence of online newspapers pursuing more “clickbaity” content with shocking or provocative headlines designed to generate more traffic in the short-term. The problem, of course, is that this also contributes to the trust issues indicated above, which can backfire in the long-term. The dilemma is that, if one newspaper does not produce clickbait or share what may or may not turn out to be a fake news story, there is a danger that the competition will, and will thereby generate more traffic in the short-term, which in turn will potentially generate more ad revenue and make them a more attractive proposition for advertisers. This could lead to a kind of (un)virtuous circle, where the additional revenue will then allow that “clickbait” newspaper to invest more and gain even more ground on more honest, cautious, ethical competitors. The temptations then to allow fake news stories to slip through the cracks, or permit clickbait headlines, can be strong in the short-term. How to sustain journalistic integrity in the era of online news and declining profitability is a key and challenging issue for newspaper companies to consider…

This article is a snippet of what's available as part of our market-leading Case Study Packs. The packs includes over four hours of pre-seen and industry analysis, mock exams weighted in accordance with official exams, exam simulators, financial ratio analysis and much more. Follow this link here to discover more.

 

Don't forget to check out our other great free SCS article here and here for more great insights ahead of your exam.

 

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